The interrelationships of state programs and federal student assistance are examined, based on a survey of 50 governors' offices. Attention is directed to: the impact on states and aid recipients of federal funding reductions; the current and longer-run outlook of the state fiscal position; and views of state officials responsible for carrying out gubernatorial policies on the appropriate roles of the federal government and state and local governments. Three major policy issues in higher education finance are also considered: how much higher education should cost; who should pay the bill, and what should be the division of responsibility between private and public institutions. Finally, the impact of federal policies on state decision making in higher education is examined. Conclusions include the following: neither the establishment nor expansion of the federal Guaranteed Student Loans nor grants for low-income students has had a significant effect on state decisions on support of higher education institutions and the tuition charged; and termination or major restriction of federal student assistance programs would have a major deleterious effect on private higher education institutions. Information on education tax expenditures of nine states and a sample questionnaire are appended. (SW)