I've been working inside the higher education system for long enough to see some crack that are so obvious that I can't imagine why they haven't been patched up this far in. I am all for the idea of financial aid, I think in theory it's great and opens up the opportunity for education for so many people. That said, the system is so broken and it needs to be fixed now.
Int he current system, let's say a student qualifies for $1000 in aid and there expenses are $800; they can finagle a refund check and cash out the $200. In fact, I've heard with my own ears student complaining about needing their refund checks for a variety of things such as vacation, Christmas gifts, cigarettes, and other things they should not be spending that money on. Whatever isn't spent on tuition and text books MUST go back into the system - we need to implement this right away.
Another rule that must be implemented immediately is academic criteria for maintaining financial. I say you should be required to maintain a C average or better or you lose your aid. You did below a C, you get on a payment plan, wages garnished and all, and pay what you took for an education that you chose not to take seriously. maintain the C or better, you keep your aid as long as you qualify. There should also be additional requirements that limit the amount of courses that are at a D or below - this is common where people tack on a "bullshit" course just to maintain 12 credits and then skate by in that class...there should be no skating by on that dime...ever.