Student grant program could soon see red ink, higher education officials say

We have good news and bad news: More students are going to college in Minnesota.

How could a rise in enrollment be seen as bad news after so many years of declines? Because more of those students are procuring state financial aid and possibly pushing the state grant program into red ink.

That scenario was presented to the House Higher Education Finance and Policy Committee on Thursday. The Minnesota State system has seen a 3.4% enrollment increase this school year, and about 1,100 more students have applied for state grants.

“Our state grant program does fund anyone who applies and is eligible for a state grant,” said Nicole Whelan, state grant research manager for the Office of Higher Education. “Which is a great thing, but also makes it kind of hard to forecast what kinds of appropriations and resources are needed for the program.”

For fiscal year 2024, the Office of Higher Education was allocated $231.9 million for the state grant program. The latest budget forecast has a spending projection for the program of $229.5 million.

But the outlook isn’t as sunny for fiscal year 2025. The program’s allocation is $224.2 million, but it’s expected to spend $244.9 million.

For the biennium, that adds up to costs of $18.3 million above available resources (or about 4%).

There are other factors behind the projected deficit. Changes in the federal needs analysis formula have had a multimillion-dollar impact on the state grant program.

“On average, we anticipate that the decrease in state grant to students would be roughly $160,” Whelan said.

The solution to past deficits has usually involved reducing awards to students. The current plan is to increase the assigned student responsibility for grant recipients from 50% to 50.8%, and the assigned family responsibility by about 10%.

The revised parameters for student grants will be set once tuition and fees have been set by Minnesota State and the University of Minnesota and the congressional appropriations process has determined the maximum federal Pell Grant award amount.

“We won’t know how it’s going to shake out until we start getting FAFSAs,” Whelan said, speaking of the Free Application for Federal Student Aid, which is currently undergoing revisions to the family need calculation. “Typically, the Federal Office of Student Aid starts getting FAFSAs to us in October. … The last guidance we got is that FAFSAs should be trickling into states and institutions by mid-March, which is next week.”

“They have a queue of over 5 million FAFSAs,” said Meghan Flores, state grant and financial aid manager for the Office of Higher Education. “We are in unprecedented territory.”