DFPI Student Loan Proposal Raises a Few Key Issues to Consider

Summary

Brief Covers Student Financial Aid Proposals at Three Departments. This brief analyzes the Governor’s General Fund budget proposals related to student financial aid at the California Student Aid Commi ssion (CSAC), the Scholarshare Investment Board (SIB), and the Department of Financial Protection and Innovation (DFPI).

Governor’s CSAC Proposals Are Warranted to Implement Program Expansions. The 2021?22 budget enacted several CSAC program expansions-including an expansion of Cal Grant eligibility for community college students, a revamp of the Middle Class Scholarship program, multiple one?time initiatives, and a new requirement for school districts to verify that high school seniors apply for financial aid. The Governor’s budget includes $479,000 ongoing and five positions for CSAC to implement these program expansions. Given the number, magnitude, and complexity of the expansions, we recommend approving the five positions at minimum. Beyond the five positions, the Legislature may wish to work with the administration and CSAC to determine if additional staffing is warranted. The Governor also proposes $500,000 one time to expand CSAC’s Cash for College program to support the implementation of the new financial aid application requirement. We recommend approving the one?time funds and adding a reporting requirement to inform future ‘s ongoing funding level.

Some of Governor’s SIB Proposals Are Justified, While Others Could be Strengthened. The 2021?22 budget expanded SIB’s California Kids Investment and Development Savings (CalKIDS) program to provide college savings accounts to low?income public school students (in addition to all newborns). The Governor’s budget includes $238,000 ongoing and two positions for SIB to administer the expanded CalKIDS program. We recommend approving both positions based on the increased workload. The Governor also proposes three initiatives totaling $5.4 million ongoing and $4.6 million one time to support CalKIDS participant financial literacy, participant notifications, and a paign. We recommend consolidating these three similar proposals into one outreach initiative to provide a more coordinated message to participants and potentially reduce overall costs. We further recommend withholding action on the financial literacy component and requesting the administration provide more detail on the proposed activities and associated cost.

The Governor’s budget includes $10 million one time to DFPI for student loan borrower outreach. The administration intends to submit a more detailed proposal in the spring. Upon receiving the full proposal, the Legislature could consider whether the proposed activities would address gaps in existing student loan resources, target borrowers facing greater repayment challenges, and be appropriate for one?time funding.

Introduction

This brief is organized around the Governor’s 2022?23 budget proposals related to student financial aid. The brief has three sections. The sections are focused on the financial aid programs administered by the California Student Aid Commission (CSAC), the Scholarshare Investment Board (SIB), and the Department of Financial Protection and Innovation (DFPI), respectively.

California Student Aid Commission

In this section, we cover the Governor’s budget proposals for CSAC. We begin with an overview of CSAC’s budget. Next, we provide updates on cost estimates for the Cal Grant and Middle Class Scholarship programs. We then analyze the Governor’s proposals to provide CSAC with new staff positions, expand the Cash for College program, and modify the Dreamer Service Incentive Grant program.

Overview

Below, we describe the major financial aid programs administered by CSAC, recap the key changes to CSAC’s programs under the 2021?22 budget, and provide an overview of the Governor’s 2022?23 budget for CSAC.

Major Programs

Cal Grants Are the State’s Largest Financial Aid Program. There are three types of Cal Grant awards-Cal Grant A, B, and C. As Figure 1 shows, the award types vary in the amount of tuition and nontuition coverage they provide. Cal Grant A covers full systemwide tuition and fees at public universities and a fixed amount of payday loans Midland online tuition at private universities. Cal Grant B, in most cases, provides the same amount of tuition coverage as Cal Grant A, while also providing an access award for nontuition expenses such as food and housing. Cal Grant C, which is only available to students enrolled in career technical education programs, provides lower award amounts for tuition and nontuition expenses. Across all three Cal Grant award types, a supplemental award providing additional nontuition coverage is available to students with dependent children, as well as current and former foster youth.