Issue 17: Inspiration for Higher Education

Insights & Outlooks

From the State House to the Beltway: Truth Talk about State Financial Aid

Financial Aid Reforms
From the State House to the Beltway: Truth Talk about State Financial Aid

The federal role in financial aid policy tends to dominate the conversation around reauthorization of the Higher Education Act (HEA). However, rethinking financial aid cannot occur without the participation of one of the primary providers of student financial aid: states.

Despite the major role that states can play in the financial aid system, they can often be disconnected from federal-level conversations and reform solutions. This disconnection may stem from outdated misunderstandings about the role of states and state aid policies. I aim to right the record on three of these common misconceptions.  

Myth #1: States don’t provide significant aid, and the aid they do provide is declining.

States have gotten plenty of press on declining support for higher education. And yes, in many states, appropriations from state general funds have not – and are unlikely to – recover since the Great Recession. What gets less attention, however, is the fact that state spending on their aid programs has increased 8.7 percent in the last year, 30 percent since the start of the Great Recession, and a full 102.9 percent since the year 2000. In fact, state spending on financial aid programs is more robust than ever, topping out over $12 billion in 2017.

Myth #2: State financial aid programs are based on merit alone.

While federal Pell Grants are awarded based on financial need and academic progress requirements, states’ eligibility requirements are much more diverse. Some states have long-standing commitments to academic merit criteria –  Georgia is a classic example. And, the fact remains that 48 states have at least one aid program based on financial need criteria. In 2017, exclusively merit-based aid accounted for only 17.4 percent of state expenditures, while programs with exclusively need-based criteria accounted for 46.1 percent. The remaining 36.5 percent is comprised of programs with both need and non-need requirements.

Myth #3: States are a roadblock in federal aid reform efforts.

This is perhaps the most frequent refrain that I hear in federal circles, and it could not be farther from the truth. Most states have aid application, awarding, and disbursement processes that align closely with federal processes; policy choices are largely made to streamline efforts and reduce burden on students and institutions. This efficiency, however, is fragile. It requires that states are brought to the table as a partner in federal reform efforts. Requiring a seat at the table does not mean that states want to halt progress or change, rather, my experience indicates that states are hungry and ready to partner on improvements.

With significant investment at stake at both the federal and state levels, ensuring that financial aid systems are setting students up for the greatest degrees of success is imperative. To do this effectively, leaders should engage in meaningful collaboration around the various solutions on the table, ranging from postsecondary data concerns to FAFSA simplification to Pell Grant eligibility. These proposals all contain implications for state-level stakeholders. As leaders come together to rethink financial aid, the key role that state higher education leaders play should not be neglected.

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