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The Growth of Cal Grants
Kevin Cook May 19, 2017

The Cal Grant program is the primary program for providing tuition assistance and financial aid to California’s college students. It has allowed California to maintain access to college for low-income students during a time of rapid tuition increases. The program has grown significantly since its inception in 1955 and now serves more than 300,000 students at an annual cost of around $2 billion.

State law protects Cal Grant recipients from tuition increases at UC or CSU: when tuition rises, so do these students’ Cal Grants. Consequently, as tuition has increased and enrollment of low-income students has expanded, the program has grown rapidly. Next fall, tuition is scheduled to increase by $280 per year at UC and by $270 per year at CSU. In addition, UC, which has enrolled 7,400 new undergraduates in each of the last two years, plans to enroll an additional 2,500 in the fall of 2017‒18, the largest three-year increase in seventy years. CSU has added around 50,000 additional students over the past five years. The expansion of Cal Grants has drawn the attention of the governor. He noted in his May budget revision that "rising Cal Grant costs from tuition hikes will also limit the state’s ability to increase General Fund support in the future.”

Nearly all of the Cal Grant funding increases have gone to students attending public institutions. CSU has seen a 75% increase in Cal Grant funds since 2011‒12, while the community colleges and UC have received a 61% and 27% increase respectively. Private nonprofit colleges, on the other hand, have seen their Cal Grant funding stagnate. The governor’s budget revision acknowledges this by reallocating $8 million that had been targeted to UC and CSU in his January budget proposal to non-profit private Cal Grant funding. These funds will prevent a planned cut to the maximum award for students attending a nonprofit private college.

By contrast, for-profit colleges have seen their Cal Grant funding decrease substantially over the past five years. The 2012‒13 budget introduced restrictions on access to state Cal Grants which affected many for-profit colleges. To some degree, for-profit colleges satisfy an unmet need for access to higher education for non-traditional students. But investigators have found that many of these colleges engage in predatory marketing and lending practices—targeting vulnerable students, making false statements regarding job placement, and overestimating the value of the degrees they provide. To address these issues the state established new institutional eligibility standards for Cal Grants. To be eligible, a higher education institution must now have a minimum graduation rate of 30% and a loan default rate of less than 15.5%. The 2012‒13 budget also cut the maximum award for a student attending a for-profit college from $9,708 to $4,000. These regulations have saved the state nearly $100 million since 2011‒12, reduced by more than half the number of for-profit colleges eligible for Cal Grants, and ensured that low-income and first generation students were not taken advantage of by higher education institutions that did not serve their economic interest.

Cal Grants are an essential tool for improving the economic mobility of the state’s neediest residents. They also allow the state to reduce the burden of federal loans on young Californians. Maintaining Cal Grants for high performing colleges— public and private—will improve access to college for all Californians.

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