States will have to use student-aid grants more efficiently to get the most value from that spending and increase the number of college graduates, recommends a new report being released on Tuesday.
A major key to doing that is to eliminate the "dichotomy" between need-based and merit-based student aid, says the report, which was written by researchers at the Brown Center on Education Policy at the Brookings Institution. Instead of giving out state aid based only on financial need or academic achievement, grants should be awarded to students who have some need and who are likely to succeed because of that financial incentive, the report says.
That approach could require students to make progress toward completing their degrees, not just to maintain a certain grade-point average, in order to continue receiving aid.
A few states, including Minnesota and West Virginia, are already doing that, according to the report. The Minnesota program gives full-time awards to students who qualify and are enrolled for at least 15 credit hours. The West Virginia program requires students to complete at least 30 credit hours per year and to maintain a 3.0 grade-point average.
"Programs that only require a certain GPA may encourage students to take fewer courses or easier courses in order to earn higher grades," the report says.
Moreover, the report says, "Many state aid programs create incentives for students to go to college, and to go to certain types of college (e.g., in-state public universities), but few programs incentivize specific behaviors in college that encourage progress toward a degree."
Another key recommendation is to consolidate and simplify the number of state grant programs, the authors write.
"Many states have multiple state grant programs, increasing administrative costs and making it difficult for students to understand and predict the awards for which they will be eligible," the report says.
Florida and North Carolina, for example, each have 11 different state aid programs, according to data in the report.
But the array of aid programs have varying requirements and application processes, placing an additional burden on parents and students who are also trying to navigate the financial-aid requirements of the federal government and the institution, says the report.
The need to overhaul state grants should be an increasing concern to policy makers and lawmakers, the authors write, because of the continuing constraints on state money, previous cuts in higher-education appropriations, rising tuition, and stagnant household incomes.
On average, states spend about 10 percent of their budgets on higher education. While total grant dollars, adjusted for inflation, more than quadrupled from 1980-81 to 2010-11, to about $9.2-billion, they still make up just 12 percent of state spending on higher education, the report says.
And even as state budgets slowly emerge from the economic downturn, higher education will continue to face competition for tax dollars with the Medicaid program and elementary and secondary education—typically the two largest portions of state budgets.