Students walk near Meiklejohn Hall at California State University East Bay on Feb. 25, 2020. Photo by Anne Wernikoff for CalMatters

by Mikhail Zinshteyn, CalMatters

The campaign to expand free tuition to more low-income California students has been riding a wave of unanimous goodwill, despite its large costs. But the state’s — and nation’s — largest public university system has made public its concern that key trade-offs required for that expansion will be a financial burden for some middle-class students. 

Backers of the effort say those concerns are misplaced. How and whether lawmakers choose to respond will affect the fate of tens of thousands of prospective college students in California for years to come. 

Officials from the California State University Chancellor’s Office warned the Board of Trustees on Tuesday that while it projects a net increase of nearly 29,000 students overall who’ll receive the free-tuition grant, it would also see a decrease of roughly 39,000 future middle-class students — even as some 68,000 low-income students would be newly eligible for the grant. To be clear, if the Cal Grant expansion occurs as proposed, middle-class students currently receiving the award will continue to do so.

The information wasn’t necessarily new. Supporters of expanding the Cal Grant, the state’s chief financial aid tool that waives tuition or gives cash aid to roughly 500,000 Californians, have been transparent that some students would lose eligibility even as more would gain. But, while it has no formal position on expanding Cal Grant, Cal State’s packaging of the information was an inversion of the dominant narrative so far that Cal Grant expansion is a net win for students. 

At issue is Assembly Bill 1746, a bill championed by key lawmakers and a constellation of student advocacy groups. The bill passed the Assembly on Thursday unanimously and is endorsed by the California community college system, whose students would be the major beneficiaries of the bill. If passed and funded, another 150,000 students would get the Cal Grant, a ​result of the bill doing away with age and time-out-of-high school restrictions for university students and grade requirements for community college students. 

But that 150,000 figure is a net gain. Because the bill would lower the income eligibility ceiling, tens of thousands of middle-class students would suddenly be left without the Cal Grant – including the 39,000 Cal State undergraduates. For a family of four, the income ceiling would drop from around $116,000 a year to $73,000, university officials said.

Prominent drivers of the Cal Grant expansion effort argue university systems will have more than enough money from their own financial aid dollars to cover any funding gaps for middle-class students. That’s because by adding more students to the state financial aid program, that frees internal financial aid money for a system like Cal State to cover students who would have previously been eligible for Cal Grants.

Sensitivities are high.

Some backers of the Cal Grant expansion viewed this week’s presentation to the Board of Trustees — the governance body of the Cal State system — as unbalanced. The presentation focused too much on who’d lose out under Cal Grant without acknowledging the benefit to lower-income students currently ineligible for the Cal Grant, said Audrey Dow, senior vice president of Campaign for College Opportunity, an advocacy nonprofit in California.

Cal Grant expansion within the bill requires more than $300 million annually in state support. It’s a large sum that needs to be negotiated as part of the state budget by June 15 between lawmakers and Gov. Gavin Newsom. Adding to the intrigue, Newsom vetoed a similar expansion of the Cal Grant last year despite unanimous support from the Legislature. 

Will Cal State’s concerns with the bill have a negative impact on those budget negotiations? “No,” wrote Assemblymember Jose Medina, a Democrat from Riverside and co-author of the bill. “Our hope is that the (public higher education system) segments will recognize the immense benefit that debt-free college will provide their students and their institutions,” Medina added in a written statement.

Architects of the bill say another financial aid expansion — Middle Class Scholarship 2.0 — will eventually cover that eligibility gap. But that wouldn’t be true until the state commits enough money to fully fund that program, which won’t happen this year. The state this year plans to put a $632 million down payment of the scholarship. Fully funding it — and thereby covering the eligibility gap left by the proposed changes to the Cal Grant — would cost the state an additional $2 billion annually. 

“The CSU believes that any modernization of the Cal Grant program should do no harm,” said Eric Bakke, interim assistant vice chancellor for advocacy and state relations at Cal State, during the Trustees meeting Tuesday.

Another author of the Cal Grant expansion bill, Assemblymember Kevin McCarty, a Democrat from Sacramento, said in a statement that “Cal Grant reform and expanding the Middle Class Scholarship is the correct pathway to debt-free college in California.” He added that lawmakers will “make both work in tandem, and the very few students who’ll end up not being eligible for the Cal Grant will be supplemented through the Middle Class Scholarship.”

Backers of the Cal Grant expansion say the Cal State system isn’t telling the whole story. The Cal State also operates a $700 million financial aid grant — called the State University Grant — that Cal Grant expansion advocates say could be used to cover the expenses for the middle-class students left out of the bill.

“I don’t think that it was a full representation of what the bill can do,” said Isaac Alferos, the outgoing head of the Cal State Student Association, which represents university students and is a key supporter of the Cal Grant expansion bill.

Under the Cal Grant expansion plan, Cal State students would receive $83 million more annually than they collectively do now at full implementation, according to data provided by the California Student Aid Commission. That’s even after accounting for the fact that the plan would get rid of a roughly $1,650 non-tuition award to cover portions of living expenses that goes to almost 114,000 Cal Grant recipients at Cal State today.

CalMatters asked the Cal State Chancellor’s Office for a breakdown of how the university’s $700 million grant would fare if the Cal Grant expansion passes, but the system didn’t provide one. Instead it offered a statement from Noelia Gonzalez, the system’s interim director of financial aid. Cal State “does not oppose Assembly Bill 1746,”she wrote, and that “we will certainly revisit our policies” if Cal Grant expansion has an impact on the university grant.

At least one Cal State Trustee homed in on the missing state university grant data. “I would have loved to see more numbers from the presentation that proposes a (State University Grant) plan along with the Cal Grant plan if passed,” said outgoing student Trustee Krystal Raynes in an interview. If there is more pressure on the university grant, the Cal State system could ask the state for more funding, she added.