First cash-strapped states> cut funding for public universities, forcing tuition hikes. Now many are cutting aid to students and in some cases, may not be able to make good on the aid they've promised. For students and their families, this introduces a whole new set of rules for applying for the aid that remains.
As it is, states give almost $680 million to students every year, which accounted for about 7.4% of the average need-based student's aid package in 2007-08, according to an analysis of the latest data by FinAid.org. Now that number's expected to drop. There are no national numbers as of yet, but reports of state cuts are trickling in: For the next academic year, Illinois will reduce its maximum awards by 5% and Texas' legislature has proposed a 41% reduction in its largest grant program. Already this year, New York cut awards from its largest grant program by about 2%. And now, some state executives are saying that grants awarded to students in their financial aid package over the next few weeks may never arrive; other students could wait months for the money, which could put students in a bind with the bursar's office. "In some states it could happen," says Sandy Baum, a higher education policy analyst and consultant for the College Board.
Some of the proposed changes would not only cut what aid is available, they would make fewer students eligible for aid. Several states are telling students that aid will be available on a first-come, first-served basis even eligible students will be shut out if they file after the government runs out of cash. And in New York, the governor is proposing stricter qualifications for aid for returning students, like maintaining better grades.
For students and their families, it all adds up to bigger bills, either today or in the future. With fewer grants, financial aid packages will likely include more loans money that has to be paid back. As it is, more families are using federal student loans: About 28% of families used student loans to pay for college in the 2009-10 academic year, up from 25% a year earlier, according to the most recent data from student loan company Sallie Mae.
It also means the money that's promised in a financial aid package might not materialize. Because states haven't finalized their budgets yet, state officers are currently making grants based on what they estimate will be available for grants in the fall, says Baum. But that money might not appear. Most states will pass their budgets for next year between April and July, and in most cases, higher education tops the list of cutbacks to come, says Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers.
If promised state grant money doesn't materialize, students could start the school year without enough money to pay tuition. In many cases, the college would have to decide whether to dip into its own coffers to make up for the lost aid or to tell students they're on the hook for the lost portion. In Texas, for example, the Higher Education Coordinating Board is telling colleges to be prepared to make up for the state grants they're including in new college students' financial aid packages for 2011-12. If colleges want to include state aid in the financial aid packages they offer to students, "they're doing it at their own risk if the money doesn't come through, they'll have to honor the commitment or be in a position to rescind those offers," says a spokesman for the board.
For students not yet enrolled, the financial math behind choosing a college has radically changed. Here are the new steps students and their parents can take to get more free aid.
Officially, students have a long time to file the Free Application for Federal Student Aid. In practice, students have typically had until June to get a shot at state grants. Not anymore. Illinois, Kentucky, Oregon, South Carolina and Tennessee have already announced that FAFSAs should be submitted immediately, and they will dole out grants in the order of applications received, until the money's gone. In a break with the traditional trends, families should no longer wait until their tax returns are ready to file the FAFSA, says Mark Kantrowitz, founder of FinAid.org, which tracks financial aid trends. Just get it in ASAP, with estimates using a W-2 and 1099 forms and the last pay stub of the year, and update the actual numbers once they're ready. This way, the FAFSA is filed on time while grant money is still up for grabs.
Ignore the bottom line
Typically, when financial aid packages arrive, students look at the total amount of free aid they're offered. But now, as state aid becomes less reliable, students may want to ignore state grants at least temporarily and then compare the aid packages, says Rod Bugarin, a former financial aid officer at Brown and Columbia universities. He advises looking for the school that offers to cover the biggest portion of tuition and fees with its own grants, which are guaranteed. Because while one financial aid package might look better because of the free state aid, that money might fall through. By comparing college grants instead, students can make sure that they're attending the most affordable college even if state aid is delayed or falls through. Also, if it isn't offered in the financial aid package, ask for work study, which colleges in conjunction with the federal government dole out to students for part-time work. And while those jobs are often coveted, an easier way to get one is to ask for community service jobs: The federal government requires community service to make up about 7% of work-study positions at each college, says Kantrowitz.
Search for scholarships
Financial aid practices have discouraged third-party scholarships, because many colleges will take away the grants they award students as a result. But now, students must contend with increased competition for state and school aid FAFSAs filed for the 2010-11 academic year so far are up 10% to 19.5 million, according to the Department of Education -- and states like Iowa and Minnesota say they're giving less to each student in order to provide aid for more applicants. Because the competition for grants is stiffer, there's less reason to worry about losing them if a student gets a scholarship. And scholarships from large companies and associations are more likely to come through, says Kantrowitz. Outside scholarship policies vary by school, but the most generous allow scholarships to substitute for federal student loans from the financial aid package.