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Even as many states have been taking a hard look at their budgets in an effort to staunch the flow of red ink, net state funding for financial aid programs for higher education increased 3.8 percent in the 2009-2010 academic year, according to a new survey from the National Association of State Student Grant and Aid Programs (NASSGAP).

In that academic year, states awarded $10.8 billion in financial aid to post-secondary students, up from $10.4 billion in the 2008-2009 year.

The lion's share of state funding came in the form of grants. The combination of need-based and non-need-based grants last year, a total of 4.07 million awards, accounted for $8.9 billion of all state-issued assistance, a 3.6 percent increase over the previous academic year.

Of those awards, need-based aid accounted for 73 percent of all grant awards, increasing $275 million to about $6.3 billion in 2009-2010. The split between need-based and non-need-based grants was essentially unchanged from the previous year.

NASSGAP reported that loans and tuition waivers comprised 71 percent of the $1.9 billion of non-grant financial aid. Other non-grant funding programs included work-study programs, loan assumptions and conditional grants.

10 states take major share of needs-based aid

Need-based grant aid was disproportionately concentrated in 10 states that each issued more than $150 million in those type of awards, accounting for 74 percent of the total. Those states were: California, New York, Texas, Pennsylvania, Illinois, New Jersey, North Carolina, Washington, Indiana and Minnesota.

At the other end of the spectrum, the states that spent the least amount of money on college aid were New Hampshire ($4.1 million), South Dakota ($4.3 million) and Hawaii ($4.7 million).

All 50 states, as well as the District of Columbia and Puerto Rico, reported need-based grant programs, with all but two identifying programs that were exclusively need-based. Thirty states said that they maintain financial aid programs that are exclusively merit-based. Programs that issued awards based exclusively on students' financial needs accounted for 47 percent of all state assistance, with 18 percent coming in the form of programs based solely on merit. The remaining 35 percent came in the form of other aid awards or hybrid programs that offered a blend of need-based and merit-based assistance.

On a per-capita basis, the leading providers of grant aid were South Carolina, Georgia, the District of Columbia and West Virginia.

Even though the aggregate numbers represent a modest uptick in state aid for post-secondary students, NASSGAP cites a recent report that identified tuition policy and prices and the fiscal condition of the states as among the leading issues affecting the higher education landscape. The new data, the group warns, may not represent sufficient improvement in funding policies necessary to make the prospect of earning a college degree a realistic outcome for many students.

"While it may be the case that some progress has been made in several of these areas, and in some cases perhaps even significant progress, it is arguable that there is as much, if not more, yet that could be done," the authors of the study wrote. "For many, the goal of completing college and receiving a degree seems almost unattainable, and little or no additional help may be on the way."

The news at the state level comes at a time when the federal picture is highly uncertain. As the White House and congressional Republicans continue their heated negotiations over how to achieve trillions of dollars in deficit reductions in the context of raising the federal borrowing limit, some higher education assistance programs, such as Pell Grants are reportedly on the chopping block.

For related news and other information from Schools.com, see:

• Degree decisions: How to choose a college major (infographic)
• The 5 cheapest colleges in the country
• Most expensive colleges: Is yours on the list?
• Study: extra financial aid makes a big difference for unlikely college grads