What is the Minnesota State Grant?

The Minnesota State Grant Program (MSG) is a state-level financial aid program for undergraduate students from Minnesota with demonstrated financial need who attend college in Minnesota.  When it was created in 1967, the law specified that “…the identification of young men and women of the state who are economically disadvantaged and the encouragement of their educational development in eligible institutions of their choosing are in the best interests of the state and of the students.”  The statute related to the MSG has been amended over forty times since 1967.  It is currently housed in chapter 136A of the Minnesota Statutes, a chapter which covers all higher education policies.  The specific provision related to the MSG is described in 136A.121.

In Fiscal Year 2019,^[1] 79,805 students received the Minnesota State Grant.^[2] According to the Minnesota Private Colleges Council, that represents about 44% of all undergraduate students in Minnesota.  About 64% of grant recipients attend a Minnesota State or University of Minnesota school and about 30% attend a four-year private college.  The rest attend for-profit schools.^[3]  The minimum award is $100 per year and the maximum award ranges from about $8,000 at a public two-year college to over $12,000 at a private four-year college.  The average student at a four-year college receives just over $4,000 per year.^[4]

The MSG targets college students from low and moderate-income families.  Students must meet seven qualifications to be eligible for the grant.  First, a student must be a resident of the state.  Second, the student must be a graduate of a Minnesota high school or have an equivalent degree (GED).  Third, the student must be at least 17 years old.  Fourth, the student must be admitted to an eligible college or university and be enrolled in at least three credits per term.  Fifth, the student must have demonstrated financial need.  Sixth, the student cannot be in default on a federal or state educational loan.  And seventh, the student cannot owe court-ordered child support.  The grant is good for up to eight semesters of full-time attendance assuming the student continues to meet the eligibility requirements.

Students apply for the grant when submitting the Free Application for Federal Student Aid (FAFSA) application, the same form that is used to award federal loans and grants.  An algorithm is used by the U.S. Department of Education to calculate the student’s financial need and this information is sent to the Minnesota Office of Higher Education, the student, and to any colleges the student listed on the FAFSA.  Minnesota colleges and universities are responsible for establishing that the student meets other qualifications such as being a Minnesota resident and graduating from a Minnesota high school (or equivalent).  The college or university then uses this information to calculate a student’s grant eligibility and the money is awarded directly to the institution.  Colleges and universities are responsible for reporting the award information to the Office of Higher Education each month.

The grant functions as a voucher that students can redeem at the college or university of their choice as long as it is deemed to be an eligible institution.  An institution’s eligibility is determined by the Minnesota Office of Higher Education, which reviews the list of colleges and universities each year.  To be eligible, a college or university must be located in Minnesota.  It must offer at least one program that is vocational or academic, leads to a degree or certificate, is at least eight weeks long, and involves at least 12 academic credits (or 300 hours).  Schools that meet those criteria must also have the capacity to administer the program and provide regular data to the Office of Higher Education.  There are currently about 100 Minnesota colleges or universities, ranging from private colleges like Gustavus, to state universities like the University of Minnesota and Minnesota State University Mankato, to community colleges like Anoka-Ramsey Community College or the Fond Du Lac Tribal and Community College, to technical schools like the Nova Academy of Cosmetology in Mankato or Hennepin Technical College.

There is a fairly complicated formula used to calculate the amount of aid a student receives from the MSG.  The state sets the formula based on the average price of attending a state university (tuition, fees, and living expenses).^[5] This amount can be adjusted by the legislature each year.  Students are expected to contribute 50% toward this cost.  This is referred to as the student share (formally called the assigned student responsibility).    FAFSA determines what portion of the other 50% is expected from the student’s family. This is called the parent contribution and is used to calculate the assigned family responsibility.  The federal Pell grant and MN state grant make up the difference between the parent’s contribution and the 50% mark.

The MSG receives an annual appropriation from the legislature.  It is not an entitlement program, so grants are awarded based on available funding.  Entitlement programs are those in which benefits are awarded to anyone who meets the criteria for the program.  If there are more people who meet the criteria for the program, the program will spend more money than originally planned.  Social Security, Medicare, Medicaid, Temporary Assistance for Needy Families, and the Supplemental Nutrition Assistance Program are examples of federal entitlement programs.  In contrast, if there is not enough money to fund the full amount for all of the students who are eligible to receive the Minnesota State Grant, the Office of Higher Education reduces grant awards across the board.

