Center for American Progress

As Debates Over College Costs Make Waves in South Carolina, It’s Time to Boost Need-Based Aid Nationwide

As Debates Over College Costs Make Waves in South Carolina, It’s Time to Boost Need-Based Aid Nationwide

The steep costs of higher education highlight a fundamental problem with how states distribute grant dollars.

Students pose for pictures at a South Carolina graduation ceremony. (Getty/Jeffrey Greenberg)
Students pose for pictures at a South Carolina graduation ceremony. (Getty/Jeffrey Greenberg)

High schools across South Carolina are holding College Application Month events this fall, rallying seniors across the state to submit their applications for the Free Application for Federal Student Aid (FAFSA). Many of these students, however, will likely be disappointed when they discover that financial need does not necessarily translate into generous financial aid.

College affordability has been a highly debated topic in South Carolina this year. Tuition costs have increased 11 percent since the 2010-11 school year and 47 percent since the 2004-05 school year at public four-year institutions. In the spring, the South Carolina Commission on Higher Education hosted town hall meetings that drew standing-room-only crowds of parents, students, and small-business owners voicing discontent about soaring tuition prices. Commission Chairman Tim Hofferth has called the inflating budgets of public universities “the next billion-dollar crisis in South Carolina,” brought on, he argues, by bloated staff, increasing construction debt, and other irresponsible spending. University officials, on the other hand, blame low state appropriations for driving up tuition.

Amid the finger pointing, however, a crucial point has been largely overlooked. South Carolina funds a robust grant program for in-state students. Unfortunately, the vast majority of this aid is distributed on the basis of academic merit rather than financial need. This limits money that goes to low-income students, making college more out of reach for those who could benefit most from a degree.

Across the United States, just 46 percent of state-funded undergraduate aid was based exclusively on need in the 2015-16 school year, meaning that more than half included a component of merit. The debate in South Carolina provides a helpful example of what can go wrong when conversations about college affordability fail to prioritize equity.

Financial aid without equity

State higher education budgets are composed of two major expenditures: institutional appropriations and student grants. In South Carolina, nearly two-fifths of the higher education budget—about $385 million in 2015, the largest share in the country—went directly to students. This works out to an average of about $2,000 worth of grants per full-time student.

While the state’s commitment to student support is laudable, it has unfortunately been misdirected. Only 8 percent of state grant funds to public college students were distributed based solely on student financial need. Three-quarters of the aid was based solely on merit, with the remaining aid somewhere in between. As a result, the amount of need-based aid students received totals only $358 per student, on average. Although South Carolina spends more than any other state, the District of Columbia, or Puerto Rico on student grants in terms of both the share of total spending and raw dollar amount spent per full-time-equivalent undergraduate, it ranks 23rd in its spending on need-based aid among all 50 U.S. states, the District of Columbia, and Puerto Rico.

While some low-income students qualify for merit-based state grants, there is plentiful evidence showing that state merit-based aid programs disproportionately benefit white and upper-income students. Merit-based aid has also been shown to be associated with decreased enrollment of low-income students, exacerbating existing disparities in higher education equity and opportunity.

To make matters worse, South Carolina is already home to one of the most expensive systems of public higher education in the country. In the 2018-19 school year, in-state tuition and fees at the state’s public four-year institutions are the ninth-highest in the nation. A 2016 report from the University of Pennsylvania’s Institute for Research on Higher Education ranked South Carolina 44th among all 50 states in higher education affordability. Families earning less than $30,000 per year must, on average, spend 87 percent of their income to afford one year at one of South Carolina’s three public research universities. With 28 percent of families in the state falling into this group, the lack of need-based grants further undermines the mission of public higher education: to provide affordable college options to residents. 

Why need-based grants matter

Need-based grants play an important role in ensuring that low-income students are able to enroll and succeed in college. Literature shows that need-based grant aid increases the enrollment and persistence of low-income students. For example, the results of a study focusing on Florida’s state aid program found that low-income students receiving an additional $1,300 in state grant aid were 12 percent more likely to enroll at public four-year institutions immediately after high school and 22 percent more likely to earn a bachelor’s degree in six years than their peers who did not.

Merit-based grant programs, however, have been shown to negatively affect the enrollment of low-income and underrepresented students, widening racial and socio-economic enrollment gaps. For example, Georgia’s Helping Outstanding Pupils Educationally  (HOPE) scholarship highlights how a merit aid program can disproportionately help higher-income students. Forty-two percent of middle- and high-income students who begin enrollment at a public university in Georgia receive the scholarship, compared with only 30 percent of Georgia’s low-income students. With just half of the state’s low-income high school graduates enrolling in college—far below the national average of two-thirds—the state could help close these enrollment gaps by investing more in its low-income students.

Without adequate grants and scholarships, low-income students must either turn to loans to fund their education or forgo college completely. This outcome can have long-term negative repercussions for low-income borrowers, who are particularly at risk of defaulting on their loans: 87 percent of federal loan defaulters received a Pell Grant at some point during their education, even though they make up just 68 percent of all borrowers.

Policymakers and advocates must prioritize need-based aid

Advocates in South Carolina should use the opportunity created by the current outrage over affordability to turn the conversation toward the importance of financial aid that supports students most in need. Concerns around state appropriations, responsible institutional spending, and affordable tuition sticker prices—the list price before aid factors in—are pieces of the puzzle, but policymakers and the public must recognize that they cannot help students meet their potential without an expansion of need-based aid.

Outside South Carolina, state policymakers must turn their attention toward funding for students who most need financial support. While 49 states invest dollars in grant programs with a need component, only 17 states award at least 75 percent of aid dollars based solely on need. State legislatures must realize that need-based programs can help low- and middle-income students receive a college education, helping foster talent, keep borrowing and default rates low, and break the cycle of inequality that the U.S. public education system too often perpetuates.

Rachel Gentry is a former intern for Postsecondary Education at the Center for American Progress.

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Rachel Gentry