State didn't give out $17 million in need-based scholarships, auditors say

Millions of dollars in scholarship money that the state could have provided to about 8,000 needy college students has sat untouched, according to an audit released Wednesday.

Auditors from the Office of Legislative Audits found that the Maryland Higher Education Commission did not spend all of the money in its scholarship fund, with the number growing from $9.9 million in 2011 to $17.2 million this year. Auditors estimated that the $17 million could have paid for the scholarships of about 7,800 of the 16,400 students on a waiting list.


"They had opportunities to use the money," state legislative auditor Tom Barnickel said of the commission. "They said they had a plan in place, but they never followed through with it."

Some 27,000 Maryland college students get MHEC grants annually, with most receiving about $2,000. The state spent $68.5 million on the program last year.


Laura Perna, a researcher in college finance and affordability and a University of Pennsylvania professor, said Maryland has made strides in college affordability, but the state "has not made a substantial investment" in need-based scholarships and it's unfortunate more students did not get them.

"For students from lower incomes, it could mean the difference between enrolling in college or not enrolling in college," she said. "It could mean the difference between enrolling in a four-year college versus a two-year college."

Losing out on a scholarship of a few thousand dollars could mean that students take on more debt or work more hours outside of school, Perna said.

"When you're in a situation like that, every dollar does count," she said.

The MHEC is working on reforming the wait list, better informing students and parents, and streamlining the process to remedy the problem, according to Greg FitzGerald, the MHEC's chief of staff.

He said that over the past few years, the move to roll over excess money in the Need-Based Student Financial Assistance Fund to the next year has been a step in the right direction. Though this means the money tends to accumulate in the fund, it also ensures that all the money goes to students, whether it's one year or the next, he said.

The unspent money accumulates when students turn down scholarship offers. The state created the fund in 2011 with the intention that the unspent money be given out to students on the wait list, but instead, auditors said, "virtually no action was taken." In the 2011-2012 school year, some 31,000 students were eligible for scholarships but were wait-listed, according to the audit.

In some cases, students have filled out the Free Application for Federal Student Aid application and are on the wait list, but they don't fulfill the conditions required to qualify for the aid, for any number of reasons.


"Sometimes they don't show up. Sometimes they're part-time" students, FitzGerald said.

FitzGerald said $14 million of the $16 million that rolled over this year has already been allocated to 2014 scholarships. The other $2 million in the Financial Assistance Fund serves as rainy-day money, in case more of the students accept and qualify for aid than anticipated and the department has to give out more.

But that rarely happens. The department keeps close track of the percentage of students who accept the awards they're offered, he said. For the 2014 fiscal year, the commission has $81 million to give out. It will offer $135 million in aid.

Most students who receive the MHEC scholarships get Educational Assistance Grants, which are capped at $3,000. A tinier portion, about 1,300 to 1,400 students, have a greater need and can be eligible for scholarships up to $16,100.

Working more closely with students and schools to more quickly identify those who are qualified for aid will help cut down on inefficiencies in the process and make sure more money goes out to students who need it, FitzGerald said.

"If they show up and they're eligible, we'll get them in the door," he said.


State auditors also called for the MHEC to increase oversight of the application process for the need-based scholarships and to ensure that students complete any volunteer requirements that were a condition of the award.