LANSING – A report released by the House Fiscal Agency recently said the state’s change from the Michigan Merit Award to the Michigan Promise Grant, which separates out financial aid to students based on finishing their coursework instead of giving them a lump sum at the start of their freshman year of college, could bring Michigan above the national average for financial aid assistance in the upcoming fiscal year.

Because the Promise Grant includes “back-end” payments to students, giving them $2,000 at the start of college but waiting until they complete two years of school to give them the other $2,000, the state is expected to spend $50 million to $60 million more on that program in the 2009-2010 fiscal year.

The state currently ranks 22nd in terms of how much state financial aid, both non-need and need-based, is provided to undergraduate students. With the state spending $501 per student, that is $112 below the national average. According to the National Association of State Student Grant and Aid Programs, South Carolina ranked first, providing $1,788 per student in financial aid.

However, because the Promise Grant is exam-based and not need-based, HFA noted that with that anticipated increase in spending the percentage of state financial aid provided to need-based students will decline further below the country’s average. Currently, 56.2 percent of the state’s financial aid for college is need-based.

The report also noted that between the state’s competitive scholarship and Promise Grant (and old Merit Award) 57 percent of the financial aid has an exam component.

HFA noted that eventually, the Promise Grant appropriation could be more than $100 million above the 2008-09 appropriation. Since the money comes from the Merit Award Trust Fund that could put greater strain on other programs funded through that fund such as Medicaid base funding.

Overall, state financial aid programs have grown by 118.8 percent to $230.4 million since fiscal year 1998-99.

At the same time, state appropriations for higher education increased by 3.1 percent, while community colleges got a 5.3 percent bump in funding.

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