State takes steps to save money on scholarship program

New eligibility requirements for Indiana's primary need-based college scholarship programs will save the state hundreds of millions of dollars over the next 20 years, a study shows.

Lawmakers this year approved changes to the 21st Century Scholars program and Frank O'Bannon grants that are designed to stretch money for the programs, which currently cost the state about $80 million a year.

But rising demand for the scholarships, budget constraints and tuition increases at state universities have strained the program, which has seen a 44 percent increase in the number of recipients since 2006. The programs were spared budget cuts that hit most state agencies in the past year, but the state financial aid agency had to shift money from other funds to cover the cost.

Now, the program that started two decades ago by offering low-income middle school students a full scholarship to college if they avoided drugs, stayed out of criminal trouble and got acceptable grades has tougher eligibility rules.

Researchers have found that about 20 percent of those who signed up for the program as middle school students no longer met the low-income requirement as high school seniors.

The new rules require 21st Century students to meet an income qualification requirement upon application to college starting in 2016-17, and they must meet an income qualification requirement for scholarship renewal if enrolled after 2011. The changes also shift enrollment to seventh or eighth grade, instead of sixth grade, and increase the required grade-point averages for students graduating high school and while in college.

The study by the state Office of Management and Budget projects Indiana will pay $257 million by 2031 under the changes. Without any revisions, the state's cost would have been $417 million that year, the Fort Wayne Journal Gazette reported.

"They were critical changes to preserve the integrity of the entire program," said Rep. Jeff Espich, R-Uniondale, chairman of the House Ways and Means Committee. "We were headed to a bad situation if you look at those charts. It was important to begin the process of rebalancing the program."

State Budget Director Adam Horst noted that even with the changes, the program is still projected to grow at a rate of 6 percent a year, which is more than the overall state budget has grown in recent years.

"It's growing faster than revenue is growing, so it's something to watch," he said.