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The 2022-23 Budget: Middle Class Scholarship Program

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Summary. The 2021‑22 budget agreement included plans to revamp the Middle Class Scholarship (MCS) program beginning in 2022‑23. The Governor’s budget includes a $515 million ongoing augmentation to begin implementing the revamped program. Under the new program rules, University of California (UC) and California State University (CSU) students will receive MCS award amounts linked to their total cost of attendance, rather than tuition costs only. The new MCS rules also will add many more recipients, including low‑income students receiving Cal Grants. With these significant changes come new issues for the Legislature to consider. Given the complexity of the revamped program, one implementation issue to consider involves the state’s ability to continue providing timely notification of awards to students. Another issue to consider is that the revamped program could contribute to shifts in enrollment demand from the community colleges (where students are ineligible for MCS awards) to the universities. The revamped program also could reduce some incentives for students to contain their living costs as well as for campuses to contain their student housing charges. The last issue we discuss revolves around the options the Legislature has for phasing in financial aid expansions—including the option to expand living cost coverage through the Cal Grant program, potentially offsetting MCS costs.

Introduction

As part of the 2021‑22 budget agreement, the state revamped the MCS program, with the new program rules scheduled to go into effect in 2022‑23. The Governor’s 2022‑23 budget includes the agreed‑upon General Fund augmentation ($515 million) to implement the first year of the revamped program. We describe the revamped program and proposed augmentation in The 2022‑23 Budget: Student Financial Aid. In this follow‑up post, we explore the MCS program changes in greater detail. We first provide background on state financial aid programs, with a focus on the Cal Grant program as well as the original and revamped MCS program. We then examine the estimated impacts of the revamped MCS program. We conclude the post by raising some issues for legislative consideration as it implements the revamped program.

Background

Cal Grant Program Is State’s Longstanding Student Financial Aid Program. In the late 1970s, the state consolidated its financial aid programs into the Cal Grant program. The California Student Aid Commission (CSAC) administers this program. The state has multiple types of Cal Grant awards, with award amounts varying by type and segment. At UC and CSU, Cal Grants typically cover full systemwide tuition and fees (currently $12,570 at UC and $5,742 at CSU). In addition, low‑income students may receive an “access award” (currently $1,648) for living costs such as food and housing. Cal Grants have various eligibility requirements, including income and asset ceilings that vary by family size. In 2022‑23, a dependent student from a family of four must have an annual household income no greater than $116,800 to qualify for any Cal Grant award, and no greater than $61,400 to qualify for an access award. As Figure 1 shows, the Governor’s budget provides $2.8 billion for the Cal Grant program in 2022‑23, with $2.1 billion of this amount going to UC and CSU students.

Figure 1

Governor’s Budget Provides
$2.8 Billion for Cal Grants

2022‑23 (Dollars in Millions)

Segment

Recipients

Spending

UC

92,681

$1,164

CSU

160,021

932

CCC

215,153

413

Private nonprofit institutions

28,861

251

Private for‑profit institutions

5,684

30

Other public institutions

32

a

Totals

502,433

$2,792

Original MCS Program Was Enacted in Response to Steep Tuition Increases. UC and CSU increased tuition during the Great Recession in response to state funding reductions. Between 2007‑08 and 2011‑12, systemwide charges for undergraduate resident students increased from $6,636 to $12,192 (84 percent) at UC and from $2,772 to $5,472 (97 percent) at CSU. The original MCS program (administered by CSAC) was enacted to help middle‑income UC and CSU students not receiving tuition coverage through the Cal Grant program receive partial tuition coverage. Awards cover between 10 percent and 40 percent of systemwide tuition and fees, with the percentage graduated downward as household income increases. State law caps spending on the original MCS program at $117 million annually and directs CSAC to prorate award amounts to remain under the cap, if needed. CSAC is prorating award amounts for the first time in 2021‑22. (As discussed in the nearby box, tuition charges at UC and CSU have been held about flat since 2011‑12.)

Revamped MCS Program Focuses on Total Cost of Attendance. The revamped MCS program (also administered by CSAC) is very different than the original program. Rather than focusing solely on tuition, the revamped program is based on a student’s full cost of attendance, including living costs. As Figure 2 illustrates, calculating a student’s award amount under the revamped program will involve several steps. First, CSAC will account for other available gift aid, a student contribution from part‑time work earnings, and a parent contribution for dependent students with a household income of over $100,000. (We refer to these three factors collectively as students’ “available resources.”) It then will deduct these amounts from a student’s total cost of attendance to determine whether the student has remaining costs. Finally, CSAC will determine what percentage of each student’s remaining costs to cover each year based on the annual state appropriation for the program. Under this formula, award amounts will vary widely among students, with each student’s award reflecting their costs and available resources.

Figure 2

New Middle Class Scholarship Formula
Takes Effect in 2022‑23

Illustrative CSU Dependent Students Living Off Campus

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