Financial Aid Dilemma
California college students compete for a shrinking pool of resources

By Carl Irving
A WIDENING GAP between available financial aid and the number of students who need it may begin to eliminate thousands of students who depend on welfare payments from California's colleges and universities this fall.

Welfare-to-work bills likely to pass the California Legislature in late summer could force more than 150,000 students--140,000 in the state's community colleges, 10,000 at the California State University, 1,000 at the University of California, and several thousand in private colleges and universities--to drop out of school or not to enroll in the first place.

The dramatic plight of these students, most of them single women with children, living well below the poverty level, is seen by some education officials as the first grim warning that California's long tradition of providing higher education for all who qualify is coming to an end.

"Where does the state make its stand with regard to whom to invest in, given there's not enough to go around?" asked Jon D. Shaver, executive director of the California Student Aid Commission. "It's an enormous issue. Who does the state want to get in the door?"

Governor Pete Wilson's administration and the Legislature are wrestling with that question but no consensus solution has emerged as yet.

The crisis among welfare students highlights a problem that has been building for years, as higher education costs, both public and private, have soared and the total of federal, state and institutional dollars available for student financial aid has fallen far short of the need.

In a forthcoming report commissioned by the policy center that publishes CrossTalk, The College Board (a non-profit college services and research organization) pointed out that tuition charges increased sharply in the first few years of this decade.

They rose 80 percent at Cal State, 97 percent at UC, 198 percent at the state's community colleges, in inflation-adjusted dollars, while the median income of California families remained stagnant. As a result, the need for financial assistance has increased dramatically.

Eighty-two percent of the undergraduates enrolled at California's private (they prefer the term "independent") colleges and universities now receive some kind of financial aid, as do two-thirds of UC undergraduates and 60 percent of those at Cal State campuses.

Although California's community college charges are among the lowest in the land ($13 per credit unit), by last fall student inability to pay had forced the system to waive these fees for one out of every three students enrolled in academic courses on the 106 campuses.

Because the level of need is well above the supply of grant and scholarship money, students and their families have turned increasingly to loans. California's federal loan volume doubled between the 1990-91 and 1995-96 academic years--from $1.3 billion to $2.6 billion, in constant dollars. Loans now account for 55 percent of all financial aid in California.

UC undergraduate borrowers now owe an average of $15,000 by graduation day, up from $5,000 a little more than a decade ago. Total borrowing by Cal State students jumped from $192 million in 1992 to $416 million in 1995, and the average borrower owes $10,000 by the time he or she earns a bachelor's degree. In the private colleges and universities, debt averages $18,000 per student.

The Student Aid Commission expects the total debt burden to rise to $5 billion by the end of this decade.

The College Board report warns that "without a stronger state commitment to need-based assistance--grant aid in particular, California will continue down the path of becoming a high tuition/high debt state, and the state's growing number of poor people will increasingly lack equal educational opportunity."

There are no signs of this sort of "stronger state commitment." There have been modest increases in Cal Grants, the state scholarship program, in the last five years but the Student Aid Commission currently provides these grants to only one of every eight high school graduates--fulfilling only half of the commitment that the state made in the late 1980s.

Both public and private colleges and universities are spending ever larger amounts on financial assistance to students.

Public institutions spent $520 million in the 1995-96 academic year, an increase from $267 million (in inflation-adjusted dollars) in 1990-91. The state's independent colleges and universities increased financial aid spending from $282 million to $480 million (in current dollars) in the same five-year period.

Much of the increase in institutional aid has come from student fee revenue.

But the gap between the assistance that is needed and that which is provided continues to widen. And the problem will grow worse in the next decade, as higher education enrollments swell and the proportion of poor students increases.

Until now, two distinct groups have competed for these resources--students fresh out of high school from families that cannot afford to pay for all of their children's college costs, and older men and women with scant resources, often with children of their own, who want to re-enroll or to begin their college educations.

This year, a third group has added to the demand for aid--the more than 150,000 students now on welfare, most of them in public community colleges. The new federal welfare law requires these students to work at least 20 hours a week and terminates their benefits after two years. Education officials believe these requirements will drive many students out of higher education.

"Most of these are single mothers with kids," said Linda Michalowski, statewide coordinator of financial aid for the California Community Colleges. "To ask them to be successful students, successful parents and successful in a job is a pretty tall order."

Surveys by Michalowski's office show that the typical community college student receiving financial aid is a 26-year-old woman, often with dependent children. If this student carries 12 academic units, she faces annual expenses exceeding $8,600, including books, food, lodging and child care costs. But federal grants and community college fee waivers typically add up to less than half that amount.

