Report Urges Better Coordination, Accountability in State Aid

• State-Funded Student Aid is Growing, May Not Be Achieving Policy Goals
• Changes in state-funded aid are typically ad hoc, not planned
• Increased spending is for merit and special purpose programs; need-based aid lags
• States account for aid, but aren’t linking aid to accountability for results

Washington, D.C., Jan. 8, 2003—State student aid can be stronger and more effective if policymakers institute coordinated, state-level management strategies for administering, funding and evaluating their aid programs, according to a new report from the Institute for Higher Education Policy.

Eleven states, those making some of the biggest investments in state aid, are included in the report—California, Florida, Illinois, Minnesota, New Jersey, New York, Ohio, Pennsylvania, Texas, Vermont, and Virginia. Although the 11 profiled states are placing more emphasis than ever on funding for student aid, the report points out that student aid has not been truly integrated into their overall strategies for higher education. Instead, state aid programs typically are managed as supplemental, categorical programs often separated from other aspects of higher education policy and finance.

The report points out that state-funded aid has increased in almost all of the states surveyed, in part because of growth in merit or special purpose aid programs, not in need-based aid. At the same time, most states are under-funding their own goals for need-based grant programs. There are exceptions. California has greatly expanded funding for need-based aid, as has Texas. In contrast, Minnesota grant aid increased by only 2 percent. Funding for need-based aid also has eroded in Illinois, a state that historically has protected need-based aid.

“We tried to determine how these states that are leaders in spending on aid, have integrated stated-funded aid into their overall strategy for paying for higher education,” said Jane Wellman, author of the report and a Senior Associate at the Institute for Higher Education Policy. “What we found is that despite a good deal of attention to the issue, their efforts are largely ad hoc, and poorly linked to larger strategies for financing higher education.”

Wellman found that one of the weaknesses in state aid lies in incomplete assessments of how all resources are used. Some types of aid are incorporated into annual accountings for student aid, while others—in particular, tuition waivers and tax credits—are left off the table. In addition, analyses of spending for student aid are not connected to evaluations of how institutional subsidies are being spent. State decision makers, as a result, get a distorted picture of who is getting what types of support to go to college. Reports on the effectiveness of state student aid tend to be reports about application and award trends, rather than evidence showing how student aid is being used to support student affordability and college choice. Wellman believes that what she calls a “weak accountability structure” may be contributing to the erosion of legislative support for need-based aid.

The report calls upon the states to develop coordinated, statewide policies for administering, funding and evaluating student aid, to

• Count all the money – subsidies, state aid, tuition waivers and tax credits.
• Set hard-edged goals for need-based student aid of affordability and choice.
• Use these goals as the basis for public accountability measures about the effectiveness of state funded aid.
• Ensure that funding policies support goals – through entitlements or other commitments to need-based aid as the first priority for state funds.
• Avoid special interest programs; evaluate existing programs and, if possible, discontinue programs that have no track record of success.

The Institute for Higher Education Policy is a non-profit, non-partisan research group whose mission is to foster access to and quality in postsecondary education. The Institute’s activities, designed to promote innovative solutions for complex issues, include research and policy analysis, policy formulation, program evaluation and seminars and colloquia.

This report, “Accounting for State Student Aid: How State Policy and Student Aid Connect,” is one of a series of reports and papers in the Institute’s New Millennium Project on Higher Education Costs, Pricing and Productivity. The New Millennium Project, supported jointly by the Ford Foundation and The Education Resources Institute (TERI), addresses strategies that can be used at the state or institutional level to cope with the rapidly changing funding climate characterized by reduced state appropriations and rising tuitions.

Copies of the report are available free to the public from the Institute for Higher Education Policy at (202) 861-8223 or by downloading the report from the website at www.ihep.org