The state of Washington is committed to higher education opportunity for all students, regardless of income, through its state financial aid programs. The purpose of this report is to provide the members of the Higher Education Coordinating Board (HECB) with an overview of state and federal financial aid in Washington, an update on state financial aid spending for the 2005-2006 academic year and projected spending for the 2006-2007 academic year. It also is intended to fulfill a requirement added by the 2006 Legislature that the board report program outcomes to the Legislature. In 2005-2006, a total of $1.48 billion in need-based aid was provided from all sources to about 135,000 Washington students. This aid took the form of grants, work study awards, and loans from federal, state, and institutional sources. As in previous years, the federal government provided the majority of the aid. About 77 percent of all federal aid was in the form of loans. Not included in these amounts are federal and institutional aid disbursed by colleges and universities that do not participate in state aid programs and other financing methods used by students and families, such as private loans, credit card debt and the impact of federal tax credits. Outcomes contained in this report reflect several changes to student financial aid funding that occurred during 2005-2006 and 2006-2007. The governor and legislature provided funding for the State Need Grant program to increase student awards by an amount equal to the dollar for dollar increases in public sector tuition. In addition, the governor and legislature funded the board's goal of boosting the median family income cutoff from 55 percent to 65 percent, extending the grant to about 10,000 additional students. The board's recommendation to close the gap between the State Need Grant award amounts and full cost of public sector tuition was not funded: these awards continue to range between 88 percent and 95 percent of public sector tuition. For the first time, the governor and legislature provided funding to keep pace with the impact of tuition increases and new enrollments in the State Work Study program, similar to its actions in the State Need Grant program. Both the Future Teachers Conditional Scholarship Program and the Alternate Routes to Teaching programs also benefited from a supplemental appropriation for 2006-2007. The Promise Scholarship program, the state's largest merit-based award, was terminated effective with the 2005 graduating high school class and the Washington Scholars program saw its awards reduced from three recipients to two recipients per legislative district for the biennium. The savings from these two merit programs were used to enhance need-based aid. For the first time, the governor and legislature provided an appropriation in 2006-2007 to help stabilize funding for scholarships to students who participated in the state's first Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) program. Funding was also provided for Leadership 1000, a program that pairs private benefactors with economically disadvantaged students. (Contains 2 charts and 12 tables.)