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Colorado Mulls Tying College Progress to Financial Aid

Colorado is on the verge of trying something innovative with its state financial-aid dollars: Giving students more money each year in college, as an incentive for them to progress and for colleges to provide supports that promote completion.

Last year, the threat of a $30 million cut in aid for Colorado college students prompted policymakers to think hard about how the state gives out its money—about $100 million a year, says Matt Gianneschi, deputy executive director of the Colorado Commission on Higher Education. Although the major reduction didn't materialize, the commission explored ways to prioritize its spending on students with the fewest resources and connect the concept of need and merit-based financial aid.

After consulting with respected financial-aid experts, Colorado developed a progressive, performance-based financial-aid model. It would give schools a set amount of aid for each eligible freshman ($600), but higher amounts for sophomores ($800), juniors ($1,000), and seniors ($1,200). To promote graduation in four years, the aid dollars would drop again to $600 each for fifth-year seniors. Colleges still have latitude in packaging awards, but the new approach gives an incentive to cultivate upperclassmen.

In Colorado, the state legislature approves the amount of financial aid to be given to students annually, but the higher ed. commission determines how it will be distributed. The new approach was introduced to the commission at a retreat in August, was revised this fall, and is expected to get final approval at a meeting Jan. 22. (For the latest discussion, click here.)

No other state has adopted such a strategy, as far as Gianneschi knows, but it is based on policy ideas promoted by the Brookings Institution earlier this year.

"We are trying to intentionally tie funding efforts to our state plan," he says. "If the goal is timely completion and to get credit hours, you can do it through mandate or incentive." The hope is that being intentional with how the money is granted will influence student behavior—and give colleges a reward for providing services to retain students. The change is not intended to take away funds, but rather to create an incentive to support low-income students all the way to graduation, says Gianneschi.

Policymakers are not linking aid with grades, he added. That could prompt students to take easier courses or majors rather than pursuing high-demand careers, such as engineering, he says. The model also gives equal financial-aid support to students going part and full time.

Like many states, Colorado has experienced a growing demand for financial aid since the recession. The number of students eligible for need based-aid has increased from about 57,000 in 2007 to more than 82,000. This has forced the state to ration its aid dollars and figure out how to "do the most good" with the money it has, says Gianneschi. And that meant crafting a system that would reward student progress.

"We want students to persist and graduate. That's the point at which the state receives a return on its investment," says Gianneschi.

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