This article reviewed and criticized financial aid policies for universities and colleges, which the government has implemented in order to reform higher education system since 1995 from the political perpective. First of all, this article inquired aims and goals of higher education reform policies through reviewing the trends and the basis of higher education reform in Korea. The results of inquire showed that the government's higher education reform policies for past 10 years have put focus on the idea of neoliberalism which is oriented to free competition or excellence much more than equity. Secondly, from the politics perspective, this article analyzed the problems of government's graded financial aid formula for higher education institutions, which is based on the results of evaluation. The government's financial aid formula has at least four problems. first, the government's graded financial aid has made higher education institutions be subject to the government. Second, the formula distorted the principle of equity due to stress too much on free competition with which its conditions has not been satisfied. Third, the government's evaluation of higher education institutions has tended to uniform the instituions because the evaluation scale did not fully consider distinctive characteristics which each institution showed. Lastly, the government's financial aid policy has violated the principle of responsiveness in policy-making process due to the closed structure of policy-making.