2017-18 California Budget Update: How to Protect Low-Income Student Financial Aid

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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