Responding to Cutbacks in State Grant Programs

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John W. Dysart
The Dysart Group, Inc.


The poor economy is challenging for colleges and universities in many ways.  This has been a particularly difficult year for financial aid as states eliminate or reduce state grants.  Colleges and universities need to develop plans for dealing with reductions in state grants as this trend is likely to continue over the next several years.

Some states are reducing commitments to state grants by making application deadlines earlier.  This has the political advantage of keeping award amounts level, while guaranteeing that overall expenditures will be reduced.  Fortunately for colleges and universities, much can be done to mitigate the impact of changes in deadlines.  Financial Aid Offices can be charged with making sure that students do not miss the deadlines.  It is easy to track currently enrolled students who have been eligible for state grants in the past.  The key is to take extraordinary measures to make sure these students apply for financial aid in time to meet new deadlines.  This involves much more than just sending a letter or making an announcement in the school newspaper.  All available communication mechanisms should be utilized to communicate with students and their families to encourage early application.  Institutions must take full responsibility for ensuring state grant deadlines are met.  The implications for retention and cash flow are serious. This is the only scenario where the institution has a significant level of control.

Often, state grant reductions are achieved by cutting award amounts across the board.  This creates a more difficult challenge for colleges and university leaders.  There are several possible approaches:

· The institution can just ignore the state grant reductions in the packaging strategy and assume that students and their families will be able to cover the shortfall.  Such an approach maximizes net revenue for the college or university.  While this can be a reasonable approach if the reductions are small, it may not be if the cuts amount to $500 or more.  Shifting the reduction to the student and family may have negative implications for both recruitment and retention.

· Some · Some schools elect to cover the entire shortfall with institutional aid funds.  This is no doubt the best option for supporting recruitment and retention efforts.  The problem is that many institutions simply cannot afford to absorb the extra expense.

· Other schools elect to replace a set portion of the shortfall.  For example, institutional leaders may decide to cover 50% of the state grant reduction for all eligible students.  While this option is definitely fair, it may not be the best choice for many schools.

· Colleges and universities sometimes set aside a pool of institutional funds and allow these funds to be awarded to students whose state grants were reduced at the discretion of the Director of Financial Aid.  In such a scenario, the Director allocates the limited funds on those students with the greatest financial need.

· Using an appeal process is another option.  Under this strategy, institutional representatives do not replace cuts in state grants as new and returning students are packaged.  Additional funding is only considered on a case-by-case basis upon appeal.

There are no right or wrong answers.  The goal is to make the right choice for your particular institution.  This is a decision that should not be made by the Financial Aid Office alone.  At minimum, the Director of Financial Aid, the Chief Financial Officer, the Chief Enrollment Officer, the Chief Retention Officer and the Director of Admission should be involved in the decision-making process.  It is never too early to begin these important discussions.  Cuts in state grants are likely to get even worse before they get better and do not be surprised if some states eliminate their higher education scholarship and grant programs altogether in the next few years.

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