Cal Grants

California Governor Jerry Brown last week released his proposed 2017-18 California state budget, which includes a proposal to phase out the Middle Class Scholarship (MCS) program. The MCS program, created in 2013, was designed to serve California students from families with incomes above typical Cal Grant income thresholds (above about $80,000 at the time) and up to $150,000 who don’t receive much other grant aid. For reference, median household income in California is just under $62,000 in 2015 dollars.

Since the program was created, we have raised questions about whether the money would be better spent on the lower income students who face the highest financial hurdles getting to and through college. We still believe this to be the right question. However, data from the California Student Aid Commission (CSAC) show that some lower income students do receive MCS awards. During the 2015-16 academic year, about 6,300 students (13% of all MCS recipients) had incomes within the Cal Grant B income range (up to about $50,000 for a family of four), and an additional 12,700 students (26% of all MCS recipients) had incomes within the higher Cal Grant A range (up to about $90,000 for a family of four). We estimate that these 19,000 students – who represent 39% of all MCS recipients in 2015-16 – received up to 51% of MCS grant dollars.

Why is a program designed to help upper-middle-income students also helping lower income students? Because there are substantial gaps in the state Cal Grant program, which is designed to help lower income students pay for college. Most critically, there are not enough Cal Grants available for all students who apply and meet the financial and academic requirements. Whereas recent high school graduates are entitled to a Cal Grant, all other eligible Cal Grant applicants must compete for a very limited number (25,750) of awards. In 2015-16, there were 14 eligible applicants competing for every grant, with over 300,000 turned away. The CSAC data suggest that some of these students who qualify for but don’t get a Cal Grant end up getting an MCS grant instead.

The huge gap between the number of applicants eligible for competitive Cal Grants and the number of awards available contributes to the substantial affordability challenges facing low-income students. While not by design, the MCS program has helped to fill a narrow slice of that gap, and it is important that the Legislature protect this progress if the MCS does get phased out. Redirecting the $117 million annual MCS allocation to the better targeted Cal Grant program would result in over 18,000 more competitive awards per year, increasing qualified applicants’ chances of receiving a competitive grant from one in 14 to about one in eight. And redirecting $60 million – the 51% of annual MCS spending that we estimate goes to students with family incomes within Cal Grant thresholds – is the least that should be done, particularly if the goal of phasing out the MCS program is to protect financial aid for lower income students.

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Earlier today, California Governor Jerry Brown unveiled his updated budget proposal for 2016-17. It includes a small but important expansion to a community college financial aid program created last year, which helps low-income students enroll full time. Under the expansion, the benefit will extend to more students enrolled in career technical education programs.

However, there’s more that can and should be done in the 2016-17 state budget to make college affordable for more Californians. As we’ve noted previously, this budget – as did the last – assumes unrealistically high spending in the Middle Class Scholarship (MCS) program. Funding for the program is set by law, and the amount that has been set is more than enough to serve the students eligible for the program, both now and in the foreseeable future. 

In 2015-16, about $34 million of the appropriated amount went unspent, and now that the year is almost over the Governor is proposing to spend those funds elsewhere. We project that even more of the appropriated MCS funding – $41 million – will go unspent in 2016-17. In the same year, hundreds of thousands of eligible Cal Grant applicants will not receive grants because too few are available, and many others will struggle to cover non-tuition costs with a grant that has not kept pace with inflation. 

Leaving unnecessary appropriations in the budget either to return to the state’s coffers at the end of the year, or be reallocated one year at a time, is a wasted opportunity. In future years, as the scheduled MCS appropriation increases, the amount unspent will be even higher.

There have been several successful efforts to strengthen Cal Grants in recent years, including the last two state budget agreements, which increased the size of low-income students’ non-tuition grants (2014-15) and the number of awards available (2015-16), and 2014 legislation by Senator Kevin de León which further increases low-income students’ non-tuition grants each year. Even after these increases, however, low-income students remain either unserved or underserved by the Cal Grant program. This year, Senator Marty Block has a bill (SB 1357) that would increase the non-tuition award for community college students. Assemblymember Jose Medina has legislation (AB 1721) that would both increase the number and size of Cal Grants available, both of which are top priorities for more than 20 higher education advocacy, student, civil rights, business and workforce groups across the state.

Clearly, the Legislature has the will to strengthen college affordability.