Context & Background

The landscape of education policy is shaped heavily by federalism, with education policy largely set by the states and local governments.  Rather than developing a federal system of colleges and universities, Congress opted to turn responsibility for higher education to the states.  In the 1862 Morrill Land Grant Act, the federal government provided every state with 30,000 acres of land to create state-run colleges and universities with very few guidelines attached other than the requirement that they offer specialization in “agriculture and the mechanic arts” (known as “A&M” colleges).  With this delegation of authority, states have generally supported higher education generally through state colleges and universities as lawmakers view higher education as a public good.

Over the years, states developed programs to support the pursuit of higher education.  Some of these programs involve direct funding of state schools, while others provide funding directly to students.  According to the National Association of Student Financial Aid Administrators, almost every state has at least one grant or scholarship available to residents.^[6]

In Minnesota, funding for higher education encompasses both of these approaches  The legislature provides direct funding for the state college and university systems, the Minnesota State system (26  colleges and 7 universities across 54 campuses) and the University of Minnesota system (5 campuses: Twin Cities, Crookston, Duluth, Morris, and Rochester).  The legislature also provides funding for the MSG and several smaller financial aid programs.  These two areas of spending are not equal.  In the most recent appropriations bill, the MN State and UM systems would receive nearly $3 billion (over two years) while the MSG would receive $421 million over the same period.^[7]

For students and families, the price of college education has increased substantially in recent years.  According to a study by researchers at Georgetown University, from 1980-2019, college costs increased by 169%.^[8]  Minnesota students attending the University of Minnesota can expect to pay over $30,000 per year for tuition, room, board, and living expenses.  Tuition, room, and board at Gustavus is currently over $65,000 per year.  With college costs rising, students rely on government grants like the Minnesota State Grant to afford higher education.

The MSG is funded through appropriations bills passed by the legislature.  Minnesota enacts budgets for a two-year cycle (a biennium), beginning on July 1 of each odd-numbered year. By law, the Governor must propose a biennial budget in January of odd numbered years.  Once enacted by the Legislature, the budget can be modified in the “off-year” legislative session. As a result of state forecasts and other changes, it has become common for the Legislature to enact annual revisions to the state’s biennial budget. These revisions are referred to as supplemental budgets.  This process means that funding for the Minnesota State Grant is almost always up for debate.

One factor influencing this debate is a projected budget surplus of historic proportions.  In a forecast released in December 2022, the Minnesota Office of Management and Budget announced that it projects a $17.6 billion budget surplus over the next two years.^[9]  This means that the legislature has big decisions to make about how this money should be spent.

Recent Policy Action

Over the years, the MSG has been modified in many ways.  One change was to extend eligibility to students who had to withdraw from college for active military service.  Another change created more flexibility for students needing to withdraw as a result of a serious health condition.

Current efforts related to the Minnesota State Grant are designed to increase the size of grants.  One mechanism for achieving this outcome is to increase the living allowance (called the Living and Miscellaneous Expense Allowance, or LME), which is generally lower than the actual cost of living.  A second approach is to decrease the share of the cost that students are expected to pay in calculating the award (the student share) or to decrease the amount families are expected to contribute (the assigned family responsibility).

One example of a bill addressing the student share was SF 1975 introduced to the Senate on March 11, 2021 by David Tomassoni (I) and co-sponsored by Gregory Clausen (DFL) and Mike Goggin (R) (Incidentally, Goggin is a Gustavus graduate) proposed reducing student share from 50% to 47%.  The Senate Higher Education Finance and Policy Committee held a hearing on the bill on March 11, 2021, which featured testimony from Gustavus student Brenda DeRosas Lazaro ‘22) and discussed including the proposal in the higher education omnibus bill.  An omnibus bill is when legislators bundle up a bunch of bills on the same general topic into one large bill and the Minnesota legislature does it frequently rather than passing each bill separately.

