As they grapple with crippling budget shortfalls, states are weighing whether to cut back on merit-aid scholarship programs that benefit hundreds of thousands of college students every year.
Since the early 1990s, more than 15 states have launched broad-based programs that offer students scholarships and tuition breaks based solely on grades, class rank and test scores. Supporters say such programs boost college-enrollment rates and help persuade high achievers to remain in their home states. Critics maintain that the programs siphon aid money away from students with financial need in favor of some who probably could have afforded college without the help.
The National Association of State Student Grant and Aid Programs, an organization of agencies responsible for state financial-aid programs, says merit grants accounted for $2.08 billion, or 28%, of all state-sponsored grants awarded in its latest tally, covering the 2006-2007 academic year. That’s up from $458.9 million in 1996-1997, when merit-aid accounted for about 15% of all state grants.
But the economic crisis has raised fears that such growth may be unsustainable, as tax revenue plunges and legislatures make drastic cuts to other state programs. And the pinch comes just as layoffs and investment losses affecting millions of families are likely to boost demand for financial aid based on need.