In unveiling his updated proposal, the Governor underscored the need for fiscal restraint. Luckily for legislators seeking to improve college affordability, there is a way to strengthen Cal Grants in 2016-17 within budget constraints. In both the Assembly and Senate budget subcommittees, recent hearings on financial aid have included discussion about unspent MCS funds going forward and whether they should be tapped to increase the number of Cal Grants available for low-income students. As soon as next week, these committees will vote on these very issues. Given the substantial need within the Cal Grant program, we urge the Legislature to reduce the ongoing scheduled MCS appropriations, and invest the savings into strengthening Cal Grants for low-income students as almost two dozen organizations have recommended

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Both the 2014-15 and 2015-16 California state budget agreements contained crucial and long-overdue increases to need-based financial aid, including Cal Grants. Those investments are helping to make college more accessible for thousands of low-income Californians, though severe affordability gaps remain for the state’s lowest income students.

The good news is that the legislature can continue closing those gaps in 2016-17, and there are resources available to do so right in financial aid’s backyard.

The Middle Class Scholarship (MCS) program was created in 2013 to reduce tuition for middle-income students at the University of California and the California State University who were ineligible for grant aid yet unable to comfortably afford tuition. Last year, lawmakers downsized the program in order to bring eligibility terms more in line with Cal Grants and to exclude students with substantial financial resources, resulting in projected savings of $112 million for 2016-17.

Yet it appears that the program still has more money than it needs, and that even more savings could be achieved without affecting MCS recipients. In both of the years that the Middle Class Scholarship has been available, there have been far fewer eligible applicants than anticipated. Still-nascent awareness about the program could explain the underutilization in 2014-15 – the first year of implementation. But even in the wake of concerted efforts by the California Student Aid Commission and California public colleges to bolster outreach to students and families, the program still has a significant surplus in 2015-16.

When the MCS has a surplus, it means that dollars intended to help Californians afford college are being returned to the state’s coffers. For 2016-17, we project that about $41 million will go unused. Combined with the 2016-17 budget savings from the eligibility changes agreed to last year, that’s a total of about $153 million previously scheduled to be spent on the MCS in 2016-17 that will not be spent on the MCS. By 2017-18, when the Middle Class Scholarship will be fully phased in, this amount could grow to $200 million or more.*

As we’ve previously argued, savings from the Middle Class Scholarship program should remain in financial aid and be reinvested in Cal Grants specifically. Some of it already has been: for instance, the 2015-16 budget, which scaled back MCS eligibility, also increased the annual number of Competitive Cal Grants, which serve students who do not transition straight from high school to college. However, far more could be done given the amount of MCS savings. The $41 million surplus in 2016-17 could increase the Cal Grant B access award, which helps low-income students pay for non-tuition costs of college, by $175.  Alternatively, it could increase the number of new Competitive awards available annually by nearly 5,700.** The legislature could triple those increases by reinvesting all of the MCS savings – the surplus as well as ongoing savings realized through eligibility changes – into Cal Grants. Both the Cal Grant B access award and Competitive Cal Grants serve the state’s lowest income students, but not nearly well enough.

For more on how and why to deepen investment in the Cal Grant program, see the report released by TICAS and twenty other organizations last week.
 

* Projections of future spending are based on 2015-16 MCS award utilization. Projections reflect the scheduled phase-in of award coverage, from 50 percent in 2015-16 to 100 percent in 2017-18.  

** Projections of 2016-17 Cal Grant awards and dollars are based on data from the California Department of Finance: California Student Aid Commission, The Cal Grant Chart: Baseline Budget Forecast thru end of Sep 2015 - updated November 20, 2015.

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The 2015-16 California budget agreement announced today includes much needed and long-overdue increases to need-based state financial aid.

First, the agreement includes the first-ever increase to the number of competitive Cal Grants, which TICAS and 17 other organizations called one of the “most effective financial aid investments the state can make." Competitive grants are available to students more than one year out of high school, but there are currently 17 eligible applicants for every grant. The budget agreement increases the number of grants by nearly 15%, from 22,500 to 25,750. While the overwhelming majority of competitive grant applicants will continue to be turned away even with this increase, it is an enormously important step that will help make college more affordable for thousands of additional students.

