Differences in phonetic boundaries versus normal controls suggest that listeners with hearing impairment (HI) have difficulty categorizing stop consonant place of articulation based solely on the dynamic spectral information present in the second formant transition (F2), even when the stimuli are amplified. This may be due to a degraded ability of the central auditory nervous system to process time-varying spectral cues despite ensuring overall audibility. However, increasing the overall level of the stimuli may not result in improved audibility of F2. To determine if spectral shaping of F2 improves performance of listeners with HI, psychometric functions and N1-P2 cortical responses were compared in 10 older listeners with normal hearing versus 10 older listeners with HI. Stimuli were synthetic consonant-vowels along a /ba/-/da/-/ga/ place-of-articulation continuum in an unshaped and shaped condition. Generally, behavioral and N1-P2 results indicate that, with shaping, categorization of /d/ and /g/ improves. These findings suggest that enhanced audibility of F2 through spectral shaping does improve perception of stop consonant stimuli. However, categorical boundaries for the individuals with HI are shifted lower in frequency with shaping for all phonemes versus normal controls, indicating that enhancing audibility improves but does not completely normalize categorization performance.