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.

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)

Source: National Association of State Student Grant and Aid Programs