The blog of the Urban Institute
May 28, 2021

States Have an Opportunity to Strengthen College Grant Aid Programs

May 28, 2021

Unexpectedly good news about state budgets as the nation emerges from the coronavirus crisis creates a unique opportunity for policymakers to strengthen their states’ grant programs, which increase opportunities for low- and moderate-income students to enroll and succeed in college.

State and local tax receipts increased more rapidly than expenditures between 2020 and 2021, and adding transfers from the federal government creates an even more positive scenario for some states. That the postpandemic fiscal outlook in most states is not nearly as bleak as many had feared, combined with the stark differences in the pandemic’s impact on adults with college degrees and those with only a high school education, suggests now is a good time for states to consider strengthening state grant programs that support college students. Budget surpluses may be fleeting, but the damage to students whose plans have been sidetracked by the pandemic will be long-lasting if states don’t make a significant effort to support them.

California’s fiscal situation is particularly strong, with the projected budget deficit turning into a large surplus. In light of this surplus, California is on a path to strengthening its state grant programs for college students.

The Cal Grant Equity Framework, proposed by the California Student Aid Commission in collaboration with students, higher education leaders, and other key stakeholders, is a model in many ways. It eliminates restrictions based on age and high school graduation date; such restrictions exclude many adults seeking to update their skills. It attempts to sync as much as possible with impending changes to federal student aid. It aims to coordinate institutional grant aid at public universities with state grant aid to help students with living expenses, in addition to tuition and fees. It allocates funding for middle-income students whose incomes are too high for them to qualify for federal Pell grants. And it facilitates access to public income support benefits to help students with low labor market earnings cover living expenses while they are in school.

One of the most encouraging aspects of the proposed changes in the California student aid system is that many of them grow out of evidence-based recommendations developed by researchers, including myself, who have studied the system with the goal of increasing its equity and effectiveness. California can provide an example for other states looking to reform their grant aid systems.

Funding for grant aid to students amounts to about 13 percent (PDF) of total state funding for higher education, ranging from no grant aid at all to more than 30 percent of the total. When it is based on students’ financial circumstances (need-based aid), grant aid can target funds to the students most in need of financial support. The optimal program structure depends on state demographics, attendance patterns at different types of institutions in the state, and the state’s priorities.

But there are basic principles states can follow, even those that cannot entertain expensive changes to their grant program. All states should be asking not only whether their state grant programs are adequately funded but also whether they reach the students who could benefit most from their support. Encouraging students to enroll in college immediately after they graduate from high school and to attend full time may increase their chances for success. But including students who do not meet these standards is likely to allow many students needing assistance to complete college programs that significantly increase their career options. Funding all eligible students may be costly in the short run, but it is likely to increase tax revenues and reduce need for income support programs in the long run. Paying attention to program design elements, such as avoiding sharp breaks in the aid available to students whose financial circumstances differ only slightly from those receiving more generous grants, simplifying application processes, and including students accepted for enrollment despite less-than-stellar high school records, can increase equity and make the program more effective in reaching its goals.

Before the pandemic, many states could have benefited from updating their state grant programs for college students by increasing funding and simplifying programs, making them more transparent to students and families, and modifying eligibility criteria to ensure programs reach more of the students who depend on these programs to complete a college education. By making inequalities in our economy and our society more visible, the coronavirus crisis has also made the need for increased investment in our citizens’ futures more apparent. That many states have both the opportunity to rethink and some resources available to augment their programs makes it all the timelier to encourage California and other states to update their state grant programs to help build back a stronger, more resilient economy and prepare their citizens for successful lives.


The Urban Institute has the evidence to show what it will take to create a society where everyone has a fair shot at achieving their vision of success. 

Show your support for research and data that ignite change. 

(Klaus Vedfelt / Getty Images)

SHARE THIS PAGE

As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.