California students will no longer be able to use state scholarships to pay tuition at most for-profit colleges under the final budget plan lawmakers are expected to send Gov. Jerry Brown today.
The move would eliminate Cal Grants for more than 11,000 students at schools like Heald College, ITT Technical Institute and University of Phoenix.
The budget would cut $103 million from the Cal Grant program by 2013-14 by imposing new performance standards that colleges must meet to receive the money, and by reducing scholarship amounts for students at private schools.
The policies take clear aim at private career colleges, which have come under scrutiny by federal officials for profiting off government loans that many students cannot repay. But the action also is another move to shift the cost of higher education from California's general taxpayers to its students and the institutions they attend.
California's new performance standards, which measure loan repayment and graduation rates at schools where many students take out loans, mean most for-profit colleges in the state will be ineligible to receive Cal Grant money from new students. Existing students will be able to continue their studies for one year but will have their Cal Grants cut by 20 percent.
And starting next year, students at for-profit schools that meet the new standards will see their Cal Grant scholarships cut by more than half -- to $4,000.
The reduction is much smaller at private nonprofit schools, such as the University of the Pacific, University of Southern California and St. Mary's. Most will still be eligible to receive Cal Grants, and scholarships to students at those schools will go down by 17 percent over two years, to $8,056 in 2014.
Cal Grant students at public colleges -- including University of California, California State University and community college campuses -- will not be impacted by the changes.
"In a limited budget environment, we want to focus the resources we have for student financial aid on the public institutions, because those are a priority for the state," said H.D. Palmer, a spokesman for Brown's Finance Department.
State officials, grappling with several years of budget deficits, have been searching for a way to rein in the ballooning Cal Grant program that gives scholarships to low-income students. In 2003, the state spent $460 million to give out 147,000 Cal Grants. Now it spends $1.5 billion on 330,000 grants, said Diana Fuentes-Michel, executive director of the state's Student Aid Commission.
Until recently, Californians of modest means could get a Cal Grant to attend almost any college or trade school in the state -- public or private -- no matter how well the school was doing at turning out successful graduates.
That started to change last year, when the state imposed new restrictions that said students could use Cal Grants to pay tuition only at schools where at least three-quarters of graduates are repaying their student loans.
Brown's budget takes the restrictions even further, raising the bar on the loan default rate to 15.5 percent and requiring schools show a graduation rate of at least 30 percent. Those standards will make about 80 percent of for-profit colleges and less than 20 percent of nonprofit colleges ineligible to receive Cal Grants, according to the Legislative Analyst's Office.
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