# Presentation: 521169

## Merit and Need-Based Aid:Recent Changes in State and Institutional Policy

- Dr. Donald E. Heller
- Center for the Study of Higher andPostsecondary Education
- University of Michigan

- Advisory Committee on Student Financial Assistance
- Boston, Massachusetts

## Topics

- Trends in state financial aid spending
- Current status and recent developments in state aid
- Trends in institutional financial aid spending
- Recent developments
- Parting thoughts

## State Financial Aid Programs – Highlights

- Spending on undergraduate aid increased from $974 million in FY82 to $3.6 billion in FY99
- Comparison with other indicators:
- Proportion of undergraduate aid spent on merit programs increased from 9.0% to 18.6%

## Increases in State Aid Spending

**Index 1982 = 100**

## Largest State Programs – FY99*

- (1)	New York	$619M
- (2)	California	$332M
- (3)	Illinois	$316M
- (4)	Pennsylvania	$271M
- (6)	New Jersey	$161M

- (5)	Georgia	$221M
- (7)	Florida	$133M
- (16)	Louisiana	$54M
- (18)	North Carolina	$53M
- (19)	Ohio	$52M

- _Need-based Programs_	_Non-need Programs_

- *Preliminary estimates

- 	58% of total	77% of total

- Overall rank of all programs in parentheses

## State Programs – Recent Developments

**Michigan Merit Scholarship**: $2,500 - $3,000 based on test scores; $50M in FY01 from tobacco settlement funds
**Kentucky Educational Excellence Scholarship**: up to $2,000 based on HS GPA (with $500 bonus based on ACT); $40M in FY99 from state lottery
**Louisiana Tuition Opportunity Program for Students**: Full tuition at public institutions based on HS GPA and test scores; $62M in FY00 from general fund

## State Programs – Recent Developments (cont.)

**Texas Toward Excellence, Access, & Success Grant: **Full tuition for completing college-prep curriculum (income <$40K); $50M in FY00 from general fund** **
**Alabama HOPE Scholarship:** Voted last October against a lottery to fund merit scholarships
**South Carolina:** Will vote this November on lottery to fund education programs

## Preliminary Evidence From Michigan

- % of eligible students earning scholarship

- Scholarship Recipients by School Free Lunch Quartile

## Preliminary Evidence From Michigan (cont.)

- % of eligible students earning scholarship

- Scholarship Recipients by Race/Ethnicity

## Institutional Aid Trends

- Institutional aid spending is rising at faster rates than other aid categories:

**Change in Spending per Total Enrollment, FY1990 to FY1996**

## Institutional Aid Trends (cont.)

- Full-time, dependent students (data from NPSAS) – Overall aid increased 111% from $2.24B to $4.73B
- While the *number* of need grants grew faster than merit grants, the *size* of merit grants grew faster

**Changes, AY1989/90 to AY1995/96**

## Institutional Aid – Distribution Among Incomes

**Distribution of Aided Students & Grant Spending — All 4-Year Institutions**

- $21,800

- $60,000

- $72,500

- $25,000

- Income
- Cutoff

- Income
- Cutoff

## Institutional Aid – Recent Developments

- Increased media attention to:
- merit aid
- package negotiations
- stanching the “brain drain”
- Retreat from commitment to meet full need
- Changes to needs analysis and packaging:
- eliminate/cap home value (Princeton, Stanford)
- replace loans with grants (Princeton)
- expand asset exemption (Yale)
- exempt outside scholarships (Stanford, Harvard)
- reduce self-help level (Harvard, MIT)

## Parting Thoughts

- Affordability defined more as an issue for middle- and upper-class families
- Growth of high-stakes testing (linked to HS and college graduation, financial aid)
- Popularity of alternative funding sources for aid (lottery, tobacco settlement funds)
- Focus on scholarships for “rewarding hard work”
- Lack of coordinated policy initiatives across federal, state, and institutional levels