As Scholarship Programs Strain, Will Students Begin to Lose HOPE?

Photo courtesy of the Georgia Institute of Technology
About half of Georgia Tech's class of 2014 will attend on HOPE dollars, but the program may not survive until their graduation. The state will have to dip into reserve funds this year and has projected that reserve will be gone by 2013 if nothing is done to scale back the program.

When Georgia launched a college scholarship program called HOPE back in 1993, it was the first financial-aid program of its kind. HOPE essentially made higher education free for all Georgia students who graduate from high school with a B average or higher. The only catch was that they had to attend an in-state public college or university and maintain that 3.0 grade point average.

The program, funded by proceeds from a state lottery, became instantly popular. Bright students, who otherwise might have left Georgia for colleges in other states, instead stayed home to claim a free ride. (Flat-rate awards of $1,750 per semester are available to attend private schools in Georgia.) More than a dozen states, from Florida to New Mexico, followed Georgia's lead by setting up merit-based scholarship programs of their own.

Now, however, the weak economy is giving Georgia's pioneering program the biggest fiscal test of its 17-year history. The lottery proceeds that HOPE relies upon have leveled off. Meanwhile, tuition costs — a key cost driver for the program — have doubled to make up for cuts in state funding to higher ed. On top of that, enrollments are booming at public universities, colleges and technical colleges, as some students opt not to go to expensive private schools. Add it all up, and more students than ever before — about 103,000 of them — are taking advantage of HOPE scholarship money, at a higher price than ever before. The program gave out almost $400 million in scholarships last year.

The result is that the future is looking ominous. This year, for the first time in HOPE's history, Georgia will have to tap into a billion-dollar reserve fund to pay all the awards and grants to qualifying students. According to the Georgia Student Finance Commission, which administers the scholarship program, that reserve will be depleted by 2013 if no changes to the program are made. Already, HOPE scholars will lose their $300 annual book stipend and money for some mandatory fees when reserve levels dip below trigger points that are predicted to be reached in the next three years. Next month, the House Higher Education committee of the Georgia General Assembly will meet to discuss ways to trim HOPE's budget.

Scaling back

Many of the other state scholarship programs are facing some of the same fiscal challenges Georgia's is. What their experience shoring up their programs suggests is that there aren't any easy options.

One possibility is to reduce the amount of the scholarship. That's what Florida did with its "Bright Futures" award and West Virginia did with its "Promise" scholarship. Rather than guaranteeing to cover 100 percent of ever-increasing tuition rates, those states now offer students awards at a flat rate. The benefit of that strategy is that it allows for more control over budgetary planning. However, it makes college less affordable for many families and disproportionately affects those with lower incomes.

The other option is to reduce the number of students who are eligible for the scholarships. West Virginia has done this by steadily increasing the academic standards required to qualify for a scholarship. The original plan only required students to carry a 3.0 GPA. Now, they're also required to score at least a 22 out of a possible 36 on the ACT college-entrance exam, and score no lower than a 20 on any of the four ACT subject-area tests.

That, too, has negative side effects. Upping academic standards steers awards toward students who are likely to attend college anyway. And it steers money away from lower-income students, minorities and those who are the first in their families to attend college. "If you're a student from a rural community or a first-generation college student," says Brian E. Noland, chancellor of the West Virginia Higher Education Policy Commission, "your odds of scoring a 22 on the ACT are marginal at best."

Tennessee's HOPE program, created in 2002, was designed to mitigate that impact. Looked upon as a model program by some experts, it doles out awards on a sliding scale based on both merit and economic need. Students are given a base award of $4,000 if they have either a high school GPA of 3.0 or an ACT score of 19. Supplemental awards are available for students with even higher marks, or for students who come from households with incomes below a certain level.

Tennessee also defines merit more broadly than West Virginia now does. Tennessee's eligibility criteria include one carefully chosen word: "or." When legislators were laying out the plans for the scholarship, they found that giving HOPE to students with a 3.0 GPA "or" a 19 ACT score, instead of the more common GPA "and" ACT qualifications, doubled the percentage of projected eligible students who were African-American.


Adjustments in Georgia

Georgia legislators will be taking all these factors into consideration when they look at how to change their own HOPE program. It isn't the first time they've had to make adjustments. In 2004, fear that the program was growing too quickly forced lawmakers to tweak how eligibility is determined, which later reduced the new recipient pool by almost one-third. They also laid out a modest plan to reduce the award's fringe benefits when the balance of the HOPE reserve fund declines past certain trigger points.

Narrowing the recipient pool to lower-income students has not been looked upon favorably in the past. When HOPE was created, there was an income limit on those who could receive the scholarship. Two years later, when lottery sales exceeded expectations, the cap was removed, to the delight of middle-class voters. The idea of going back to an income cap is a political hot wire.

"The fact of the matter is that we have a merit-based scholarship," says David Lee, vice president of strategic research and analysis of the Georgia Student Finance Commission. "And through that scholarship, we distribute a lot of money to needy students anyway."


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