Proposed modifications to the Minnesota State Grant were included in the Omnibus Higher Education Policy and Finance Bill (SF 975) during the 2021 session of the legislature.  SF 975 was introduced in the Senate on February 11, 2021 by Senator David Tomassoni, an Independent representing an area of north central Minnesota.  A comparison bill (HF 993) was introduced the same day in the House by Representative Connie Bernardy, a DFL member representing parts of Anoka and Ramsey counties.  Tomassoni chaired the Senate Higher Education and Finance Committee and Bernardy chaired the House Higher Education Finance and Policy Committee.^[10]

The House Higher Education Finance and Policy Committee and House Ways and Means Committee both reviewed the proposal favorably, as did the Senate Higher Education Finance and Policy Committee and the Senate Finance Committee.  SF 975 was approved by a vote of 38-29 and sent to the House

Because there were differences between the Senate version and the House version of the legislation, a conference committee was created with five members from the House and five members from the Senate to negotiate differences.  In terms of proposals related to the Minnesota State Grant, there were relatively minor differences between the House version and the Senate version, with the House version being more generous towards students.^[11]  The House version included about $2 million more in funding ($210,587,000 in FYs 22 and 23 instead of $208,401,000) and increased the living allowance from 106% of the poverty level to 113% (the Senate version also increased it but only to 107% of the poverty level).  Both versions added a semester of eligibility to students who had to withdraw due to serious health conditions or who had to care for family members with serious health conditions.  While these differences were not huge in the grand scheme of things, the omnibus bill included funding and program changes to all state higher education programs in a bill that was nearly 70 pages long.  The conference committee was able to negotiate through the differences, but ran out of time for final passage before the legislature adjourned for the year.^[12]

The proposal was reintroduced in new bills (HF 7 and SF 18) in a special session that was called by the governor.^[13]  This time, both chambers moved quickly, winning approval from the Senate Finance committee and the House Ways and Means Committee within a few days.  The House voted to pass HF 7 on June 19 by a vote of 71-57 and the Senate agreed to the House version on June 21 by a 66-0 vote.  The bill was signed by the governor on June 26,2021.

The bill that passed allocated $3.51 billion toward higher education, although only a small portion of that went toward the MSG.  In the end, the bill set appropriations for the MSG at $210,037,000 for both 2022 and 2023, added the extra semester of eligibility for illness or caretaking, increased the expense allowance to from 106% to 109% of the federal poverty guidelines, and reduced the assigned family responsibility…but it did not include language from SF 1975 to reduce the student share.

Key Actors and Arguments

As the discussion of recent policy action indicates, the MSG is supported by both Democratic and Republican legislators, with some of the greatest support coming from legislators who serve on the Senate Higher Education Committee (formerly called the Higher Education and Policy Committee) and the House Higher Education Finance and Policy Committee.  The policy appeals to both liberals, who like the emphasis on educational access, and conservatives, who like the emphasis on individual choice.

The main unofficial actor advocating for the Minnesota State Grant program is the Minnesota Private College Council (MPCC).  The MPCC is an advocacy group that represents eighteen private colleges in Minnesota.  The group’s president is the primary advocate at the legislature, and the MPCC also employs an Advocacy and Communication Coordinator and Director of Government and Community Relations who help to coordinate advocacy efforts by member institutions and students.  The MPCC also employs a lobbyist to represent its interests at the legislature.^[14]

Although students at private colleges receive less than one-third of the grants, these schools rely heavily on the funding from these grants.  According to the MPCC, 26% of students at private nonprofit colleges and universities received the Minnesota State Grant and these schools received over $60 million in state grant money.  At Gustavus, there were 776 State Grant recipients in 2021-22, which translates into 34% of Gustavus students receiving the grant.

The MPCC points to a number of benefits to financial aid programs like the Minnesota State Grant.  First and foremost, the group emphasizes that the design of the policy allows students to attend the college or university that best fits their academic needs.  This argument about personal choice is a powerful argument, particularly among Republican legislators.

Second, the group emphasizes that the design of the program invests in Minnesota’s economy by “making a strategic investment in our state’s future workforce.”^[15]  The MPCC reports that 68% of recent graduates of Minnesota private colleges stay in Minnesota after they graduate, which means that prioritizing Minnesota students attending Minnesota schools is a good way to keep the educated labor pool in the state.  This argument is also particularly effective among Republican legislators, but it also appeals to many Democratic legislators.

Third, the group argues that need-based grants help increase college enrollment among low-income students, students of color, and Native American students.  Research suggests that students who receive need-based grants have increased retention and persistence, meaning that they are more likely to graduate.  The MSG, the MPCC argues, can help to close the achievement gap by making education more affordable and by helping to ensure that students who start a degree graduate on time.  This argument about equity and access is particularly attractive to Democratic legislators.

