California policymakers have limited access to the Cal Grant program to postsecondary institutions that are based in the state and meet high quality standards. These requirements are especially important to shield students from very short-term programs and low-quality for-profit institutions that create a particular risk of harming California students and taxpayers. Specifically, key provisions define and distinguish public and private higher education institutions or segments, outline Cal Grant eligibility requirements, and dictate that out-of-state institutions operating in California with oversight by the Bureau for Private Postsecondary Education (BPPE) do not have outright permission to participate in the Cal Grant Program. However, recently – detailed below – out-of-state institutions have pursued circumventing or changing these requirements to access California financial aid programs. California students, taxpayers, and lawmakers must remain vigilant and clear-eyed about these efforts and protect against the weakening of guardrails for different financial aid programs.
State budget trailer bills as an avenue to access state aid
California’s annual state budget process especially the use of trailer bill language can be used to enact broad changes to state law without these changes being subject to the scrutiny, stakeholder input, and potential challenges of the normal legislative process. For example, the 2022-23 and 2023-24 budget bill packages included trailer bill language allowing out-of-state, exclusively online postsecondary institutions access to the Golden State Teacher Grant (GSTG) program if they met newly adapted requirements. This was the result of previous 2021-2022 budget efforts by Western Governors University (WGU) to create a new state grant program for older students enrolled in exclusively online higher education programs and a failed legislative vehicle, AB 2572 (Rubio), which faced opposition from TICAS and other stakeholders.
The acquisition of California institutions by out-of-state institutions
Recently, out-of-state intuitions have sought a new path to access California financial aid through the acquisition of California-based institutions that are struggling financially. This allows an out-of-state institution to establish indirect access to California aid through an institution that may already be eligible. The new owner of the acquired institution can enroll financial aid eligible students and stands to gain as the ultimate recipient of aid funds. While acquisitions by for-profits or non-profits are not a new thing in California, the new risk comes when the acquiring institution is an out-of-state public institution whose governing body is in another state. The following are two noteworthy examples of this occurring:
In December of 2022, Arizona State University (ASU) announced that Columbia College Hollywood (CCH) — a Los Angeles-based college offering degrees in cinema, visual effects, graphic design, and interactive media— would become an ASU affiliate. Coincidentally, this federal change of control was approved shortly after a successful budget trailer bill policy change by CCH to retain their Cal Grant eligibility even though they exceeded the allowable CDR threshold. The timing overlap of the ASU-CCH acquisition and CCH’s Cal Grant exemption efforts raises some questions as to whether the partnership was adequately transparent for the purposes of relevant state law. For example, why did CCH officials not mention the future change of control to the California Student Aid Commission when they took up the eligibility appeal? Similarly, would reinstated Cal Grant eligibility paired with the change of control be a loophole to provisions in SB 1433 (Roth, 2022) since ASU —an out of state institution— would indirectly access Cal Grant funding?
In April of 2023, ASU also acquired the LA campus of the Fashion Institute of Design & Merchandising (FIDM) around the same time that three other FIDM campuses lost Cal Grant eligibility and/or ceased operations. Once more, this partnership raises questions about whether there was adequate transparency for state policymakers as the deal was being considered and whether ASU is indirectly accessing financial aid without the necessary permission from state policymakers.
While all the instances described above are unique, they all point to one trend: out-of-state institutions are finding new, inventive ways to stretch the boundaries of protections meant to ensure that California financial aid dollars serve California students at approved, accountable, and high-quality California institutions. In an upcoming blog, TICAS will further detail the implications of these recent occurrences and uplift potential opportunities for action.