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States Dole Out More Aid for College, But Lags Behind Cost

Students received more dollars in state aid to attend college last year, but it still wasn't enough to keep up with rising tuition costs and inflation.

An annual survey by the National Association of State Student Grant and Aid Programs (or NASSGAP) shows that states spent 2.7 percent more on financial aid in 2008-09 than the previous year. For need-based and non-need-based grant aid for undergraduates, states spent on average 5.6 percent more.

Of the grant funds awarded last year, 72 percent was need-based and 28 percent was non-need-based, almost the same breakdown as seen in 2007-08.

While the boost was welcome, it doesn't completely cover the ever-increasing costs of college. The College Board reported that tuition at in-state, four-year public colleges rose by an average of 6.4 percent last year.

This was also the first time in 10 years that states didn't provide an increase in constant dollars—taking into account inflation—from one year to the next. Even in 2002-03, in the last economic downturn, funding increased by 1.2 percent in constant dollars. Last year, grant aid went up 7.1 percent, which was 4.6 percent adjusted for inflation.

Still, Lois Hollis, president of NASSCAP and special assistant to the deputy commissioner of the Texas Higher Education Coordinating Board, was encouraged by the report. "I was happily surprised that with the economic situation all the states are facing that they continued to put more money into these programs," she said. "There are lots of tough choices, but states are funding needy students."

The report says that most state economies are lagging behind any national fiscal recovery, meaning the worst might be yet to come at the state level. Next year, it may be more difficult to increase spending on aid as states run out of stimulus money, says Hollis.

All 50 states, plus the District of Columbia and Puerto Rico, have state-funded undergraduate programs with awards based solely on need. Thirty states identified programs which gave awards based only on merit. Exclusively need-based aid made up 48 percent of all aid to undergraduates; exclusively merit-based aid was 19 percent, with the remaining—33 percent—for other programs and by those with both need and merit components, according to the report.

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