BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1285 (Fong) - Cal Grant B Entitlement Awards
Amended: June 25, 2014 Policy Vote: Education 6-1
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Jacqueline Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: This bill would delete the 2% limit for receipt of
payments for tuition and/or fees for new Cal Grant B Entitlement
award recipients in their first academic year of attendance, and
instead provides that, for the 2015-16, 2016-17, and 2017-18
academic years, respectively, 25%, 50%, and 75% of the Cal Grant
B recipients would be eligible for payments for tuition and/or
fees in their first academic year of attendance. In 2018-19, and
each academic year thereafter, all new Cal Grant B recipients
enrolling for the first time in an institution of postsecondary
education would be eligible for payments for tuition and/or
fees. The bill also provides that a student who receives a Cal
Grant B that includes tuition costs in the first year shall have
an amount of institutional aid the student receives that is
equal to that award used to offset the highest interest rate
loans extended to the student as part of his or her financial
aid award, as specified.
Fiscal Impact:
Cal Grant B: Increased award costs of approximately $35.5
million in 2015-16; $38.6 million in 2016-17; $38.7 million
in 2017-18; $38.8 million in 2018-19, and annually
thereafter (General Fund).
Institutional aid: Potentially substantial costs to the
University of California (UC) and California State
University (CSU) to provide increased institutional aid for
particular students, in order to match the new Cal Grant B
tuition and fees assistance award levels, as required by
this bill.
Administration: Significant ongoing workload for the UC and
CSU to implement the provisions of this bill ensuring that
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the UC and CSU apply institutional aid to a Cal Grant B
recipient's student loans (or another Cal Grant B award
recipient, as specified). See staff comments.
Background: Existing law authorizes the Cal Grant Program,
administered by the California Student Aid Commission (CSAC), to
provide grants to financially needy students to attend college.
The Cal Grant programs include both the entitlement and the
competitive Cal Grant awards. The program consists of the Cal
Grant A, Cal Grant B, and Cal Grant C programs, and eligibility
is based upon financial need, grade point average, California
residency, and other eligibility criteria, as specified.
(Education Code 69430-69433.9)
The Cal Grant B Program provides funds to eligible low-income
high school graduates who have at least a 2.0 GPA on a
four-point scale and apply within one year of graduation. The
award provides up to $1,551 for books and living expenses for
the first year and each year following for up to four years (or
equivalent of four full-time years). After the first year, the
award also provides tuition fee funding at qualifying
postsecondary institutions. Currently, up to 2% of new Cal Grant
B recipients can be eligible for payment of tuition or fees or
both in their first academic year of attendance. (Education Code
� 69435.3)
Existing law provides that the Cal Grant B award amount cannot
exceed $1,551, but provides that this amount may be adjusted in
the annual Budget Act. (EC � 69435)
"Access costs," for purposes of the Cal Grant Program, are
defined as living expenses and expenses for transportation,
supplies, and books. (EC � 69432.5)
Proposed Law: This bill deletes the 2% cap on the number of new
Cal Grant B recipients who are required to be eligible for the
payment of tuition or fees or both in their first academic year
of attendance. This bill also establishes a phased in expansion
of eligibility for the payment of tuition or fees or both in
their first academic year of attendance for new Cal Grant B
recipients as follows:
1) For the 2015-16 academic year, up to 25% of new Cal Grant B
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recipients will be eligible for payment of fees and tuition
in their first year of attendance.
2) For the 2016-17 academic year, up to 50% of new Cal Grant B
recipients will be eligible for payment of fees and tuition
in their first year of attendance.
3) For the 2017-18 academic year, up to 75% of new Cal Grant B
recipients will be eligible for payment of fees and tuition
in their first year of attendance.
4) For the 2018-19 academic year and every year thereafter, all
new Cal Grant B recipients will be eligible for payment of
fees and tuition in their first year of attendance.
This bill also requires that students who receive a Cal Grant B
that includes tuition costs in the first year shall have an
amount of institutional aid he or she receives that is equal to
that award used to offset the highest interest rate loans
extended to the student as part of his or her financial aid
award. If no such student loans are part of the award, the
institution shall use these institutional need-based funds to
offset the highest interest rate loan awards for other Cal Grant
recipient students.
Staff Comments: The most substantial cost of this bill is to
provide additional award funding to Cal Grant B recipients for
the payment of tuition or fees or both in their first academic
year of attendance. At full implementation in 2018-19, annual
costs will likely be $38.8 million (General Fund).
This bill also places new requirements on UC and CSU, in terms
of how they calculate and process financial aid awards.
Specifically, this bill also requires that students who receive
a Cal Grant B that includes tuition costs in the first year also
be given institutional aid equal to the amount of the award
"used to offset the highest interest rate loans extended to the
student as part of his or her financial aid award." Essentially,
this bill entitles the same student to get an additional
institutional award of equal or greater value than the tuition
and fees funding, and presumably the campus would apply that
amount of money toward the highest rate interest loan.
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For example, if a UC student who is Cal Grant B eligible
received an additional $12,192 in tuition assistance for the
first year of attendance, the UC would also have to contribute
at least $12,192 in institutional aid toward that student's
loans. If that student did not have loans, or (more likely) did
not have loans of more than $12,192 in his or her first year,
the UC would need to apply the full amount or balance of the
$12,192 in institutional aid toward the student loans of "other
Cal Grant recipient students."
This requirement would, at a minimum, require substantial
upfront work for the UC to develop internal regulations to
implement a complicated financial aid dynamic, particularly
during the phase-in years in which every Cal Grant B award
recipient is not entitled to the additional tuition assistance.
The UC would have to produce a preliminary financial aid
package, and revise it if the student was one to receive the
additional tuition assistance and needed to have loans cancelled
or reduced. Then, if there was excess institutional aid "owed",
the UC would have to determine which Cal Grant recipients would
receive that money applied toward his or her loans; this bill
does not specify a priority system for the excess funds, and the
bill allows for the money to be applied to any other Cal Grant
recipient.
The UC estimates that it would cost $100,000 per campus,
ongoing, to implement this change. The CSU, which has a more
automated award system, would incur annual costs of $300,000
statewide. Administrative costs could rise for both segments,
depending on the prevalence of having to apply one student's
excess "owed" institutional aid to other students' financial aid
packages.