Gov. Mark Dayton's plan to boost aid to college students could provoke a bigger debate about who gets the extra help.

Dayton's budget proposal, announced last week, would add $80 million to the state's grant program -- the same dollar increase he proposed for the University of Minnesota and the Minnesota State Colleges and Universities systems.

That's "historic," said Larry Pogemiller, director of the Minnesota Office of Higher Education. If passed, it would bump up the State Grant Program's total funding by 25 percent, he said, the greatest increase in 25 years.

"It's a recognition that the financial aid system has not kept up with what's really going on in higher ed," Pogemiller said.

Dayton's proposal for the grants, which students could use at colleges of their choosing, comes as states and think-tanks across the country study whether college students' financial aid could be structured in new ways to encourage graduation.

"There's a lot of soul-searching going on right now about the financial aid system," said Donald Hossler, a professor of educational leadership and policy studies at Indiana University at Bloomington. "Have we really got this right? Might there be ways to do it better?"

The state's public, nonprofit and for-profit colleges and universities often debate the complex math behind the grants, which is based largely on family income but also takes into account things like the price of a college. "It's a wicked complicated formula," said Chris Halling, MnSCU's financial aid director.

MnSCU spokesman Doug Anderson praised the governor's grants proposal , saying it "will help remove financial barriers for students."

The public system of state universities and two-year colleges is also advocating for changing the formula to give working, part-time students bigger grants.

Part-time students who are independent from their parents and have no income get their fair share, Halling said. But if you're working, "the curve descends rapidly."

Halling said that when he worked at the University of St. Thomas years ago, the grant program "worked very well for what was a homogenous group of mostly recent high school graduates." But now, a greater proportion of students are going to school part time. Many are adult students returning to school for retraining.

"It's a different world," he said. "It's a different student population."

More than half of students who attended MnSCU's two-year colleges in 2011 were part time, according to the state Office of Higher Education. About a fifth of the students at its seven state universities attended part time.

"We have students who are single mothers. Students who have lost their jobs and are going back to school," said Moriah Miles, chair of the Minnesota State University Student Association and a student at Minnesota State University, Mankato.

"Students working part time who, if they were taking 15 credits, would literally have to stay awake 22 hours a day."

Working students have income that is accounted for in the grant formula. That formula expects a family to contribute the same amount toward a student's schooling if they're taking 15 credits or five, said Meredith Fergus, policy analyst at the state Office of Higher Education.

"It really comes down to a question of: Do we expect families of part-time students to contribute less to their education if they have the income and assets of a full-time student?" she said.

'A fiction of what it costs'

Dayton's budget would up the maximum tuition and living expenses that could be covered by the grants. That would give grants to an additional 5,000 students, bringing the total to more than 100,000. It would increase the average yearly grant by $300 and benefit more middle-income families.

"Today the system doesn't actually, totally work because it's not calibrated on real prices -- it's calibrated on kind of a fiction of what it costs," Pogemiller said.

This "step in the right direction" will keep students from taking on so much debt, Pogemiller said.

New numbers from his office show the average total loans for those who graduated in 2011 with debt reached $29,800. That's third-highest in the country. About 71 percent of the class of 2011 graduated with loans, the fifth biggest share of any state.

The Minnesota Private College Council cheered Dayton's proposal as "good news." About one in four students at the council's 17 nonprofit, private colleges receive a state grant. Paul Cerkvenik, president of the council, said before the budget's release that the program ought to "reach a little higher into the middle class."

"This program was designed in an era when middle-class incomes were growing and more capable of keeping up with college costs," he said.

Swirling around the debate is the problem of how to get more students who get grants to graduate. One reason the State Grant Program counts full time as 15 credits -- three more than the federal Pell Grant system it's packaged around -- is to encourage students to go full time, several officials said.

Hossler believes that grants ought to be structured to encourage people to take more credit hours.

A new report by Complete College America found that two-thirds of part-time students dropped out without earning degrees. That data has Hossler questioning whether "we have promised a dream that doesn't exist ... that you can go to college part time and ever complete a degree."

He's a fan of financial aid structures that award students with bigger grants the longer they stay in school. But if a grant program doesn't adequately cover the cost of college for most full-time students, then tweaking it to encourage certain behavior is "baloney," Hossler said.

Matthew Rubel, a student at North Hennepin Community College, says that "when students on my campus talk about financial aid, they don't even talk about the state grant," he said, "because it's so minimal."

Halling doubts the grant program's 15-credit basis is helping much. "It certainly didn't turn things around," he said. He believes that "the best way these programs work is if we meet students where they are in their lives," he said, "and don't try to influence the shape of their lives."

But Pogemiller and Cerkvenik question whether MnSCU's proposal would help completion -- or hurt it. "The issue is well-raised," Pogemiller said. "But I'm not sure about whether ... it's a good policy thing to do -- or it's a way to drive more money to MnSCU."

Jenna Ross • 612-673-7168 Twitter: @ByJenna