State Student Aid, Before the Fall

You're familiar with the pattern by now: Groups release reports with data and analysis about various aspects of higher education finance, fund raising and other matters, but because they cover a time before the economy crashed late last year, the conclusions carry a big, fat asterisk.

The latest such report comes today from the National Association of State Student Grant and Aid Programs (NASSGAP), in the form of its annual look at how states have distributed financial support to students. The survey examines the 2007-8 fiscal year, which for most states ended in the middle of last year, and includes money that in most cases was allocated by legislatures during their 2007 sessions, when many states were flush.

As a result, the data from 2007-8 present an upbeat picture that is almost certainly not reflective of what most states, colleges and students are feeling now, or will be experiencing going forward, acknowledges Lee Andes, assistant director for financial aid at the State Council for Higher Education in Virginia and president of NASSGAP. "The 2007-8 numbers "demonstrate states' commitment to student grant aid," but they were clearly pre-recession, he said. The current economic crisis, he said, "will test many states’ ability to maintain the affordability of a college education."

The 2007-8 data showed total financial aid awarded by states to students growing by 7.1 percent over 2006-7, to $10.022 billion from $9.347 billion. Need-based grant aid rose at a rate of 5.9 percent, to $5.836 billion, 72.5 percent of all grant aid awarded by the states. That represented a slight upturn in the proportion of all grant aid that states distributed based on need; the comparable proportion was 72.1 percent in 2006-7, suggesting that states are beginning to respond to calls from policy makers and financial aid experts to emphasize financial aid for needy students over that awarded based on academic merit, which has been ascendant for a decade or so.

In another sign of a potential shift, need-based grant aid made up 64.8 percent of the $4.236 billion in undergraduate financial aid that states awarded in 2007-8, up from 63.9 percent in 2006-7.

The NASSGAP report shows several states ramping up their spending on need-based aid, including several that have in recent years focused most of their student aid on merit. Louisiana, for instance, awarded just $1.4 million in need-based aid in 2006-7, but $18 million in 2007-8. That's still far less than the nearly $120 million the state distributed in aid based on merit, but represents a sizable increase. Missouri nearly tripled its spending on need-based aid in 2007-8, to $72 million from $25 million in 2006-7, and Texas continued to ratchet up its hefty spending on need-based aid, which has risen from $66 million a decade ago to $337.5 million in 2005-6, $411 million in 2006-7, and $537.9 million in 2007-8.

As is historically the case, the bulk of the nation’s need-based aid comes from a handful of states. Nine states (California, Illinois, Indiana, New Jersey, New York, North Carolina, Pennsylvania, Texas and Washington) together awarded more than $3.8 billion in undergraduate grant aid based on need, 68 percent of the total.

Total Financial Aid Awarded, By State (in millions)

Source: National Association of State Student Grant and Aid Programs