Expansion of college financial aid in California may be at risk

March 15, 2023

Community college students like those at Fresno City College would benefit the most from Cal Grant expansion.

A major expansion of financial aid for California’s college and university students, set to go into effect next year, could now be in jeopardy.

That uncertainty is causing alarm on campuses around the state that hoped the changes would help more students as it also streamlines the current complicated grant system.

As part of last year’s budget agreement, lawmakers and Gov. Gavin Newsom agreed to overhaul the state’s main financial aid program, the Cal Grant beginning in 2024. The changes would simplify the program and expand eligibility, especially to community college students, by eliminating high school grade requirements and guaranteeing awards to all low-income students eligible for federal Pell Grants.

But those changes are set to take effect only if there is enough revenue available in 2024 to support the reforms. That is estimated to cost an additional $365 million annually on top of the current $3.4 billion budget for the California Student Aid Commission, which administers the Cal Grant program.

And with the state now facing potential deficits in future years, that additional funding and the linked changes are threatened, according to the Legislative Analyst’s Office, a nonpartisan office of the Legislature that provides fiscal and policy advice. “Cal Grant reform is very unlikely to be triggered” in 2024, the LAO told lawmakers in a memo prepared for an Assembly hearing Tuesday.

Under last year’s budget deal, lawmakers and Newsom agreed that they would decide in spring 2024 whether there is enough funding “available to support” the proposed changes. They did not set a specific revenue level that would need to be met.

But the LAO now suggests that the Legislature act more quickly than that. Given the state’s uncertain budget outlook, lawmakers could decide to scrap Cal Grant reform altogether. Or they could prioritize it and designate funding for the program in this year’s budget deal, squirreling it away for a year and committing to funding the changes in 2024.

Either way, making a decision soon is important so that next year’s prospective students who want to start college in fall 2024 know what financial aid is available to them when they make their college decision in spring 2024. If Cal Grant expansion and reform are still hanging in the balance next spring, colleges wouldn’t be able to provide students with accurate information about their financial aid when they send admissions offers in March and April.

“If the state waits until next May to determine whether to proceed with Cal Grant reform in 2024, some students will likely need to make enrollment decisions before knowing whether they’re eligible for a Cal Grant and how much aid they will receive under the program,” Lisa Qing, a policy analyst for the LAO, said during Tuesday’s hearing of the Assembly budget subcommittee on education finance.

The changes would make an additional 150,000 students eligible for the awards, including 109,000 community college students, according to state estimates. In 2022-23, nearly 600,000 students were offered a Cal Grant.

Lawmakers did not say Tuesday what they plan to do, but the chair of the subcommittee, Assemblymember Kevin McCarty, D-Sacramento, said agreeing to a Cal Grant overhaul last year was a “major win.” In a statement to EdSource, McCarty said he supports “staying the course and implementing the Cal Grant expansion,” but didn’t say whether he would try to address it during this year’s budget negotiations.

If the proposed changes are enacted, it would simplify what critics say is an overly complicated Cal Grant program by consolidating it into just two awards: the Cal Grant 2 for community college students and the Cal Grant 4 for students at four-year universities. Currently, there are several grant types — A, B and C — and the awards aren’t always guaranteed.

Under the new system, the awards would be guaranteed to students if they meet income eligibility thresholds. The reforms would also fully eliminate age and other limits that made getting an award more difficult for older students who did not start college soon after high school.

The Cal Grant 2 would give community college students an annual award of at least $1,648 for assistance with nontuition costs. The amount would be adjusted each year based on inflation, and there would be no GPA requirement for students. Students currently need a 2.0 high school GPA to be eligible for a similar award, a requirement that proponents of the changes say is outdated and serves as a significant barrier, particularly to older students who can’t locate their high school transcripts.

The Cal Grant 4 would cover the cost of full tuition but not housing and food, for students at the University of Calfiornia and California State University, who would need a 2.0 GPA in college to be eligible. At UC, tuition for undergraduate students entering in 2023-24 will be $13,752. That rate will rise for future groups under UC’s new cohort-based tuition model. 

In the case of both grants, they would be guaranteed to any student whose family’s household income is low enough to qualify for a Pell Grant. The median household income of a Pell Grant-eligible student is about $59,000 a year, according to the Student Aid Commission.

During Tuesday’s hearing, Lizette Navarette, interim deputy chancellor of California’s community college system, urged legislators to do whatever is necessary to “continue its commitment to Cal Grant reform,” adding that the changes would be essential to helping students with housing and other basic needs.

Jake Brymner, the deputy director of policy and public affairs at the Student Aid Commission, agreed and told lawmakers to consider the students who are currently excluded from getting those awards. Many students are often prevented from getting a Cal Grant because they are too old or don’t meet the grade requirements.

“They are very often our most financially vulnerable students and are largely Black and Latino students,” he said.

Newsom’s Department of Finance is still planning to monitor the state’s “long-term fiscal outlook” and will determine in May 2024 whether it should implement the Cal Grant changes, Devin Mitchell, an analyst with the department, told lawmakers.

But waiting that long could be problematic for the state’s higher education systems and their students.

In the case of UC, for example, the system’s nine undergraduate campuses admit students and make financial aid offers in March and April. The offers include information not only about Cal Grant but also about university-administered aid and federal awards such as the Pell Grant — information that students use to make their college decision. Since incoming freshman enrollment decisions are made by May 1, UC might not be able “to provide accurate information” about financial aid before that deadline, Shawn Brick, UC’s executive director of financial aid support, told lawmakers Tuesday.

Assemblymember David Alvarez, D-San Diego, added that the Department of Finance’s plan to wait until next year to make a determination is “a problem for all folks” and suggested lawmakers should act more swiftly than that.

“It sounds like from the systems, in order for them to implement this most effectively, they need to know sooner rather than later,” he added.

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