The MPCC coordinates an advocacy campaign each spring that brings college students and administrators together to lobby on behalf of the MSG.  In this year’s legislative request, the MPCC’s primary focus is asking the legislature to reduce the student share from 50% to 46%.^[16]  The MPCC argues that the assumption that students should be able to pay 50% of the cost of college (a cost that includes tuition and living expenses) is outdated given the high cost of attending college.

Figure A.1: Gustavus students at the Day at the Capitol event in March 2020 (just a few days before the entire state shut down due to COVID)

There is no direct opponent to the Minnesota State Grant program, but rather the program competes for attention, support, and resources with the University of Minnesota and Minnesota State systems.  Even though a majority of students who receive the Minnesota State Grant attend a UM or Minnesota State school, the funding these schools receive from grants is very small in comparison to the direct funding they receive through the legislature.  As a result, advocates from the state schools don’t spend time or resources on behalf of the MSG; instead they focus on efforts to cap tuition at state schools and increase funding for operating expenses and building projects.  They argue that support for public institutions should be prioritized over support for individual students.

What happens next?

The 93rd legislative session began on January 3, 2023 after November elections with Democrats (technically the Democratic-Farmer-Labor party, or DFL) controlling both the House (70 to 64) and Senate (34 to 33).  DFL Governor Tim Walz was reelected for another four year term.  Dennis Olson is the current Commissioner of the Office of Higher Education, serving in the position since January 2019.^[17]

The legislature has established deadlines for itself.  The first deadline is March 25, 2023 when committees need to act favorably on bills introduced in their chamber.  Bills that have not had a hearing and favorable vote by this date will generally not advance.  The second deadline is April 1, 2023.  By this date, a bill that was reviewed by a committee in one chamber should be reviewed favorably by a committee in the other chamber.  The final deadline is April 8, 2023 and this is the deadline for favorable action on major appropriations and finance bills.  The legislature will adjourn in May.

Glossary

Appropriation: An appropriation is a document (bill) that gives the government legal authority to spend money on a program or activity.  In Minnesota, the state appropriates money in a two year budget cycle called a biennium, which begins on July 1 of odd-numbered years.

Assigned Family Responsibility: The amount a family is expected to pay for college.  Also known as the parent contribution where FAFSA determines what portion of the other 50% (of the cost of attending a college or university) is expected from the student’s family.

Eligible Institution: In Minnesota, eligibility to accept money from the Minnesota State Grant program is determined by the Minnesota Office of Higher Education by the following factors: a college or university must be located in Minnesota and offer at least one program that is vocational or academic, leads to a degree or certificate, is at least eight weeks long, and involves at least 12 academic credits (or 300 hours).

Entitlement program: A program in which benefits are awarded to anyone who meets the criteria for the program.  If there are more people who meet the criteria for the program, the program will spend more money than originally planned.

Federalism: A system in which powers are split between two or more levels of government.

Free Application for Federal Student Aid (FAFSA): A federal application that is used to award federal loans and grants for postsecondary education.

Living and Miscellaneous Expense Allowance (LME): A standard allowance established by the Minnesota Legislature for room and board, books and supplies, and other miscellaneous expenses related to postsecondary education.

Minnesota Office of Higher Education: This state agency administers public policies related to postsecondary education.

Minnesota Private College Council (MPCC). The MPCC is an advocacy group that represents eighteen private colleges in Minnesota.

Omnibus Bill: A process in which legislators bundle up a bunch of bills on the same general topic into one large bill and the Minnesota legislature does it frequently rather than passing each bill separately.

Student Share (formally called the assigned student responsibility): An expectation that a student contributes 50% towards the cost of education of a state university, which is determined by the state-set formula (tuition, fees, and living expenses).

U.S. Department of Education: This federal agency administered public policies related to education from pre-K to postsecondary institutions.

Resources

Minnesota State Grant Statute: https://www.revisor.mn.gov/statutes/cite/136A.121

Office of Higher Education: https://www.ohe.state.mn.us/mPg.cfm?pageID=138

State Financial Aid Manual Minnesota State Grant Program: https://www.ohe.state.mn.us/pdf/FAManual/StateGrant22.pdf

Minnesota Private College Council: https://www.mnprivatecolleges.org/policy-research/minnesota-state-grant-why-it-matters

Senate Higher Education Committee: https://www.senate.mn/committees/committee_bio.html?cmte_id=3124&ls=93

House Higher Education Finance and Policy: https://www.house.leg.state.mn.us/Committees/Home/93011