The agreement also includes $39 million in financial aid for full-time community college students, to be distributed as supplements to the Cal Grant B access awards which help students cover non-tuition costs of attendance like textbooks and transportation, and $3 million in administrative funds for community college financial aid offices. The creation of these supplemental awards, an idea championed by the Assembly, targets necessary support to the students who most need to limit their work hours to study, and at the colleges where state and institutional grant aid is particularly scarce. In 2012-13, community colleges enrolled almost two-thirds of the state’s undergraduate students yet received just 6% of Cal Grant dollars. With the purchasing power of the Cal Grant B access award having fallen to just one-quarter of its original value ($1,656 in 2015-16 compared to an original grant value of over $6,000 in 2015 dollars), these stipends will help make up some of the difference for full-time community college students.

While these changes alone aren’t going to solve the state’s affordability challenges, they are hugely important steps in the right direction. The same is true about agreed-upon changes to the state’s Middle Class Scholarship program, including the imposition of time limits and asset ceilings, which begin to bring the program more in line with Cal Grants. We thank the Legislature and Governor for recognizing the importance of investing in need-based financial aid, and look forward to working with them to build on these investments in the coming year.

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We commend the California State Legislature for taking another significant step towards improving college affordability by strengthening financial aid for low-income Californians at all types of colleges. The Conference Committee on the Budget agreed earlier this week to increase the number of annually authorized competitive Cal Grants, the grants available to students who do not enroll in college straight after high school, to 38,750 (up from 22,500). It also agreed to increase the size of the Cal Grant B access award, which helps low-income students pay for non-tuition costs, to $1,804 (up from an expected $1,656 in 2015-16), as well as to extend prior legislation that would provide for more increases in future years. The Committee also approved a plan to use Proposition 98 funds to further strengthen financial aid at California’s community colleges in particular, which serve the vast majority of the state’s low-income, Latino, and African-American students. Together, these actions provide a clear mandate for the most effective financial aid investments the state can make to promote access, affordability, and success for students who need help the most.

California needs 2.3 million college graduates beyond current projections by 2025 to remain competitive, so deepening the financial aid investments that make college possible for so many is critical. Yet on key indicators, the state is falling increasingly behind: with only one grant for every seventeen eligible applicants, a competitive Cal Grant applicant could drive to Las Vegas and be more likely to win money for college by gambling than be offered a grant.

The Legislature has spoken loudly and clearly that strengthening competitive Cal Grants and the Cal Grant B access award are priorities for budget spending. We urge the Governor to do the same by approving these actions in the 2015-16 state budget. 

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From a financial aid perspective, California Governor Brown’s revised budget released earlier today looks a lot like his January proposal. That’s a shame, because it provides no new funding for state financial aid programs beyond an expected increase to the Middle Class Scholarship. While we are disappointed that need-based financial aid wasn’t prioritized, we appreciate that the budget formalizes a much needed albeit modest $1.9 million increase to raise low-income students’ grants for non-tuition costs (from $1,648 to $1,656), driven by legislation championed last year by Senator Kevin de León.

In spite of a growing economy, college affordability remains a substantial challenge for Californians, particularly the state’s lowest-income students. The majority of college students in the state – and the vast majority of those with low incomes – attend community college, where tuition and fees are low but total costs are quite high. Factoring in textbooks, transportation, and living expenses, total costs for community college students can exceed $18,000. But low-income students at community colleges get much less in grant aid than students elsewhere, leaving them with more costs to cover out of pocket.

As we have documented, even amongst students at the same type of college, college costs are most burdensome for the lowest income students. For instance, even after accounting for existing grant aid, college costs eat up far greater shares of family income for low-income students than for higher income students at both the California State University and the University of California.  Is it then a surprise that low-income students are more likely to graduate with debt than their higher income peers?

For students with limited resources, need-based financial aid can mean the difference between a high school diploma and a college credential. While the $1.8 billion Cal Grant program has done much to bring college within reach for many Californians, there’s clearly room for improvement. Because there aren’t nearly enough grants to go around, a growing number of eligible students are being turned away from the program – most of whom are living in poverty. Meanwhile, the grants for the lowest income students in particular hold just a fraction of their original purchasing power.

That’s why our Cal Grant recommendations – along with those of more than a dozen other groups representing students, civil rights, and business – have focused on increasing the number of competitive Cal Grants available, so eligible applicants have a fighting chance of getting a grant; and strengthening the Cal Grant B access award, which helps the lowest income students pay for non-tuition costs.

