Strong economy fuels drop in college students seeking grants, PHEAA reports

PHEAA's Board of Directors meets in Harrisburg on Feb. 20. Capital-Star photo by Elizabeth Hardison.

As student debt and college tuition rates rise in Pennsylvania, fewer in-state students are seeking and receiving state grants that help them pay for their education, state student loan officials confirmed Thursday.

The Pennsylvania Higher Education Assistance Agency, which administers state-supported scholarship programs, expects to distribute grants from its flagship scholarship fund to 136,000 students this year — a three percent decline from last year, when it gave out 140,000 awards, budget documents show.

An agency spokesman said that the number of students seeking financial aid has fallen amid sinking college enrollment rates and a period of low unemployment.

“A strong economy leads to a downturn in applications,” PHEAA spokesman Keith New told the Capital-Star after an agency board meeting in Harrisburg.

Applications for student financial aid have fallen at a similar rate over the same time period, New said.

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PHEAA anticipates that awards from the Pennsylvania State Grant program will decline by another three percent in the 2020-2021 fiscal year, which starts July 1, Nathan Hench, vice president for public affairs, told board members. 

The Pennsylvania State Grants are one of PHEAA’s bedrock financial aid programs. The grants, which provide up to $4,123 to each recipient annually, are awarded to students based on financial need and do not have to be repaid. 

While fewer students may be matriculating into college and seeking aid, state and federal data show higher education isn’t becoming more affordable.

Shrinking student populations have led to budget cuts and tuition hikes in Pennsylvania’s state university system, which is currently ranked as the least affordable in the nation, the Associated Press reports

Data from the State Higher Education Executive Officers Association show Pennsylvania provided less funding for each student in public universities in 2018 than it did in 2000.   

Meanwhile, student loan burdens in Pennsylvania have crept to their highest levels in decades. 

The average student debt amount in the Commonwealth topped $37,000 in 2018, according to the Institute for College Success and Access, a D.C.-based research organization. 

Only Connecticut logged a higher student loan burden that year. 

PHEAA executives say that the state grants are an important tool to reduce student debt. 

An internal study presented to the board Thursday found that high-need students who received Pennsylvania State Grant awards borrowed $9,200 less in loans over four years than similar students who did not get them.

Officials also say that affluent families are increasingly applying for student aid, which shows the difficulty of funding college education “at all levels” of income, Elizabeth McCloud, PHEAA’s vice president of grants and special programs, said.

New said PHEAA expects to raise the cap on state grant awards next year. The agency has requested a $341 million appropriation in the 2020-2021 state budget — a 9.7 percent increase from its current $311 million appropriation.

PHEAA intends to supplement that appropriation with revenue from its private student loan servicing arm, which in December extended a $1.2 billion contract with the federal Department of Education. 

It will also roll over any surplus from this year’s PA State Grants program, New said.

The current $4,123 cap on Pennsylvania State Grants has held steady for three consecutive years, according to PennLive. Even if PHEAA’s board votes to raise it this year, it’s less certain whether they will tweak their award criteria to make the grants available to families with moderate to high incomes.

New said, “We have a finite amount of funds, and we [want] to make sure those who have the financial need receive the award.”

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