Academic achievement in higher education is an important current policy issue because institutions are under public pressure to justify state subsidies and rising tuitions with demonstrable gains in student learning. This article uses data from three flagship public universities to examine the effects of financial aid on first-through fourth-year college grade point average. The findings indicate that need-based aid and merit-based aid both have positive effects throughout college, and thus colleges may be able to use financial policy levers to increase academic achievement. However, since the effect of merit aid is larger than that of need-based aid, institutions may have incentives to reallocate aid and admissions spots from needy to merit students unless appropriate safeguards are adopted. (Contains 6 tables and 10 notes.)