Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

State Grant Programs - State Student Incentive Grant Program

AwardYear: 1997-1998
EnterChapterNo: 9
EnterChapterTitle: State Grant Programs
SectionNumber: 1
SectionTitle: State Student Incentive Grant Program
PageNumbers: 3-11

[[Purpose of program]]
The State Student Incentive Grant (SSIG) Program assists states in
providing students who demonstrate substantial financial need with
grants to attend postsecondary schools. Each state may use a
percentage of its SSIG funding to provide work-study assistance
through community service-learning job programs. (This work-study
assistance is explained in more detail beginning on page 4 of this

These state programs carry a variety of names that do not necessarily
include the words "student incentive grants" in program titles. The
SSIG Program provides funds to the 50 states, the District of
Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam,
the Northern Mariana Islands, and the Republic of Palau.

Because state programs vary, student and school inquiries about
SSIG and other state grant, scholarship, and work-study assistance
should be directed to the state agencies listed in Section 5. Do not
inquire directly with the U.S. Department of Education (the

To help financial aid administrators understand the variety of state
practices, this section describes some of the conditions and
regulations that affect state program operations.


Each eligible participating state receives an annual SSIG allotment
(formula grant) from the Department based on the state's eligible
postsecondary education enrollment. The federal allotments must be
matched by funds appropriated by the state, and this matching must
represent an increase in the state-appropriated grant and work-study
expenditure over the amount spent during an established base year
(defined as the second year before the state began participating in the
SSIG Program). The state must maintain its matching SSIG Program
expenditures at a level NOT LESS THAN the average for the
preceding three fiscal years, or at the level of the average per full-
time equivalent student for those years. SSIG Program expenditures
used in matching the federal allotment must be the net amount of
expenditures and should not include any refunded or returned
amounts that were not actually expended.

[[Matching in auditable dollar amounts]]
Matching must be in auditable dollar amounts. Tuition waivers or
remissions may be considered grants only if money actually changes
hands from state to school to student, and if this transfer can be
documented as a cash transaction in the appropriate records at each

Each award year, a state may use up to 20% of its allotment for a
community service-learning job program. The student must receive
compensation for work, not a grant. The job program must be
administered by postsecondary schools in the state, and each student
employed under the program must be employed in work for the
public interest. The employer may be a school; a federal, state, or
local public agency; or a private nonprofit organization. An
arrangement must be established between the school and the agency
or organization.

[[Community service-learning job program]]
Schools, in consultation with local nonprofit, governmental, and
community-based organizations, identify jobs (in direct service,
planning, or applied research) that are designed to improve the
quality of life for residents (particularly low-income residents) of the
community served.

Each community service-learning job must

- provide the participating student with a job related to his or her
educational or vocational program or goals;

- be governed by conditions of employment that are considered
appropriate and reasonable, based on such factors as type of work
performed, geographic region, and proficiency of the employee;

- pay at least the current federal minimum wage as mandated by the
Fair Labor Standards Act of 1938 (but may not use the
subminimum wage);

- not displace employed workers or impair existing contracts for
service; and

- not involve the construction, operation, or maintenance of any part
of a facility used or to be used for religious worship or sectarian

[[Funding reallotment]]
Basic SSIG allotments not used by one state are reallotted to other
qualified states. Within the constraints of federal appropriations,
states are free to schedule their own funding cycles for students, but
funds may not be carried over from one fiscal year to the next.
However, the funds may be used for the summer term if the term
falls within the program year (July 1 through June 30) for which the
funds were appropriated.


There are different ways in which a state may choose to administer
its program. The state may choose to use centralized administration,
decentralized administration, or a combination of both. Whichever
method is used, a state must use all federal funds and state matching
funds for student awards. (A state is not permitted to use either
federal funds or state matching funds to help defray administrative

[[Centralized administration]]
Most states, particularly those with well-established state student
assistance programs, use centralized administration. In centralized
administration, a single state agency receives and processes student
applications, notifies students of awards, verifies attendance, makes
disbursements, and keeps complete records on all student awards.

[[Decentralized administration]]
In other states, particularly those with relatively new state programs,
the designated state agency delegates certain functions to
participating schools. This is called decentralized administration. In
these cases, funds available through the state agency are generally
suballocated to eligible schools on the basis of enrollment or need
formulas. The schools recommend SSIG recipients to the state
agency, which approves individual awards from these fund
allotments. In states that use decentralized administration, funds
awarded under these programs are still considered to be state aid and
not institutional aid.

[[Location of student files]]
In the centrally administered state programs, actual student files are
located in the state agency. In decentralized state administration,
which requires schools to process much of the student information,
the financial aid administrator gives the state agency the information
needed for formal approval of individual student awards. In either
case, to monitor the use of SSIG funds, schools examine student files
to verify that recipients met all eligibility criteria and received the
correct award amount.


