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State grant program faces projected deficit; formula levers highlighted as options
Summary
House staff told the committee the state grant program has a projected shortfall driven by enrollment increases and FAFSA changes; staff outlined how cost is calculated and which formula elements the legislature can change.
Nonpartisan legislative staff told the House Higher Education Finance and Policy Committee that Minnesota’s largest financial aid program, the state grant, faces a significant projected deficit and that the legislature can adjust formula levers to control program cost.
Nathan Hopkins, legislative analyst with House Research, walked members through how a state grant award is calculated and which inputs the legislature can change. ‘‘A student's grant amount typically equals the cost of attendance, minus the assigned student responsibility, minus the assigned family responsibility, minus the Pell grant,’’ Hopkins said. He described cost of attendance components (tuition and fees capped at the highest equivalent public institution, plus living and miscellaneous expenses), the assigned student responsibility (commonly a 50 percent share), and the assigned family responsibility (the FAFSA-derived Student Aid Index multiplied by statutory percentages). Hopkins noted the Student Aid Index can now be negative under current federal rules, which affects award calculations.
Hopkins gave FY2023 baseline figures: the state grant served 67,854 students and distributed $215,000,000 in total awards, producing an average award of $3,168. He told members that 54 percent of recipients had family incomes under $40,000.
Hopkins said the projected deficit is driven largely by enrollment increases among higher-need students and larger-than-expected impacts from FAFSA changes. He also reminded the committee that the Office of Higher Education (OHE) has statutory authority to reduce or increase awards to accommodate insufficient or surplus appropriations; staff said such adjustments typically occur in the second year of a biennium when transfers between years are possible.
Members asked clarifying questions about residency definitions and how awards were adjusted in the current biennium; staff said they would follow up with more precise residency criteria and specific reduction figures. Representative Robbins asked whether the FY2023 averages included the reductions enacted in year two; staff replied FY2023 numbers were pre-reduction and said they would provide post-adjustment figures on request.
The committee did not take formal action during the briefing. Staff framed the state grant program as a policy lever: adjusting living and miscellaneous expense assumptions, the assigned student responsibility percentage, family contribution multipliers, or tuition caps would change program cost and therefore the appropriation needed to maintain award levels.
No final policy decision was made; staff recommended members consider which formula components to change if the committee elects to address the projected deficit in statute rather than rely on administrative adjustments by OHE.
