Outlook bleak for state-funded college financial aid

The state of Minnesota's fiscal woes could impact a cash-strapped government program that provides financial aid for needy college students.

If lawmakers aren't able to find millions of dollars to prop up the program this session, thousands of college students could see a decrease in their financial aid next year.

An essential program for some students

The Minnesota State Grant Program provides financial aid to college students from low and middle-income families. The average award is more than $1,700 dollars.

Last fall 76,000 Minnesota college students received aid through the program, 20 percent more than the year before.

That was partly driven by an overall increase in enrollment at public and private colleges in Minnesota.

Mark Misukanis, the director of finance and research at the Minnesota Office of Higher Education, said the poor economy meant more of those students needed help paying for college.

"The family income might have dropped simply because mom or dad lost their job last year and they may have been making $80,000 before and now they're down under $50,000," he said.

A stretched budget

Faced with a greater need for financial aid for more students, the Minnesota Office of Higher Education could have simply offered students less money than it had promised. But officials at the state agency didn't think that sounded fair. So they drained their $145 million dollar budget and borrowed money from next year's budget to give students what they were promised.

Now Misukanis said in order to meet next year's demand for financial aid, they need another $41.6 million dollars in state funds.

"Failing that, we have the authority in current law to make some changes as well to reduce the awards to students in order to bring the spending within the resources available," Misukanis said.

If reductions were spread among all students eligible for the State Grant Program, it could mean a few hundred dollars less in aid for tens of thousands of students. Currently 70 percent of students receiving state grant money come from families that make less than $40,000 a year.

That's a concern for Jennifer Weil, chair of the Minnesota State University Student Association. Weil said financial aid is more important than ever, because the poor economy has pushed people back to school.

"For many people, receiving aid is the only way that they're able to afford going back to college and furthering their education," Weil said.

That demand is why state Rep. Tom Rukavina, DFL-Virginia, said lawmakers should find more money for student financial aid. Rukavina chairs a house committee that oversees higher education funding. Rukavina is also running for governor.

"I want us to find $40 million and then find maybe under $20 million to put in there because it's really necessary right now in these tough economic times," Rukavina said.

State Sen. Sandy Pappas, DFL-St. Paul, who chairs a senate higher education committee, said finding that money in light of the state's $1.2 billion dollar deficit isn't likely. Pappas said one way to come up with the extra funds would be to raise revenue through taxes, something Gov. Tim Pawlenty firmly opposes.

Problem exists nation-wide

Haley Chitty, a spokesman for the National Association of Student Financial Aid Administrators, says states across the country are dealing with similar challenges in funding student aid.

"What you're seeing in Minnesota reflects what's going on nationwide," Chitty said. "We've seen dramatic increases in the number of students who apply for financial aid, and qualify for financial aid."

While states work to spread out their financial aid money, the federal government is actually increasing aid to needy students. The Pell Grant program increased its maximum payment by $200 this year, and will increase it by another $200 next year.

Officials at Minnesota's Office of Higher Education say that increase may merely soften the financial blow to students who could get less aid from the state next year. They say for most students it won't make up for the decrease.