Within the limits of federal statutes and regulations, states determine
eligibility standards in terms of their own fiscal, constitutional, and
statutory restraints. See Chapter 3 on institutional eligibility for
details about federal limits on school participation.

Schools that are licensed by their state agency as clock-hour
institutions must use clock hours to determine a student's eligibility
for SFA funds. (See Chapter 3.)

All nonprofit institutions of higher education in a state are eligible to
participate, except when participation violates the state's constitution
or a state law enacted before October 1, 1978. While states are not
required to include proprietary (for-profit) schools in their state
programs, most recent SSIG participation figures show that 26 states
made SSIG awards available to students attending such schools.

[[Other factors affecting participation]]
School participation may also be affected when some states
suballocate available SSIG funds to the various types of schools on
the basis of enrollment, need, the availability of other non-SSIG aid,
and other relevant criteria. In such instances, money not claimed for
student awards at one school may be reclaimed by the state and
reassigned to other schools.


Student eligibility criteria for receiving aid from the SSIG Program
differ among states depending on constitutional, statutory, or policy
restrictions. (Some states have legislated formulas for determining
student eligibility and the amount of assistance given to individual
students.) However, to be eligible for assistance under the SSIG
Program, all students must meet the relevant eligibility requirements
contained in Subpart C of the General Provisions regulations (34
CFR Parts 668.31 - 39) and must demonstrate substantial financial
need as determined in accordance with the states' criteria as approved
by the Secretary. The standards that states may use to determine need
are discussed in more detail in the subsection on Student Application
Procedures and Awards beginning on page 8 of this section.

[[General eligibility requirements to receive SFA funds]]
The relevant eligibility requirements of Subpart C are summarized
briefly below. These requirements are covered in greater detail in
Chapter 2.

In general, the student must

- be either a U.S. citizen or an eligible noncitizen,

- be enrolled as a regular student in an eligible program at an
eligible school,

- have a high school diploma or its recognized equivalent (or be
beyond the age of compulsory school attendance in the state where
the school is located and have passed an independently
administered test approved by the Department),

- be maintaining the satisfactory academic progress standards in his
or her course of study,

- sign a Statement of Educational Purpose and a Certification
Statement on Overpayments and Default, and

- register with the Selective Service, if required.

A student is not eligible for SFA funds if he or she

- is enrolled in an elementary or secondary school;

- has borrowed in excess of the annual or aggregate limits for the
SFA loan programs; or

- is in default on a student loan or owes a refund on a student grant
from the SFA Programs.

[[Eliminating SSIG overpayments]]
If, however, a student owes a refund on an SSIG overpayment, that
student would still be eligible to receive additional SFA funds as
long as he or she meets all other eligibility requirements and as long
as the school can eliminate the overpayment by adjusting financial
aid payments (other than Federal Pell Grants) in the same award
period in which the overpayment occurred.

Other factors that determine whether a student is eligible for an SSIG
award include the state's definition of substantial financial need, the
method of determining maximum awards, and the costs that can be
covered. Some states limit awards to cover only the cost for tuition
and fees; some states include allowances for room, board, and other
costs. Some have allowances for commuters. Many state grant
programs exclude part-time students and those who attend schools
outside the state. Some states have reciprocal arrangements with
neighboring states, so that students may receive SSIG funds from
their home states even though the students are enrolled in schools in
other states. SSIG funds may be awarded to students participating in
programs of study abroad that are approved for credit by the home

A state's SSIG independent student program funding should be
comparable to the overall state program if the entire state program is
not contained in the state's SSIG program. To the extent practicable,
the proportion of SSIG funds awarded to independent students in the
SSIG Program must be the same proportion of funds awarded to
independent students in the state program (or programs) of which the
state's SSIG program is a part.

If a state awards grants to independent or less-than-full-time
students, it must allocate a reasonable portion of funds for these
awards. The Secretary of Education (the Secretary) will determine if
the allocation is reasonable on a case-by-case basis, if necessary.

If the state's allocation is based on a formula that includes the
financial need of independent or less-than-full-time students, the
state must ensure that those students receive a reasonable proportion
of SSIG funds.


The student must apply to his or her state agency either directly or
indirectly through the school. Every award requires the official state
agency's formal approval, based on a determination of need.
(Section 5 lists these state agencies.)

[[Maximum award]]
The maximum award that a student may receive is $5,000 per
academic year. The maximum award is reduced proportionately for
students who attend part time. Many states set maximum awards
under $5,000.

Most states limit SSIG awards to undergraduates attending at least
halftime. However, at each state's option, graduate, less-than-half-
time, and other nontraditional students may also be eligible to
receive SSIG awards. States may decide whether to make individual
SSIG awards that vary according to student need or to give a set
amount to all students who meet the established need criteria.

