College financial aid shrinking as demand booms

MADISON, Wis. – Struggling with budget shortfalls that reach into the billions, several states are making deep cuts in college financial aid programs, including those that provide a vital source of cash for students who most need the money.

At least a dozen states are reducing award sizes, eliminating grants and tightening eligibility guidelines because of a lack of money. At the same time, the number of students seeking aid is rising sharply as more people seek a college education and need help paying the tuition bill because they or their parents lost jobs and savings during the recession.

Many of the affected programs are need-based grants that provide money that complements financial aid offered by schools and the federal government. Without that cash, some students might be forced to drop out, transfer to cheaper schools or simply have less money available for rent and groceries. Experts fear others will take on too much debt or spend even more time working as they pursue a degree.

“There’s almost no question the folks coming in are probably going to have much more difficulty getting by year to year in college and staying enrolled as a result,” said Sara Goldrick-Rab, an assistant professor at the University of Wisconsin-Madison and an expert on financial aid. “The safety net is falling away.”

State financial aid accounted for 12 percent of the grants awarded to college students in 2007-08, according to the New York-based College Board. While that’s a fraction of the financial aid provided to millions of students by schools, the federal government and private scholarships, the demand for aid is booming. Roughly 620,000 more students applied for federal aid in the first quarter compared with last year, a jump of more than 25 percent, according to the U.S. Department of Education.

University of Illinois senior Brandi Cho, 21, said her parents cannot afford to make up the $2,500 she expected to do without after her state grant runs out in the spring. She is considering two options: find a second weekend job on top of the 15 hours a week she already works, or cram five senior-level accounting classes into the fall semester to graduate early.

“The best that I can do is just start saving every penny that I have,” Cho said.

The cuts come as lawmakers and governors struggle to balance budgets crippled by the recession’s impact on tax revenues. Lottery-funded merit aid programs in states such as Georgia, Florida and West Virginia are also pinched as revenues from the games are leveling off and in some cases declining.

Education Sector, a Washington, D.C.-based think tank, warned in a recent study that student debt was at an all-time high, with a rising share owed to riskier private student loans. The study warned that could eventually reduce access to higher education and lead to more students defaulting on their loans.

“It’s going to start to impact the equation of whether college is worth it for some students,” said Erin Dillon, a policy analyst for the group.

Wisconsin decided to slightly increase the average grant awards because students are showing much greater need, said Connie Hutchison, the executive secretary of the Wisconsin Higher Educational Aids Board. That meant university students who applied in July for aid are learning the pool of money has run out.

“We’re getting a lot of questions about why students are not getting financial aid they got last year,” Hutchison said. “It’s so hard to explain to them.”