Thousands of Minnesota college students will receive smaller grants this year as the state grapples with a $40 million shortfall in a key financial aid program, throwing another twist into an already dramatic college admissions cycle.

Between 65,000 and 70,000 students receive the Minnesota State Grant in a typical year. This fall, they face grant reductions averaging between $175 and $730, depending on their family size, income level and other factors.

“It’s a last-minute curveball for students and families,” said Paul Cerkvenik, president of the Minnesota Private College Council, who noted that about a quarter of private college students rely on the grant and some are facing much higher reductions.

The shortfall is happening in a chaotic year for college admissions. The U.S. Department of Education’s flawed attempt to update the Free Application for Federal Student Aid (FAFSA) means many colleges received applicants’ financial information months later than usual. Weeks before the fall semester is set to begin at many Minnesota colleges, some students are still waiting to receive their financial aid offers, and now others are questioning whether the ones they have are correct.

The Minnesota State Grant program provides assistance to low- and middle-income students who attend public or private colleges in the state. Award amounts range from $100 to $15,830, depending on the student’s finances, the number of credits they’re taking and the type of institution they attend, among other factors.

The state’s Office of Higher Education has just over $450 million this biennium for the grant program but predicts it will need nearly $500 million to meet demand.

It attributed the shortfall to several factors: Enrollment at the Minnesota State system’s two-year colleges grew more than anticipated. Public university systems raised tuition or fees more than Office of Higher Education leaders expected. Troubles with the FAFSA left school counselors with less time to process students’ aid packages. And FAFSA submissions have been unpredictable overall. So far, they remain down about 6% compared to this time last year, but students could still submit them in the coming weeks.

“I feel confident in our projection in that I think we kind of did the best that we could with the information we had,” said Nicole Whelan, state grant research manager for the Office of Higher Education. “The big puzzle piece still is that FAFSA filing number.”

This is the second shortfall in a state-run financial aid program this year. This spring, state lawmakers shuffled around $5 million in the budget to plug a hole in the Fostering Independence Grant Program, which covers tuition and some living expenses for students who spent time in the foster care system.

State Rep. Gene Pelowski, DFL-Winona, who chairs the House higher education committee, noted this situation is different, in part because the legislative session is over.

Still, Pelowski said he’s “well aware of” the shortfall and working to ensure that lawmakers get accurate spending numbers so they can see “what the hit is totally” and whether the program should get additional money early next year.

Without the possibility of additional funding on the immediate horizon, leaders at the Office of Higher Education instructed colleges in late June to begin rationing Minnesota State Grants. They also did that in 2012, when enrollment grew after the Great Recession.

Whelan said higher education leaders faced a difficult decision: If they handed out too much money, they risked having to cut students’ awards halfway through the school year. If they reduced awards now and found they have money left over, they might be able to increase aid in the future.

“We decided to be a little more cautious in our approach,” Whelan said.

Universities typically have the bulk of their fall enrollment nailed down by May, but many extended their decision deadlines this year to give students more time to sort through troubles with the updated FAFSA. Financial aid officers scrambled again when they learned of the shortfall.

Teams at the University of St. Thomas, a private school in St. Paul, are “working all hours” to help students, said President Rob Vischer. “They understand the impact of their efforts now, as you’re going into the summer months. This is an 18-year-old’s dreams that are in your hands.”

About a third of the school’s undergraduates receive the Minnesota State Grant. Vischer said the university is trying to give additional aid to some of them “but we don’t have the institutional funds nearly extensive enough to cover the entire gap.”

Some private college leaders say they’re especially worried about their students, who don’t qualify for the North Star Promise, a new program that provides free tuition for some Minnesota residents attending public colleges.

The University of Minnesota is offering a one-time scholarship to some students who receive the grant and meet certain income requirements “to keep the financial aid consistent with last year for these students,” Stacey Tidball, associate vice provost of academic support resources at the Twin Cities campus, said in a statement.

Nearly 41,000 students in the Minnesota State system of colleges and universities have received the grant in recent years, and leaders there are urging them not to lose hope.

“We understand that delays in receiving accurate and timely information about financial aid awards have been frustrating,” Chris Halling, the system’s director for financial aid and enrollment services, said in a statement.

Halling encouraged students with questions to contact the financial aid officers at the schools where they’ve applied, adding: “Students should still be able to enroll for fall semester with more complete information about their financial aid award.”