A budget deal between lawmakers and Gov. Gavin Newsmon includes $227 million more for the state’s Middle Class Scholarship, part of a commitment to eventually remove any reason for public university students to borrow loans. The revised program debuted last year, sending an average of nearly $2,000 to 300,000 students.
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California cemented its status among the most affordable states to earn a bachelor’s degree after lawmakers and Gov. Gavin Newsom fulfilled their promise to expand the state’s Middle Class Scholarship program by another $227 million in this year’s budget deal.
That overhauled scholarship, which debuted last year, is now a $859 million juggernaut. It’s also a growing slice of the state’s financial aid pie: Between 2016 and 2022, California lawmakers poured roughly $1.4 billion more into grants and scholarships, bringing the state’s total contribution to around $3.5 billion.
Using new data that examines how the Middle Class Scholarship helped students in its first year, a CalMatters analysis shows that the grant worked largely as intended, sending more money to students of higher-income families.
But the program has frustrated some advocacy groups, who want the state to spend more on lower-income students, especially those who are ineligible for existing state financial aid. For lawmakers grappling with a shaky state financial outlook while also attempting to rein in the cost of college, this is a tough needle to thread.
The scholarship itself had growing pains in its first year. Many students who expected aid at the start of the 2022-23 academic year received their money months later as campuses and the state agency running the program rushed to jump-start a complicated program in a short amount of time.
Here’s the latest information and what you need to know about financial aid in California.
Who got new Middle Class Scholarship money — and how much
Because of the Middle Class Scholarship, 302,000 students received an average of $1,970 more dollars toward their education in the 2022-23 academic year, according to data CalMatters obtained from the state’s financial aid agency, the California Student Aid Commission.
Students from families with higher incomes received more money than those from lower incomes by design. That’s because students from wealthier families receive less financial aid from other sources. The scholarship uses a formula that takes the total cost of college and deducts how much a student receives in financial aid. It also assumes a student works enough to earn about $8,000 a year. For dependent students in households that earn more than $100,000 annually, an added formula is used to calculate how much their families can pay toward college. The assumption is that wealthier families have more money than poorer families to commit to college.
Students whose family incomes were between $150,000 and $200,000 received an average Middle Class Scholarship of roughly $2,800 — it was higher for UC students. For students whose families earned less than $50,000, their average scholarship was around $1,400.
Students will likely get more money going forward as the scholarship grows by another $227 million.
The scholarship complements the state’s marquee financial aid tool, the Cal Grant, which covers the in-state tuition for UC and CSU students and provides cash aid to community college students. Students generally are eligible for both aid programs for up to four years of full-time enrollment.
The middle class scholarship is available to a far larger swath of students: those whose families earn as much as $217,000. The income cut-off for the Cal Grant is lower. Students in a family of four will receive a Cal Grant in 2023 if their families earn no more than $125,600, depending on the type of grant.
Lawmakers intend to eventually grow the scholarship so that any student who gets the state aid won’t have to borrow to attend a UC or CSU, a public university debt-free promise. That would require around $2 billion more dedicated to the scholarship annually. Last year, the program was funded at about a quarter of its capacity, so students received about a quarter of the full amount they would have been awarded under the scholarship.
Different financial aid helps different students
Community college students are among the state’s poorest to pursue higher education. And though California posts the lowest community college tuition in the country, community college students still must find ways to afford rent, food and transportation.
Because students attending UC and Cal State campuses have access to more state, federal and institutional financial aid, often community college students end up paying more for their education than students enrolled at California’s public universities, according to a series of reports by the California-based Institute for College Access & Success.
Leaving out community college students from the debt-free promise of the Middle Class Scholarship excludes most of California’s public postsecondary students, who outnumber UC and CSU students nearly 3 to 1.
Lawmakers have expanded the Cal Grant to more than 100,000 additional community college students in recent years, but the state is due to decide next spring whether to expand the aid program so that practically any student with low-enough family income could get the grant, which follows students to a UC or CSU if they transfer. A key unknown: whether the state will have the funds to do it.
Some advocates think the state should put a pause on growing the Middle Class Scholarship and instead continue expanding the number of students eligible for the Cal Grant, including community college students.
“It is critical that California approach college affordability equitably by prioritizing students with the least resources,” Education Trust — West and the Institute for College Access & Success wrote in May. “Fully funding Cal Grant reform instead of (Middle Class Scholarship) is by far the best approach.”
California supports more low-income students than other states
But while the state’s students from modest means already benefit a lot from financial aid, middle-class families often shoulder a larger load of college costs.
Federal education data analyzed by CalMatters tells the tale.
Depending on which income bands you look at, California ranks fourth or fifth among all states in how much students from families earning less than $75,000 had to pay for expenses like tuition, housing and food after deducting all their state, federal and campus financial aid — a concept known as “net price.”
However, affordability plummeted for students whose families earned more than $110,000. For that group, California ranked 42nd, meaning they received considerably less aid. Still, as a percentage of income, students from wealthier households need to spend less of their family earnings on college costs than students from lower-income families, other data shows.
The federal data is from 2020-21 — the most recent available — and captures all first-time, full-time students who got some kind of federal grant or loan that year.
Among the “net price” highlights for UC and CSU students:
- California students with family incomes between $30,000 and $48,000 needed to pay an average of $7,800 — about $3,200 less than the U.S. average;
- For California students with incomes above $110,000, the net price was around $21,000 — $1,800 above the national average;
- The public can look up this “average annual cost” data by school using the College Scorecard tool.
Middle Class Scholarship expected changes and lingering problems
One expected change is that students formerly in foster care won’t have to borrow starting this fall, as long as they work part-time. They will begin receiving their full scholarship, a new social commitment in this year’s budget deal that should benefit roughly 600 students annually at a cost of around $5 million each year.
A problem that may continue for most other students, though, is that the mechanics of that scholarship complicate how quickly students actually receive the money.
Every Cal State student and some UC students didn’t receive their Middle Class Scholarship money until late 2022 or early 2023, meaning the dollars promised to them for early fall term never arrived, according to data CalMatters obtained from the California Student Aid Commission.
Why? The state discovered how difficult it was to run a new financial aid program that’s unable to determine how much money a student deserves until all that student’s other aid is calculated. Not to mention that suddenly 300,000 students were eligible for the revised scholarship.
The Middle Class Scholarship is a “last-dollar” cash award. How much a student gets is a basic math problem: the total cost of attendance, minus all other financial aid, minus the $8,000 from working and minus the family contribution from students whose households earn more than $100,000.
When the scholarship debuted last summer, campuses and the student aid agency running the program scrambled to accurately tally the amount each student would get.
“As a result, students and families were not notified of their award amounts in time for it to influence their enrollment decisions or their financial planning around covering college costs,” the Legislative Analyst’s Office wrote. The student aid commission said students who didn’t get scholarships in the fall saw that money the following term along with the remaining funds promised to them.
A further complication: If students receive additional money during the school year, they have to give back an equal amount of the Middle Class Scholarship aid.
Some of that confusion is set to go away, both because the scholarship has had a year of being implemented and because of a new bill awaiting Newsom’s signature. It would allow students with emergency expenses — such as several hundred dollars to repair a car, pay rent or afford a medical procedure — that also get campus emergency aid to avoid having that count against their total financial aid.
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