[[Determining substantial need]]
Student recipients are selected annually on the basis of substantial
need, according to criteria established by the state and approved by
the Department. A state may define need in terms of income,
Expected Family Contribution (EFC), or relative need, as measured
by cost of attendance minus available resources. Regardless of which
need analysis system the state selects, the designated state agency is
responsible for final approval of individual student recipients, thus
allowing each state to develop consistent methods in awarding aid to
candidates statewide.

[[Need analysis systems]]
Most states measure need by using a single need analysis system for
all applicants (the Federal Needs Analysis Methodology). However,
in decentralized programs--where schools recommend student
candidates for awards subject to the designated state agency's
approval--student applications may be processed according to the
need analysis systems used by the various schools. In any event, the
designated state agency has final authority for selecting recipients
who meet the need criteria under standards established for the
statewide program.

[[Dependency criteria]]
As discussed in Chapter 2, a dependent student who applies for aid
from any of the SFA Programs must include parental information on
the application. An independent student need only include his or her
financial information (and, if married, that of a spouse). The criteria
a student must meet to apply as an independent student appear in
Chapter 2.

The Department may approve, on a case-by-case basis, a state's
criteria if they vary from those listed in Chapter 2. The state must
show that it had good reason to use different criteria. This option to
approve different criteria began in the 1995-96 award year.

[[Alternative criteria for determining dependency status]]
States that wish to use variant definitions for "independent student"
must provide information concerning their definition when applying
for program funds. The information should include a justification,
with accompanying supporting documentation, showing why a
variant definition should be approved. For example, a state may want
to use its own definition because the state may incur excessive costs
if required to use the federal definition.

In approving a state's "independent student" definition, the
Department might also consider the extent to which the new
definition imposes additional data requirements beyond those
provided for by the federal definition and the Federal Needs Analysis

A state's definition might not totally differ from the federal
definition. For example, a state might use the federal definition but
might delete the professional judgment provision.

[[Cost of applying]]
To award a student state aid, a state may require a student to provide
applicant information on the Free Application for Federal Student
Aid (FAFSA) or on another free form. In addition, the state may
require a student to provide supplemental information on a fee-based
supplemental form. If there is a fee for submitting and processing the
state information on the supplemental form, the fee must be payable
to the state, regardless of whether the information may also be used
for institutional aid. Decentralized state grant programs (under which
schools participating in the state SSIG programs award state grant
funds) must consider state grant funds as state aid and not
institutional aid.

[[Records and reports]]
State agencies responsible for administering SSIG funds must
document their decisions and disbursements in their own central
records, in school records, or in both. Variations of student/school
rosters are often sent back and forth between the state agency and the
schools to verify attendance, provide information related to student
need, document disbursement of funds to students or to student
accounts, guard against overawards, and help provide required
records and reports.


In general, fiscal and reporting relationships between participating
schools and the state agencies vary according to whether the states'
programs are administered in a centralized or decentralized manner,
or in a combined manner. In any case, the state agency must be held
accountable for the disbursement of federal funds and for making the
required reports to the Department. States are given considerable
leeway in demonstrating fiscal responsibility related to
administration of the SSIG Program. However, participating schools
must meet the federal standards of fiscal responsibility described in
Chapter 3.

At a minimum, even schools using the most centralized
administrations must assure that students will meet satisfactory
academic standards, must document the status of grant refunds, and
must document the status of loan defaults. A school must also
document student acknowledgment of awards if funds are paid to the
school on behalf of the recipient; furthermore, the school must
cooperate in packaging aid to avoid overawards.

In decentralized systems (in which the state agency depends on the
school to help screen applicants) school records must also include
need analysis documentation to justify formal approval of individual
awards by the official state agency.

Individual student awards are subject to approval by the designated
state agency. Schools may not transfer awards from one student to
another without that agency's approval. Schools and state agencies
should maintain regular communication so that any funds that
become available later in the year will be used for qualified students.

[[Recovered funds must be redistributed]]
All funds (federal plus state) recovered from overawards should be
redistributed to other qualified students during the applicable award
period unless records for the period have been closed. If these funds
are not reissued to qualified students, the state must return the
recovered federal portion to the Department.

The state agency requires certain school reports to document the
disbursement of federal funds to student recipients. The school
reports also provide information needed to improve efficiency in the
operation of state programs and to provide data for state budgets and
for annual reports to the Department.

[[School reports document fund disbursement]]
The actual form and content of school reports vary from state to
state, depending upon the size and maturity of the state programs,
among other factors. There are no standard formats or channels for
these school reports. For example, information about recipients by
income level may come either from the central office records or from
the schools. Communication may follow established procedures or
may be developed through cooperative efforts of state and school

[[Student and school inquiries]]
For specific information on state student financial assistance policy,
student and school eligibility, and grants to students attending out-of-
state schools, contact the SSIG state agency program individuals
listed in Section 5.

Last Modified: 07/09/1998