Merit Aid Still King

Despite increased pressure to move more money away from merit-based aid programs and into need-based grants, there is little sign of such a shift happening across the nation as a whole, according to a report released today.

June 23, 2008

Despite increased pressure to move more money away from merit-based aid programs and into need-based grants, there is little sign of such a shift happening across the nation as a whole, according to a report released today.

The annual report, issued by the National Association of State Student Grant and Aid Programs, shows that need-based grants made up about the same proportion of total grants awarded in 2006-7 as they did in 2005-6. Need-based grants constituted about 72 percent of the total grants awarded last year, which was actually down slightly from 73 percent in 2005-6.

The association’s report comes as a growing chorus of critics call on states (as well as private institutions, for that matter) to place their grant dollars in programs that might help needy students enroll in college who might not otherwise, instead of merely changing the enrollment patterns of those who could still otherwise afford a college education. Grant aid, which is measured in isolation within the report, is particularly coveted for needy students because it does not have to be paid back.

Sandy Baum, senior policy analyst for the College Board, said she’s seeing more institutions stress need-based aid -- even if seismic shifts aren’t reflected (at least so far) in the national figures compiled by NASSGAP.

“I do think that there is increasing consciousness of the importance of need-based aid,” said Baum, a professor of economics at Skidmore College. “I think there is some movement in that direction.”

With the data currently available to analysts, it’s still somewhat difficult to discern how many needy students are in fact helped by programs that are classified as merit-based, Baum added.

“Actually, more meaningful [data] would [show] how many of these state dollars are going to students who could afford to pay anyway. We don’t have that answer,” she said.

The report notes that need-based aid over all has increased, even if it hasn’t gone up as a proportion of total grant aid awarded. Need-based grant aid grew to about $5.3 billion nationwide in 2006-7, a one-year increase of about 7 percent.

Marilyn Cargill, president of NASSGAP, said she was encouraged to see that total state aid, including all grants as well as loans, increased by about 10 percent in 2006-7, bringing the total awarded up to $9.3 billion. But as states slash their overall budgets this year, as many are doing in tough economic times, it remains to be seen whether such gains will continue.

“If there aren’t significant increases in grant assistance, I think it’s going to create phenomenal hardships,” she said. “And it’s going to lead to increased lending or borrowing.”

Need-based programs accounted for a greater percentage of grants just 10 years ago, making up 84 percent of the total in 1996-97, according to the NASSGAP report. In that time frame, however, large merit-based programs like Georgia's Hope Scholarship and Florida’s Bright Futures have exploded. Since Bright Futures began in 1997, the program has doled out just under $2 billion for students with no demonstrated financial need.

While states like Georgia and Florida continue to grow their merit-based programs, Washington has ended its largest such program. The Promise Scholarship, established in 1999, was phased out beginning in 2005. As such, the state’s merit-based aid dropped by 52 percent, or $3.4 million, between 2005-6 and 2006-7, the NASSGAP data show. The money saved by ending the program was shifted into need-based aid, according to state officials.

Tennessee has a significant lottery-funded program that primarily emphasizes merit-based aid, and the NASSGAP data show the program’s impact. According to the report, 71 percent of the state’s aid in 2006-7 was merit-only. State officials, however, think those numbers will shift in the coming years. In the fall, Tennessee will place an additional $10 million in recurring dollars into the state’s need-based program.

The influx of need-based dollars in Tennessee comes on the heels of a string of reports that showed a significant gap between merit and need-based aid in the state. Claude Pressnell, president of the Tennessee Independent Colleges and Universities Association, said he thinks policy makers have realized the state needs to do more to help poor students.

“I think some people were really hoping that the lottery scholarship would solve all of their problems, and it really hasn’t done it,” he said. “I wouldn’t say they were shamed into it; their attention was drawn back to it.”

Much of the nation’s need-based aid comes from a handful of states. Of all such aid awarded in 2006-7, 69 percent came from California, Illinois, Indiana, New Jersey, New York, Ohio, Pennsylvania, Texas and Washington. The nine states collectively awarded more than $3.6 billion in need-based assistance.

Total Financial Aid Awarded, 2006-7, By State (in millions)

State Need-
Grant Aid
Alabama $5.905 $4.212 $0.177 $10.293
Alaska 0.587 - 78.06 78.646
Arizona 13.241 - 1.985 15.226
Arkansas 22.003 11.240 3.675 36.918
California 763.399 - 36.656 800.055
Colorado 62.919 9.143 13.219 85.281
Connecticut 41.716 0.482 58.843 101.041
Delaware 10.496 4.182 0.707 15.386
Florida 142.304 351.658 101.067 595.029
Georgia 1.313 485.413 12.270 498.997
Hawaii 0.408 - 24.767 25.175
Idaho 0.972 4.778 1.937 7.687
Illinois 418.820 27.943 7.648 454.410
Indiana 322.940 8.864 18.747 350.551
Iowa 55.535 - 6.050 61.585
Kansas 16.379 0.119 4.233 20.730
Kentucky 91.016 93.384 5.630 190.029
Louisiana 1.452 120.563 0.060 122.074
Maine 15.556 - 3.325 18.881
Maryland 93.536 4.504 9.706 107.745
Massachusetts 83.649 - 33.528 117.177
Michigan 92.713 117.540 105.220 315.472
Minnesota 162.987 0.079 150.079 313.145
Mississippi 2.414 20.191 8.072 30.678
Missouri 25.050 34.752 11.352 71.154
Montana 4.563 - 0.958 5.521
Nebraska 10.388 - 74.947 85.335
Nevada 15.612 25.392 14.322 55.326
New Hampshire 3.718 0.009 0.339 4.066
New Jersey 249.889 30.726 238.398 519.013
New Mexico 23.069 48.225 17.970 89.265
New York 843.694 21.243 82.614 947.551
North Carolina 170.127 59.087 67.189 296.404
North Dakota 1.886 0.353 0.450 2.688
Ohio 177.559 78.380 0.562 256.501
Oklahoma 56.188 10.009 100.237 166.434
Oregon 33.118 0.265 35.407 68.790
Pennsylvania 468.319 0.258 36.181 504.758
Puerto Rico 39.455 - - 39.455
Rhode Island 13.021 - - 13.021
South Carolina 50.320 222.966 0.480 273.767
South Dakota - 2.140 0.479 2.618
Tennessee 57.962 176.926 1.278 236.166
Texas 410.916 - 150.969 561.885
Utah 7.368 2.103 45.737 55.208
Vermont 18.247 0.096 0.342 18.685
Virginia 102.699 69.747 83.236 255.682
Washington 181.824 3.133 29.201 214.158

Source: National Association of State Student Grant and Aid Programs


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