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States Boost Merit-based Aid At Expense of Need-based Aid

Despite a turbulent economy and an increased demand for state-funded aid, state financial aid agencies awarded $9.3 billion in funds to students during the 2006-07 academic year — a 10 percent increase from last year’s $8.5 billion, according to recently released data in the National Association of State Student Grant and Aid Programs’ (NASSGAP) 38th annual survey.

Information from its recently released survey suggests that states have continued to focus on grant aid, making more than 3.7 million awards representing $7.6 billion in need and non-need-based grant aid, NASSGAP President Marilyn Cargill said in a statement. 

For many financial aid advocates, the report shows a continued trend that might hurt students who rely more on need-based aid and not merit-based aid. Of the grant funds awarded in 2006-07, 72 percent was need-based and 28 percent was nonneed-based — almost the same percentage seen in NASSGAPS report last year.

The report found that aid of all types that considers financial need, account for more than $5.2 billion of the $8.2 billion in aid reported as awarded to undergraduates. States have also remained committed to awarding special purpose aid targeting veterans and National Guard members, as well as teachers and nurses who serve in needy communities, the report found.

The report also found that funding for undergraduate need based aid increased by $336 million nationwide going from $4.9 billion in 2005-2006 to almost $5.3 billion in 2006-2007. The report showed that California, Illinois, Indiana, New Jersey, New York, Ohio, Pennsylvania, Texas and Washington were among the nine states that collectively awarded $3.6 billion in undergraduate need-based grant aid—over 69 percent of this type. California, through its need-based, “Cal Grant A, B, C” grant program awards up to $11,259 to students; Indiana’s “Indiana Higher Education Award & Freedom of Choice Grants,” up to $10, 272 and New Jersey’s tuition aid grant program, up to $10,142.

States offered other types of non-grant aid — mostly loans and tuition waivers, but also loan assumptions, conditional grants, work-study and tuition waivers collectively in the form of $1.7 billion.

South Carolina, Washington, D.C., Indiana, Georgia and New York provided the greatest amount of grant aid on a per capita basis and were the largest providers of aid per capita for students between the ages of 18-24.

States awarded graduate students financial aid mostly in the form of tuition waivers, need-based, and non-need-based grants.

Cargill, who is also the director of Financial Aid Delivery and Operations for the Vermont Student Assistance Corporation, said the survey is the only of its kind “and is used by respected researchers nationwide as the definitive source of state-funded student aid.”

For many students, these state funds, usually in the form of grants, have become the only way they can obtain higher education when combined with federal, institutional funds and private funds, according to NASSGAP.

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