Monday, November 11, 2013

Erosion in State Student Need-Based Financial Aid and Implications for College Affordability

State student financial aid is intended to increase affordability, by providing students with state funds that can be used towards paying for college. In 2010-11, states awarded a total of $11 billion in student aid. Between 2000-01 and 2010-11, state spending on student grant aid increased from a total of $5,810 million to $9,105.5 million in constant 2010 dollars. Grant aid is a form of student financial aid that does not have to be paid back (as would student loans). Although there has been an increase of nearly 57% in state student grant aid over the decade, in general, there has been erosion in college affordability over time.
One way to think about how well states are doing in supplying need-based grant aid is to compare the efforts of each state to the amount that the federal government spends on need-based aid in each state through the Pell grant program. Need-based grant aid is aid that is awarded to students who show demonstrated financial need (or are low-income). Most states still award the majority of their grant aid on the basis of need. An example of a need-based grant aid program is Illinois’ MAP grants program. The Pell grant program is the largest need-based student grant aid program that is administered by the federal government. In 2011-12, the maximum Pell grant was $5,550. Pell grants are awarded to students on the basis of financial need, with larger award amounts going to more needy students. Pell grant award amounts also vary based on full- or part-time attendance status and the cost of attendance at the institution where each student is enrolled. Although there have been changes to the Pell maximum award and eligibility requirements over time, Pell grants remain targeted to low-income students and these grants serve as a useful benchmark for the level of federally identified student financial need in each state.
Figures 1 and 2 show total state student need-based aid investment as compared to the total federal investment in need-based aid awarded through the Pell grant program. This is done through a simple calculation in which I computed the following ratio for each state:

The data in these figures do not indicate if the same students received both a need-based state award and a Pell grant. However, if a state awards smaller total amounts of need-based aid (less than 100%), then the state lags behind the federal government’s investment in need-based financial aid for students in the state. By contrast, states that offer more state need-based grant aid than Pell (more than 100%) are doing more than the identified federal investment in need-based aid.
Figure 1 shows the state investment in need-based aid compared to the federal investment in 2000. Four states (Illinois, Pennsylvania, Minnesota, and New Jersey) offered more need-based aid to students in their state than did the federal Pell grant program in 2000. More than 50% of the federal investment in Pell grants was offered by 13 states. Less than 10% of the federal investment in need-based aid was offered by 11 states.
When considering the data from 2010, the drop-off in the relative state investment in need-based aid is striking, as shown in Figure 2. Zero states offered more than 50% of the federal investment in need-based aid through Pell grants in 2010. Less than 10% of the federal investment in need-based aid was offered by nearly half of the states (22 in total).
            These numbers show the remarkable extent of the erosion of state support for need-based aid. This trend towards reducing the amount spent on need-based aid in the states as compared to the federal investment in Pell grants has concerning implications for college affordability. The solution is for states to reinvigorate their investment in need-based student financial aid. Not to do so will mean that many students will continue to lack the financial resources to make their college dreams a reality. 

by Jennifer Delaney

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