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The Need for Need-Based Aid

Many low-income college students will still receive up to $5,500 in Pell grants during the 2012-2013 academic year, thanks to federal budget negotiations that staved off a reduction in the maximum grant level. But changes to eligibility requirements for the grants could mean that an estimated 100,000 students will face additional financial barriers to enrolling in and completing college. Students without a GED and part-time students who take longer than 12 semesters to finish their degrees, such as many working parents, will no longer be eligible. And students must now have family incomes below $23,000 - rather than $30,000 - to automatically qualify for a grant at the maximum level.

In this current budget climate, the changes certainly could have been worse. But they’re part of a larger, concerning trend: dwindling sources of need-based grants, which we know can make the difference between dropping out and a diploma.  Low-income, degree-seeking students who receive Pell grants complete their studies at higher rates than those without the grant funding (National Center for Education Statistics). The students who no longer quality for Pell grants have few need-based alternatives beyond additional student loans. These are the same students already carrying significant educational debt, and who face the risk of defaulting on payments.

A shift towards more merit-based aid at the state level and at individual institutions has also widened the funding gap for low-income students.  In the last twenty years, state-level merit-based aid, as a percentage of total state aid, has grown from 11% to 28% (College Board). Merit-based aid recipients are more likely than ever to be from higher income brackets, meaning that the funding is less likely to be a “make or break” factor in college attendance. During the 1995-1996 academic year, 51% of merit-based aid went to high middle income and high income students. By 2007-2008, this had grown to 57% (Institute for Higher Education Policy). 

According to one national expert we spoke with recently, “Merit aid exacerbates the inequality that already exists within the current education system.  The student who was privileged enough to get a good education in high school is rewarded and is given additional resources for [their] college education, while the student who was not privileged in high school is not rewarded.”  If we are most interested in increasing the number of students who earn degrees, shifting aid towards the students more likely to finish college – even without that aid – isn’t an efficient way to do it.

With the bleak state of our national budget, it’s unlikely that federal funds for need-based aid will grow any time in the near future.  It’s worth reconsidering the shift towards merit-based aid among other funders, and ensuring that limited resources target the low-income students we know will benefit most.

Amber Johnson Binkley

Former Associate Director