Planned Cal Grant Expansion for Public College Students in Jeopardy Amid Growing State Deficit

When California’s budget surplus was in the tens of billions of dollars two years ago, legislators passed a law that would expand the state’s nationally renowned free-tuition and cash-aid program to an additional 137,000 college students by fall 2024 — but only if the money was there.

Whether the Cal Grant tuition program grows will play out in the next two months as state legislators and Gov. Gavin Newsom grapple with a budget deficit now estimated at between $38 billion and $73 billion, depending on whom you ask.

Early signs suggest California’s upcoming budget, which legislators and the governor must finalize by late June, won’t be able to shoulder the new expenses. “Based on current revenue projections, those conditions are unlikely to be met in 2024–25,” wrote Lisa Qing, an analyst with the nonpartisan Legislative Analyst’s Office, in an email last week.

Full expansion would cost $245 million, on top of the $2.4 billion the state already spends on the Cal Grant program. The financial aid juggernaut fully covers tuition at the University of California and California State University and provides cash awards to community college students of $1,650, though some students with children get more. Private college students receive partial tuition waivers.

If implemented, much of the increased benefit would go to lower-income community college students who aren’t eligible for the Cal Grant due to GPA restrictions.

Some lawmakers are asking whether the state could partially expand the grant program in the hopes that more money will be available next year — no sure bet as projections show California will battle $30 billion deficits through 2028.

Meanwhile, the UC system has asked lawmakers to delay changes to the Cal Grant until next year. An official cited the colossal problems caused by new changes to the federal financial aid application, known as FAFSA, that have upended the normal workflow of financial aid offices across the country.

Another reason is that the proposed Cal Grant changes would generally lower the income eligibility cutoff, ultimately making fewer UC students eligible for the grant over time.

“Given that and the challenges that we’re facing this year with FAFSA, we would prefer that Cal Grant reform be enacted for ’25–’26,” said Shawn Brick, UC’s director of financial aid, at a March Assembly hearing.

What full Cal Grant expansion would look like

Right now, Cal Grant consists of eight programs, each with its own rules and award amounts that collectively benefit about 400,000 students. The law to revamp Cal Grant would collapse all those programs into just two: the Cal Grant 2 for community colleges and the Cal Grant 4 for four-year universities.

The overhaul would expand eligibility to roughly 185,000 additional students but exclude 48,000 students currently eligible — a net increase of 137,000 students. Those already getting the award would continue to receive it.

Students would be newly eligible for several reasons. If they’re community college students, they’ll no longer need to satisfy a minimum GPA of 2.0. This builds on a 2021 law that allowed more than 100,000 community college students to receive the Cal Grant for the first time. University students would be newly eligible because the rules would no longer limit the award to students under 28.

The new rules would also make students eligible for the Cal Grant even if they enroll directly into a university more than a year after finishing high school, removing the time-out-of-high school restriction.

However, the overhaul would also lower the income ceiling, excluding about 48,000 students who are now eligible for it. For example, under current rules, the income ceiling for a family of four with a dependent student going to college is $131,000. It would drop to $76,000 under the Cal Grant overhaul, Qing said at a March legislative hearing.

Also, university students would no longer be eligible for some cash awards, with the expectation that campus financial aid programs pick up the slack. At the same time, some university students who now only receive a $1,650 cash award as freshmen would instead be granted the tuition waiver, which is a higher value.

Also, under the new Cal Grant rules, an additional 45,000 lower-income students who are parents would be eligible for the award, and students with dependent children could receive an additional $6,000.

Most of the new awards would go to community college students

The agency that oversees financial aid, the California Student Aid Commission, projects that by the end of the decade, 120,000 more community college students will receive a Cal Grant annually under the overhaul.

It’s a different story for UC students. Under existing rules, the number of UC students receiving a Cal Grant is projected to grow by 17,000 by 2030. But under the overhauled Cal Grant, only 5,500 more UC students would get the award by then.

Still, students at UC, which has the highest tuition, would collectively receive more Cal Grant dollars than students elsewhere.

Assemblymember David Alvarez, a Democrat from Chula Vista, noted at a March hearing that UC is enrolling a smaller percentage of lower-income students than in the past, which he thinks is the reason why the system is projected to see fewer of its students acquire a Cal Grant under the overhaul.

“Let’s identify more of our California students that are lower income to be able to attend our UC system,” Alvarez said. “And therefore, I think Cal Grant can be a net benefit for the UC system.”

Alvarez, who leads the Assembly’s budget subcommittee on education, wants to see the Cal Grant expanded in some capacity by July when the state’s 2024–25 budget begins. “We know it will happen, but we are in a budget situation where we need to think about how that is going to happen. But I believe it must start this year,” he said.

Last month, state senators asked the Student Aid Commission to float some ideas for a partial rollout that limits costs.

One idea is to increase the size of the community college cash awards this year so they’re tied to inflation — one of the changes that would kick in under a full Cal Grant overhaul anyway.

Another option is to expand the number of students who are also parents receiving the cash award but lower the amount each student receives. An official with the commission, Jake Brymner, told lawmakers at a March hearing that doing so would mean 45,000 more students receive the cash award but that everyone would get between $3,000 and $4,000 — less than the $6,000 students get now.

Brymner also suggested limiting the Cal Grant for community college students to those who meet the current 2.0 GPA rule.

Finally, lawmakers could overhaul the Cal Grant but lower the income ceilings even more to limit costs, Brymner said. That idea is likely the least popular.

“I would hate to see a reduction to the income ceilings,” Noelia Gonzalez, Cal State’s director for financial aid programs, said at the same hearing. She said it would come at a particularly poor time for middle-class students.

Because of the state’s budget deficit, Newsom favors nixing a planned one-time increase to the Middle Class Scholarship, a relatively new financial aid program funded at around $630 million in 2022–23 and $860 million in 2023–24. Last year, lawmakers had promised to put an additional $60 million into the scholarship. Instead, Newsom wants to cut it back to around $630 million.

That would drop average awards from above $2,500 to just below $2,000 for the roughly 300,000 UC and Cal State students receiving them.