State higher‑education officials face scrutiny over student aid errors, funding strains

Department of Legislative Services analysts told the Education, Business and Administration Subcommittee that Maryland’s student financial aid programs are under growing strain as demand rises and system errors disrupt awards.

David Propert, the committee’s budget analyst, said the fiscal 2027 allowance for student financial assistance increases about 2.6% to $222.2 million but flagged several operational problems. FAFSA filings have surged in recent years, he said, and Guaranteed Access (GA) awards now make up an increasing share of Educational Excellence Awards (EA) funding, crowding out initial EA awards. DLS noted that no initial EA grants were made in the past two fiscal years because available funds were prioritized to GA renewals.

Propert also described data and vendor problems in MD CAPS, the state scholarship processing system, saying that a vendor error in September 2025 led to 457 potentially ineligible GA awards and initially denied 172 students who should have received awards. "We recommend restricting funds pending a report on the errors in the GA program and changes made to the Teaching Fellows and GA programs," he said.

Maryland Higher Education Commission Secretary Sanjay Ry and OSA Executive Director Al Dorset defended the agency’s overall outreach and said they are working to resolve operational issues. Dorset said declines in initial GA totals for the current award cycle reflect timing differences and that GA growth flows from HB 923 (2023), which expanded GA eligibility. He acknowledged MD CAPS errors and said OSA has rectified many cases and is implementing vendor and reconciliation fixes.

The panel also examined inconsistent written guidance last summer on the Teaching Fellows scholarship’s room‑and‑board eligibility for off‑campus students. MHEC initially told institutions off‑campus students would lose room‑and‑board coverage, then partially reversed that position after an Attorney General opinion, creating confusion for recipients. Dorset said the agency is restoring awards where appropriate and strengthening its written guidance to institutions in advance of award cycles.

Committee members pressed agency officials about the Conroy and Crier scholarship reimbursement process, which pays institutions by semester and has been repeatedly oversubscribed. MHEC said it has detected a pattern of paying reimbursements using future allocations and expects to cover an estimated $9.8 million in outstanding fall and spring reimbursement requests from the need‑based student financial assistance fund while pursuing statutory changes to prevent the practice.

Lawmakers urged MHEC to provide more timely reporting and stronger internal controls. "We have to clean this up," said Senator Bailey, who pressed for clear procedures and clearer notice to the legislature when programs face funding pressure. MHEC said it is restructuring operations, developing standard operating procedures across financial aid work, and will produce the reports DLS requested.

What happens next: DLS recommended committee narrative and several reports; MHEC pledged to submit additional data and to pursue statutory and technical fixes to MD CAPS and scholarship processes.