California cannot get ahead by leaving a growing number of low-income students behind. We look forward to working with the Governor and Legislature to shape a 2015-16 budget that begins to right these inequities.

- Debbie Cochrane and Matthew La Rocque

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Earlier today, California Governor Jerry Brown released his proposed budget for the 2015-16 fiscal year, and it includes some much-needed resources for higher education. For the state’s public universities it provides new funding, contingent upon UC and CSU keeping tuition flat, and it supplies community colleges with more funding, including $200 million to invest in student success. Within financial aid programs, the budget plan includes a boost to the Middle Class Scholarship program. Adding the Governor’s proposal to the State Senate Democrats’ and the State Assembly Speaker’s plans, it is certain that 2015 is going to be an important year for higher education. It is now clear that college affordability is a universal priority, and that the Governor, Assembly, and Senate all want to do more to help low-income students pay for college. That is great news. What is also clear is that those parties disagree on the best way to do this. Here is what we at TICAS see as the top two priorities for new financial aid investments:

1. Help more eligible students get Cal Grant awards. Less than one quarter of the lowest income students in California who apply for federal aid receive a Cal Grant. For students who don’t apply within a year of graduating high school, there are only 22,500 grants available, and there are hundreds of thousands of eligible applicants. This means that the odds of an eligible applicant getting a Cal Grant are lower than the odds of getting into an Ivy League school. The students turned away empty handed have an average family income less than $21,000 and a family size of three.

2. Increase the size of the Cal Grant B access award. Total college costs go beyond tuition and fees – textbooks, food, housing, and transportation are all necessary to be a successful student. The Cal Grant B access award provides needy students – many with family incomes several thousand dollars below the poverty level – with resources to pay for these crucial college costs. While important progress was made in 2014, the award still lags far behind where it should be. Adjusted for inflation, the original access award would today have a value of over $6,000, almost four times today’s maximum award of $1,648.

College isn’t easily affordable these days for many families, but for some, costs are an insurmountable barrier to getting to college and graduating. Research shows that college costs comprise the largest share of family income for the lowest income students, and low-income students are much more likely to graduate with debt than their higher income peers. Need-based financial aid – like the Cal Grant program – can help to bring higher education within reach for these families. Yet hundreds of thousands of the students least able to afford college do not receive state grants simply because there are not enough. And the stagnation of Cal Grant B access awards means that on average the lowest income Cal Grant recipients receive smaller grants than higher income recipients. These are critically important points that must remain front and center as the debate around higher education investments evolves. We look forward to working with the Governor and Legislature to shape a 2015-16 budget that strengthens college affordability for the students who need the help most. - Debbie Cochrane and Laura Szabo-Kubitz

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Earlier this week, the Los Angeles Times reported that 73,000 state university students will receive Middle Class Scholarship awards in 2014-15, fewer than half of the 156,000 originally anticipated. The Middle Class Scholarship program was created last year to provide tuition discounts to students with family incomes between $80,000 and $150,000. When we asked California Student Aid Commission staff how much the 2014-15 awards add up to, they told us about $60 million.  That means that about $47 million of the budgeted $107 million for 2014-15 will go unused.

How about putting that money back into Cal Grants, which help students with family incomes up to $80,400 for a family of three (well above California’s median income)? Our analyses have documented that it’s the lowest income students who face the most severe college affordability challenges, and University of California data show that the lowest income students are most likely to graduate from UC with student loan debt.

Part of the problem is that there aren’t enough Cal Grants to go around. For hundreds of thousands of needy students – a group with an average income below $21,000 and a typical family size of three – winning a Cal Grant is even tougher than beating the odds in Vegas. That’s because students who apply for aid more than one year after high school graduation compete for just 22,500 awards authorized annually. In 2013-14, there were 16 eligible applicants for every available award. With $47 million more, the state could fund nearly 20,000 additional competitive grants to support the very students for whom college is least affordable.

When so many low-income students are being turned away, we should at least be redirecting unspent Middle Class Scholarship money to the Cal Grant program to support students who need help the most. – Debbie Cochrane and Matthew La Rocque

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The California state budget signed last week will make an important down payment towards college affordability for the state’s most financially strapped students.  The agreement includes a long-overdue increase to the Cal Grant B access award, which helps California’s lowest income students pay for books, supplies, transportation, and other non-tuition costs of attending college. Under the new budget agreement, the award would increase from $1,473 to $1,648 – a much-needed step in the right direction after decades of stagnation and a recent cut.

