Most states use need-based state grant programs to reduce financial barriers to college for students from low-income households. The policy design and eligibility requirements of these grant programs vary from state to state and even across sectors. But some policies may unintentionally disproportionately exclude students from underrepresented racial and ethnic minority groups.

This report from the Urban Institute analyzes data on students who attend college in their state of legal residence and how the characteristics of need-based state grant programs affect students from different racial and ethnic groups. The study focuses on 11 states with significant need-based grant programs and examines both program structure and the distribution of aid among students from different racial and ethnic groups.

The data show that differences in aid receipt are not as large or as prevalent as one might expect. But in some states, Black, Hispanic, or Asian students are less likely than others in similar financial circumstances to receive state grant aid. These differences usually do not occur within the public four-year sector but occur either among public two-year college students or among college students overall. Another significant issue is the relatively small share of state grant aid going to students attending public two-year colleges, which tend to enroll relatively large shares of Black and Hispanic students.

Each state has a unique program design for need-based aid, and both student demographics and enrollment patterns vary considerably among states, so the most effective policies will differ from state to state. If states want to ensure inclusivity in their need-based state grant programs, the report concludes that they would be well advised to examine their policies for differential impacts by race and ethnicity.