Minnesota college students are staring at a financial aid cliff. The state’s main need-based grant program is projected to be about $130 million short for the coming biennium, a hole large enough that thousands of students could see their awards shrink or disappear. With the regular legislative session ticking toward its May 18 constitutional deadline, lawmakers in St. Paul are scrambling over whether to find more money, change the rules, or both. For many students, the choice is blunt: close the gap or risk dropping out.
State forecasts put the shortfall at roughly $131 million and chart a sharp jump in the number of students using the program, with recipients rising from about 76,000 in 2024 to an estimated 88,000 last fall, according to the Star Tribune. Those same projections suggest that, without more cash, the Office of Higher Education and colleges could be forced to cut individual awards or ration funds. Advocates warn that the students most likely to be squeezed are the ones already juggling multiple jobs just to stay enrolled.
Why the Gap Widened
The Minnesota Office of Higher Education’s February spending outlook traces the gap to three big forces: more students enrolling, a revamped federal FAFSA system that produced far more zero or negative Student Aid Index scores, and the new North Star Promise program, which expanded demand. The Office of Higher Education report also spells out that the agency already has statutory power to “ration” State Grant awards and lays out specific levers it could pull to stay within its current appropriation.
What Lawmakers Are Proposing
At the Capitol, no one is pretending this is an easy fix. In the Senate, budget writers have floated an extra $52 million in a supplemental bill, which would help but still leave a large gap, the Star Tribune reports. On the House side, higher-ed language moved through committee while a series of amendments went down in flames, including attempts at larger one-time infusions and policy changes aimed at who should shoulder more of the cost. Session Daily summed it up as lawmakers openly wrestling over who, exactly, is going to plug the hole.
Walz's Plan and Tradeoffs
Governor Tim Walz’s budget pitch offers a more technical route. His proposal includes a modest annual funding bump paired with statute changes that would tweak how State Grant awards are calculated, which his office argues would help stabilize future spending. The official budget narrative lays out options such as setting minimum required family contributions and lowering certain allowances, and it models scenarios where the average grant would drop by about $900 in fiscal year 2026 and the total number of recipients would fall unless lawmakers put in more money. The Governor’s Budget walks through those tradeoffs in detail.
Campus leaders, especially at private colleges, have been sounding alarms about what those numbers mean in real life. Several schools have sent out alerts warning that the shortfall could translate into smaller grants for tens of thousands of students and that some campuses are bracing for students to leave if their aid vanishes. Bethany Lutheran College, for example, has warned that roughly 18,000 students across Minnesota could lose their State Grant entirely under the current funding gap. Bethany Lutheran College
How Quickly Officials Must Act
Time is not on anyone’s side. The regular session must end by May 18 under the state constitution, a hard stop set out on the Legislature website. If lawmakers cannot agree on a fix, the Office of Higher Education has said it will finalize rationing rules and alert campuses by the end of June so fall aid packages can be adjusted in time, according to the agency’s Office of Higher Education projections.
For financial-aid offices and students across the state, that gives only a few weeks before the numbers turn into reality. Lawmakers have sketched out partial fixes, but unless a bigger appropriation clears the Capitol quickly, the weight of the State Grant shortfall will land squarely on Minnesota’s students and the colleges trying to keep them enrolled.
