Many States Increased Student Aid Despite Recession, Data Show

July 15, 2013

Even as state spending on higher education was being propped up with federal stimulus money, states increased their amount of student financial aid by nearly 2 percent during the 2012 fiscal year, and used a larger share of that money for need-based aid than they had since 2003, according to an annual survey released on Monday.

While the total increase is relatively small, after adjusting for inflation, the survey reveals that many states shifted financial-aid dollars away from merit-based aid and nongrant aid, such as loan forgiveness and work-study, in order to spend more on grants based on financial need. And the data indicate that many states focused their financial aid on the neediest students, with 60 percent of the dollars going to families with incomes less than $40,000 annually.

The figures, compiled by the National Association of State Student Grant and Aid Programs, show that states spent $11.1-billion on student aid in 2011-12, with about 85 percent of that money being awarded in the form of grants and scholarships, mostly to undergraduate students.

Within that pool of grant money, nearly $7-billion was awarded based on financial need, an increase of 6 percent from the previous year. Oregon more than doubled the amount it spent on need-based grants, to nearly $44-million in the 2012 fiscal year. Washington State increased need-based grants by 26 percent, and Pennsylvania spent 24 percent more that year on such grants. State-by-state figures also show that 23 states cut need-based aid from 2011 to 2012.

At the same time, non-need-based grants declined by more than 9 percent, according to the survey. And nongrant aid, such as loans, work-study, and tuition waivers, also declined, falling 4 percent from 2011 to 2012.

The overall shift toward aid based on financial need shows that states are "being challenged to make the dollars they have available go as far as possible," according to a written statement by J. Ritchie Morrow, president of the association. One way to do that is by "developing the skills of the state's neediest residents," he said.

Correction (8/6/2013, 2:19 p.m.): This article originally misstated which year the survey covered. The latest results are for the 2012 fiscal year, not 2011. The article has been updated to reflect this correction.