The board of the state's student loan agency voted Thursday to cut the money it contributes to the grants.
Originally, the Pennsylvania Higher Education Assistance Agency had planned on contributing $35 million to the grant program.
But PHEAA now says it does not have any money for the grants because its earnings have been pummelled by troubled credit markets.
Details of how the size of individual grants will be affected were not immediately available.
State tax dollars also help fund the grants.