The students who receive Cal Grant B access awards typically have family incomes well below the federal poverty line and attend all types of colleges.  Yet the purchasing power of this award has declined dramatically even as college has become less affordable for all students and families. Had the award kept pace with inflation since it was created in 1969, the original $900 award would be worth about $6,000 today. In 2012-13, low-income California college students had to put three times as much of their discretionary income towards net college costs (total costs after subtracting grants and scholarships) than did higher income students.

The increase to the Cal Grant B access award is welcome news to a statewide coalition – including civil rights, college access, and business groups, and every statewide student association – that has recommended increasing the Cal Grant B access award so that our state financial aid policies do not leave low-income students even further behind. Importantly, the budget also enables Cal Grant recipients who lose eligibility for renewal grants because their financial situation temporarily improves to later regain eligibility if their finances worsen, fixing an unintended consequence of the 2012 Budget Act.

To be clear, these financial aid changes are not a silver bullet for solving the college completion crisis and equity gaps that plague our state, or even the affordability challenges facing low-income students.  Even at the new level of $1,648, the Cal Grant B access award will still be worth far less than it was a generation ago: it will not even cover the estimated cost of books and supplies ($1,746) let alone other educational expenses. Furthermore, far too many Cal Grant eligible students will continue to be turned away because there simply aren't enough grants for those who don’t enroll in college right after high school or miss the application deadline.  Still, the Cal Grant B increase is a crucial step in the right direction, and we applaud the California Legislature, Assembly and Senate leadership, and the Governor for making a smart investment in California’s future.

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California college students who meet Cal Grant eligibility requirements are guaranteed a Cal Grant if they’re recent high school graduates who meet the application deadline. But students who apply for a grant more than one year after finishing high school or who miss the application deadline face a starkly different reality. Just 22,500 Cal Grants for these students – called “competitive” Cal Grants – are authorized each year. And for 2013-14, there were 16 eligible applicants for every authorized award.

In other words, an eligible applicant’s chance of receiving a competitive Cal Grant is about 6 percent. Wondering how that stacks up against other notoriously long odds? We did some digging and found that it’s tougher for an eligible student to earn a competitive Cal Grant than:

• for a gambler to win in a Las Vegas casino (13 percent);1 or

• for a high school senior who applies to Ivy League colleges to actually get into one (9 percent);2 or

• for a college baseball player to get drafted by a Major League team (9 percent).3

Getting financial aid shouldn’t be harder than beating the odds in Vegas, getting into the Ivy League, or making the majors. The hundreds of thousands of eligible students denied Cal Grants have an average family income below $21,000 for a family size of three, and an average GPA of 3.0. The odds confronting these students are far too long, and the losers far too deserving, for policymakers to continue accepting the status quo. Parallel efforts are underway in the California State Assembly, via this year’s budget negotiations and Assembly Bill 1976 (Quirk-Silva), to increase the number of competitive grants available and ensure that all authorized grants are actually getting to students. Putting our money on high-achieving, low-income students isn’t just a safe bet – it’s an investment with great returns for California. - Matthew La Rocque

Across all games and tables in the Clark County Downtown Las Vegas area, the average win percentage is about 12.8 percent. For slot machines, the average win percentage is about 6.7 percent. State of Nevada. State Gaming Control Board. Gaming Revenue Report. December 31, 2012. http://gaming.nv.gov/modules/showdocument.aspx?documentid=7618.

Among applicants for the Class of 2018, the aggregate admissions rate across the eight Ivy League colleges was about 8.9 percent. Washington Post. March 28, 2014. http://www.washingtonpost.com/local/education/the-ivy-league-admission-rate-8-point-something-something-percent/2014/03/28/558400de-b67e-11e3-8cc3-d4bf596577eb_story.html.

About 9.4 percent of NCAA senior male baseball players will get drafted by a Major League Baseball (MLB) team. NCAA Research. Estimated Probability of Competing in Athletics Beyond the High School Interscholastic Level. 2013. http://www.ncaa.org/sites/default/files/Probability-of-going-pro-methodology_Update2013.pdf.

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