Frank O'Bannon Grant recipients at public and private schools across Indiana are expected to see their awards decreased, but exact cuts are still to be determined. (Allison Zeithammer)
A proposal to shrink thousands of state financial aid grants is likely to cut deepest at schools like Ivy Tech Community College, as well as Indiana, Purdue and Ball State universities.
Last fall, Indiana’s Commission for Higher Education (CHE) approved reduced awards for the Frank O’Bannon Grant after changes to the Free Application for Student Financial Aid (FAFSA) caused more students to qualify. The cuts ranged from between 14% and 86%, depending on where a student goes to college and their specific financial needs.
Although lawmakers could add to the funding pot during the legislative session, the latest draft of the state budget — so far approved by the House — suggests identical appropriations from the last biennial spending plan.
If the proposed reductions are confirmed for the 2025–26 academic year, thousands of grants at public and private Hoosier schools are likely to be decreased — and some students could lose eligibility altogether.
New data provided to the Indiana Capital Chronicle by CHE shows grant dollars doled out to higher education institutions in Fiscal Year 2024 — the latest available — totaled $171 million for roughly 32,000 students. Average grant amounts were about $4,700 for students at public universities, and just shy of $8,200 at private schools, although specific student awards varied. Unique data on individual award amounts was not available.
The lion’s share, close to $19.2 million, was claimed by Ivy Tech, where the average award among the school’s nearly 6,800 recipients was about $2,800.
But grants at other schools averaged much higher, setting the stage for more significant cuts.
At Indiana University Indianapolis, more than $12.6 million in Frank O’Bannon dollars were approved for 2,500 students for an average award amount of $5,048. IU Bloomington made a similar request for $12.8 million; grants for 2,352 students at the flagship campus averaged $5,464.
Roughly 1,900 grants at Purdue University West Lafayette totaled $9.96 million, with average awards coming out $5,212.
Ball State University, which received $10.5 million, funded 2,069 student grants with average student payouts of $5,082.
According to the approved draft, the maximum award for a student with the highest need attending a public institution would drop from $6,200 a year to $5,300. Similarly, the maximum award for a high-need student attending a private institution would drop from $12,400 to $10,600.
Those attending Ivy Tech or a proprietary institution would drop from $4,700 to $4,050.
Grant awards expected to drop
The Frank O’Bannon grants are designed to provide access for Hoosier students to attend eligible public, private and proprietary postsecondary institutions. Eligibility for the grant is based on financial need as determined by the FAFSA. The grant may be used toward tuition and regularly assessed fees.
To be eligible, students must be full-time and earn at least 24 credit hours; their award goes up if they earn 30 or more credit hours.
In 2024, the number of Indiana students who qualified for state financial aid jumped after significant changes were made to the federal formula that determines aid eligibility. But because data was unavailable during a botched rollout of the new FAFSA forms, commission members kept the awards at the same amount.
That led to an unexpected increase to Indiana’s projected spend for Fiscal Year 2025 from around $210 million to an estimated $225 million, forcing CHE to dip into its reserves to cover the inflated costs.
Although overall FAFSAs submitted for the 2024-25 award year were down, CHE staff noted that students with the highest need were up by more than 8% overall, and up 14% among high school seniors.
Commission staff said they will still issue the same number of awards for Fiscal Year 2026 — around 33,000 — but cap the total cost back at roughly $175 million.
Where dollars go
Officials at multiple Hoosier higher education institutions said they worry that less available aid will lead to fewer students attending in-state schools, further complicating an ongoing effort to boost Indiana’s stagnant college-going rate.
Reducing the grants means that colleges will likely have to make up the difference in aid themselves, or risk students leaving schools or not enrolling at all due to the costs.
But CHE leadership have emphasized that — even with reductions — the grant amounts will remain higher than they were in the 2022-23 schedule, and overall the program is spending $44 million more than two years ago. That was when commissioners boosted the maximum grant award by 35%, which returned the award to its pre-recession levels.
Mary Jane Michalak, senior vice president for legal and public affairs at Ivy Tech, said a preliminary analysis suggests that students at the community college will lose $6 million, with 7,200 students impacted and 400 a total loss of eligibility.
Other Indiana colleges and universities said they’re still calculating potential impacts, but expect comparable decreases.
Impacts to individual grant amounts will depend on an institution’s graduation rates, the number of students who file FAFSA renewal, and the number of students who meet the new renewal criteria, according to CHE.
The General Assembly appropriated $167.7 million to the Frank O’Bannon Grant in Fiscal Years 2024 and 2025. House Republican budget writers included the same appropriations in their version of the next state budget.
State budget regulators will need to approve the recommended cuts before the start of the next fiscal year, which begins July 1. The budget panel’s next meeting date has not been announced yet.
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Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.
