KY Policy Blog

Study Calls for New Approach to State Financial Aid

By Ashley Spalding
May 16, 2012

A new report by the Brookings Institution makes the case for overhauling state financial aid grant programs to focus on “students whose chances of enrolling and succeeding in college will be most improved by the receipt of state support.” Brookings suggests that financial aid should target students with the greatest financial need—particularly those from low- and moderate-income families—while also tying that aid to advancement toward a college degree.

Yet in Kentucky, the report notes, only 49 percent of state aid is based on financial need, compared to 73 percent of all US state grants. As described in previous KCEP reports, Kentucky prioritizes the merit-based Kentucky Educational Excellence Scholarship (KEES) program over the need-based College Access Program (CAP) by fully funding KEES but denying CAP to two-thirds of those who are eligible.

The report indicates that merit-based grants like KEES tend to disproportionately benefit students from middle- to high-income backgrounds and suggests that in order to target less affluent students, state grant programs refrain from measuring academic achievement in terms of exceptionally high grades and test scores in high school (which is the basis for KEES). Indeed, data from the Kentucky Higher Education Assistance Authority shows that one-third of KEES monies go to the highest-earning 20 percent of aid applicants whose median family income is $106,940 a year.

Instead, grant programs should be designed to provide incentives for students who need financial support to make good progress toward degree completion (i.e., providing aid based on students successfully earning college credits). The report also criticizes policies that provide state aid to those who apply early and deny aid to those who apply after the money runs out—which is how Kentucky allocates resources for its need-based College Access Program (CAP). There are other options for making good use of scarce funds—for instance, lowering income limits, reducing grants for all recipients—with the neediest students losing the least—or building into the programs more incentives for college completion.

John Hayek of Kentucky’s Council on Postsecondary Education is one of the report’s co-authors.

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