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FAFSA changes and rising need shift MHEC financial‑aid budget focus; analysts propose cuts to some programs
Summary
Analysts told the subcommittee FAFSA technical changes have changed eligibility and increased applications for certain state grants. DLS recommended trimming underspent programs; MHEC officials asked for time to evaluate transitions and urged preserving funding for Promise and other student‑aid programs.
Department of Legislative Services testimony and MHEC officials at the Education and Economic Development Subcommittee hearing outlined how federal FAFSA changes and state budget decisions are reshaping Maryland’s student financial‑aid landscape.
DLS analyst Micah Richards told the panel that the federal FAFSA Simplification Act replaced the expected family contribution (EFC) with the student aid index (SAI). Technical and implementation challenges delayed applicants for one award year and contributed to a roughly 3% drop in FAFSA submissions in Maryland for the 2024–25 award year, Richards said. Despite that, MHEC reported Maine’s FAFSA completion rate remained above the national average (the DLS presentation reported Maryland’s FAFSA completion as roughly 50% versus a 46% national average).
Changes to SAI and statute increased the number of students eligible for the Guaranteed Access (GA) grants; DLS noted GA initial awards rose significantly (DLS reported a 69% increase in initial GA awards in FY25 compared to FY24). Richards also reported that many state programs have historically underspent appropriations; DLS recommended reducing mandated funding levels or appropriations for several programs — including a proposed $5 million reduction in the Community College Promise Scholarship and $4 million in reductions for the Teaching Fellows scholarship program — because of consistent underspending.
MHEC and Office of Student Financial Assistance (OSFA) representatives testified about efforts to modernize systems and outreach. Al Dorsett, OSFA executive director, described procurement and implementation of a modern financial aid management system to replace the older MDcap system, and noted efforts to adapt outreach to police, probation and other prospective scholarship applicants following prior underspending of legislatively mandated appropriations.
MHEC officials opposed some of the DLS proposed reductions and asked for at least two years to let program changes — such as a decentralization of Promise scholarship administration to colleges — settle so the state can better judge utilization. MHEC also said some underspending reflects implementation timing, student cancellation rules (for example, Promise cancellations when students do not enroll with minimum credits), and the transition to part‑time eligibility in some programs.
Why it matters: State financial aid programs fund college access for low‑ and moderate‑income Marylanders. DLS’s proposed reductions are intended to reallocate limited state dollars where they will be spent; MHEC’s response stressed implementation changes and outreach efforts to increase uptake and avoid reducing aid prematurely.
The committee asked MHEC to provide additional reports requested in prior budget language — including a review of the agency’s financial aid website and an analysis of credit‑completion requirements’ effect on award eligibility — and DLS indicated it would recommend that withheld funds be released if MHEC’s reports meet the statutory requirements. No final appropriations decisions were made during the hearing.
