In the midst of a grueling recession and widespread budget cuts, a new report found states have increased spending on need-based and non-need-based grants by 9.8 percent this past year to aid students suffering from the stagnant economy.

The statistic was released by the National Association of State Student Grant and Aid Programs in its 33rd annual report.

Financial aid increased to $5.14 billion; this increase is smaller than the landmark 14.5 percent rise in the 2000-2001 academic year. Considering current economic hardships, experts say any increase is remarkable.

The report examined spending by the 50 states plus the District of Columbia and Puerto Rico, starting with the academic year that began just before the attacks of Sept. 11, 2001, when states first started to go public with impending budget problems. The full brunt of the recession had yet to hit.

But the economy has certainly hit colleges since then, with some states currently cutting higher-education budgets midyear, these cuts have resulted in reports from students and parents that they are not receiving as much aid as the state had promised. The weak economy has led to more students becoming eligible for need-based aid as their bank accounts and their parents’ dwindle.

University of Wisconsin economics professor Donald Nichols said this is expected because, in most cases, increases in financial-aid spending are offsets to tuition increases that are voted for at the same time.
“The aids and tuition are usually packaged together in the minds of the legislatures,” Nichols said. “They increase tuition in order to pay for a larger share of the university’s costs through tuition, but they then absorb the impact of this on lower-income students through increases in financial aid.”

Nichols explained the increases are not a net gain to the students because the financial aid is likely to cover only tuition increases.

“It is not a net increase in aid that any student will see,” he added. “The students will, in fact, have to turn all that aid over in the form of higher tuition.”

UW Board of Regents president Guy Gottschalk said people across Wisconsin strongly support increasing financial aid for the most disadvantaged students. However, parents and students agreed with the regents’ position that it is unfair to fund financial-aid increases by increasing other funds or using student fees set aside for other important projects. He urged legislators to find a permanent funding source.

“We must work with the president, the chancellors, state leaders and our constituents to chart the best course possible for the university’s future,” Gottschalk said. “A lot of people are depending on us. We are obliged to carry on our predecessors’ traditions of access, excellence and affordability in this era.”

But cuts are already being felt in Wisconsin. The state cut overall financial aid to roughly $73.4-million, down $2.9-million or 3.8 percent.

But even though the economy kept getting sour, other states continued to pour money into financial aid. During the past two academic years, 40 states increased their spending while 11 decreased it; one state reported no change.

However, education-finance experts said the outlook for the upcoming 2003-4 academic year does not look nearly as bright. Economic and political demands might force some states with traditionally strong financial-aid programs to decrease their amount of aid.