Making Financial Aid Work for Students and States

Jun 13, 2012 by Josh Diller

This is the first blog in a three-part series regarding career readiness after college.

The combined unemployment and underemployment rate for recent college graduates was more than 28% between April 2011 and March 2012, despite well-established data demonstrating the benefits of completing a college degree. State policymakers can mitigate this structural and economic problem by encouraging stronger alignment between degree production and workforce needs.

A three-part blog series will explore policy options that states and institutions could consider to reduce the level of unemployment among recent graduates. The first appears below:

Consider changes to financial aid policies that would provide incentives for students to pursue degrees that are in high demand in the state or region.

Implementing a policy based on this principle can provide a number of benefits, including:

• Helping ensure that the higher education system is producing a sufficient number of graduates skilled in the particular areas demanded by the state economy
• Providing an opportunity for institutions and states to tie financial aid to student performance metrics, such as progress towards degree, without affecting base financial aid
• Reducing the number of low-income students – those who are the least likely to have a substantial safety net – who will find themselves unable to find a job that utilizes their degree after graduation.

Across the nation, states already have begun implementing a variety of financial aid policies intended to increase degree completion in high-need areas. These policies can be divided into three key categories:

1)      Policies that target specific programs. Many states have enacted laws designed to increase degree completion in specific careers, typically in health care or education. California, for example, created a nursing pilot program in 2010, where students receive financial aid and intensive student supports to facilitate degree attainment. Programs like these are ideal for filling very specific workforce needs, but tend to be too narrowly targeted to provide a noticeable benefit to the student population as a whole.

2)      Policies that focus on high-demand career clusters but do not contain a need-based component. Legislation in several states provides additional financial aid to students who enter high-demand fields regardless of financial need. Among these states, Utah provides a scholarship to students who are enrolled in engineering, computer sciences, or related technology degrees and who continue to make satisfactory progress towards a degree. North Dakota provides scholarships to students enrolled in career and technical education programs who maintain a minimum 2.75 GPA.

3)      Policies that focus on high-demand career clusters and contain a substantial need-based component.  A few states have implemented programs that are designed to provide additional financial aid to students with demonstrated financial need who are seeking degrees in high-need areas. Texas has grant programs for both two-year and four-year institutions in which students receive a need-based scholarship if they pursue a major in a shortage field and maintain satisfactory progress towards a degree. Illinois, Montana, and Washington have similar programs, each targeting a different group of students pursuing particular careers.

A review of the policies that have been created in recent years demonstrates a wide range of options that institutions and states can consider to provide students with greater opportunities for success after graduation. Depending on the needs and characteristics of your constituency a variety of components may be appropriate for your policy, including: academic merit, financial need, demographic characteristics, and workforce needs.

Josh Diller is completing an internship with the Education Commission of the States. He is a graduate student pursuing a Masters of Public Administration at the University of Colorado Denver.