States Grow Need-Based Aid

States are increasing the financial aid they provide to undergraduates, with need-based aid rising at a much faster pace than non-need-based aid.

Funding for undergraduate need-based grant aid increased nationwide from about $7 billion in 2013 to about $7.4 billion in 2014, an increase of 4 percent when adjusted for inflation, according to a report released today by the National Association of State Student Grant and Aid Programs.

Need-based aid accounts for about three-fourths of all state grant aid, which in 2014 totaled $11.7 billion. Though overall aid also grew last year -- at an adjusted rate of 1.6 percent -- the growth of need-based aid was more than double.

Non-need-based aid grew less than a percent last year, when adjusted for inflation.

“The last few years the pendulum has swung back toward need-based aid,” said Frank Ballmann, director of NASSGAP’s Washington office. “As states have had budget shortfalls, they’ve realized it’s much more efficient to help people who would not otherwise go to college, or pay for college, then it is to try to help everyone equally.”

He continued: “If I’m a student from an upper-middle-class family, there’s a good chance I’m going to go to college one way or the other. But if I’m from a lower-income family, the probability of going to college without financial aid is pretty much zero.”

States increased need-based aid in 2013 as well, growing such aid 3.5 percent even as overall spending on aid reached a plateau that year.

Need-based aid by state:

The average amount of need-based aid per undergraduate in 2014 was $533, up from $509 the previous year. Yet funding varies vastly depending on the state; for example, Washington awarded $1,316 per student while South Dakota awarded $5 per undergraduate.

In fact, eight states distribute 70 percent, or $5.2 billion, of all the need-based aid awarded in the country. Those states include California, New York, Texas, Pennsylvania, New Jersey, Illinois, Washington and North Carolina. And two states, Georgia and New Hampshire, have no need-based aid programs. Yet Georgia’s non-need-based aid is the most generous of any other state, awarding some $570 million in 2014.

That year 35 states increased or held close to level spending for their primary need­-based grant program, and the average award amounts to students increased about 5 percent from the year before. Such increases reflect an effort by states “to recognize that the cost of attending [college] is rising,” said Ballmann.

Though much of the aid distributed by states is either need based or non-need based, some of the grants are a mix of both. According to the report, 47 percent was exclusively need based, 18 percent was non-need based and 34 percent was a mix.

Fully 85 percent of state aid in 2014 was in the form of grants -- roughly 4.5 million of them nationwide. The rest of state aid -- some $1.7 billion -- was distributed in the form of loans, loan assumptions, conditional grants, work-study and tuition waivers. Loans and tuition waivers accounted for about two-thirds of nongrant funds awarded.