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Some states move toward financial aid based on need rather than merit

Sophie Quinton, Stateline.org on

Published in News & Features

State-funded merit scholarships are politically popular. But as college tuition rises, policymakers in some states are starting to rethink financial aid that disproportionately benefits white, wealthy students and often duplicates scholarships awarded by public universities.

Lawmakers in Georgia added a need-based grant last year, as did Utah lawmakers this year. Mississippi and Louisiana are locked in long-running debates over how to best spend aid money as costs rise.

And Utah may be poised to take a radical step: Last month, the Utah State Board of Regents recommended lawmakers eliminate two merit scholarships -- which comprise 90% of annual state financial aid spending -- and instead spend 70% of the state's $20 million annual financial aid budget on grants for students struggling to pay for college.

"I think the Regents were asking themselves: What's the best use of finite state funds, and how can we ensure that all Utah students know that college is accessible and available to them?" said Melanie Heath, assistant commissioner for communications and outreach at the Utah System of Higher Education.

While states are spending less per student on higher education than they were about 20 years ago, they're spending more on financial aid, according to the State Higher Education Executive Officers Association, a membership group based in Boulder, Colo. State financial aid spending has more than doubled since 2000 to $10.6 billion.

Most state aid dollars are spent on grants for low-income and middle-class students. But 10 states and Washington, D.C., spend more than two-thirds of their financial aid budgets on grants that reward students for their high school grades and test scores, regardless of family income.

 

Merit aid supporters have historically argued that since the federal Pell Grant helps low-income students pay for college, states should spend their financial aid money on a complementary program to reward and retain high-achievers, said Sarah Pingel, a senior policy analyst at Education Commission of the States, an education policy research organization based in Denver.

Some states are starting to question that approach, Pingel said. "College affordability issues are touching so many more students now than they used to."

To be sure, at least one state is moving in the opposite direction and newly embracing merit aid. Illinois lawmakers created the state's first state-funded merit scholarship last year, and this year increased its funding by $10 million to $35 million in addition to increasing need-based aid funding by $50 million.

Democratic Gov. J.B. Pritzker called for more money for both types of grants in his February budget speech, saying he wants to fund merit aid "so we can keep our best and brightest in Illinois."

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