Governor Wilson has proposed spending an additional $52 million next year to provide community college welfare students with job training, counseling and child care. But college officials say that would pay for only a small fraction of the students who are likely to be affected by the new welfare laws and regulations.

Many are not sympathetic to the problems of welfare students. "I doubt most of the public wants to pay for (college) access for a 33-year-old single mother," said Maridel Moulton, chair of the Student Aid Commission.

Legislators are sharply divided over what, if anything, to do about the problem, and probably won't decide until well into the summer. But an interview with a key state senator indicated that many of these students are doomed to disappointment.

"Full-time students currently on welfare approaching the end of their programs should be allowed to continue, but we won't be enrolling any new people in these long-term programs," said Senator Patrick Johnston (D-Stockton), chairman of the Senate Appropriations Committee and co-chairman of a special welfare reform committee. "The guiding principle will be to take any job ahead of training or education."

Johnston described his position between two extremes, one of which says "to hell with those welfare students in school" while the other counsels "untold patience...I'm somewhere between these two." Sacramento sources who are familiar with welfare-to-work issues believe Johnston reflects the will of a large bipartisan majority in the Legislature.

Community college students are not the only ones who would be affected by the tough new federal and state laws. Officials of the 22-campus Cal State system estimate that 10,000 of their 337,000 students are AFDC (Aid to Families with Dependent Children) beneficiaries. Even the University of California enrolls about 1,000 undergraduates who are on welfare.

Jonathan Brown, president of the Association of Independent Colleges and Universities, estimated that "a few thousand" students in the private schools receive AFDC payments.

Ted Lempert (D-Palo Alto), chairman of the Assembly Higher Education Committee, agreed with Senator Johnston that there is not enough additional student financial aid in sight to help most of these students.

Lempert said Assembly Speaker Cruz M. Bustamante has asked staffers to seek sources of additional funding "so the system will be truly open to all who qualify, either through tuition or real financial aid." But Lempert conceded that funds for these large, new, long-term expenditures "have not been identified" and that there is little support for such an effort either in the State Senate or in the Wilson Administration.

The squeeze on resources may widen long-standing rifts among the state's higher education segments.

Representatives of Cal State and the Community Colleges favor lowering academic requirements for Cal Grants, the state scholarships, so that more of them would go to older, part-time students and those from poor or minority backgrounds who did not have an equal chance to prepare for college.

Lee Kerschner, former special assistant to Cal State Chancellor Barry Munitz and a former member of the Student Aid Commission, said expanding the number of state grants that are not dependent on grade-point averages "could solve both the welfare issue for the community colleges and the warfare between UC and CSU." Kerschner is now executive vice chancellor of the Minnesota State Colleges and Universities system.

But those who speak for UC and for most independent institutions favor higher priority for academically qualified but financially needy students who are fresh out of high school.

"We really need to avert the trap of looking at welfare programs as student aid," said Kate Jeffery, UC statewide director of student financial support. "It ought to be a separate pool of funds."

Jeffery favors retaining the present criteria for awarding Cal Grants, most of which require a B-plus high school average.

Jeffery said UC's share of students from families with low to moderate incomes has increased more rapidly than Cal State's since 1990 (but Cal State still enrolls more such students) and that UC's annual student costs now exceed $13,000, about $3,000 more than the average cost of attending a Cal State campus.

Here is a brief look at the financial aid picture in each of California's higher education groups:

 

Non-profit Private Colleges and Universities
Federal loans are the largest source of financial assistance for students in the state's independent, non-profit institutions. In 1995 these loans amounted to $1,142,745, more than the total for UC, Cal State and community college students combined, according to the forthcoming College Board report.

In addition, private schools have poured increasing amounts of their own money into financial aid--$488 million in 1995, up from $330 million in 1990, according to the new report. This aid takes the form of scholarships, loans, fee waivers, work-study and money from private sources.

State scholarships--Cal Grants--provide a third source of financial assistance. Although the program originally was intended to make it possible for more students to afford to attend private schools, increasingly the beneficiary has been the University of California.

Last year, 42 percent of the Cal Grants went to UC students, while only 34 percent were awarded to those in non-profit private institutions. (Cal State students won 15 percent of the awards, community college students only 6.7 percent.)

In the last two years, however, independent colleges and universities have benefitted from a sympathetic, conservative Republican governor's proposals for more generous state scholarships that are tailored to cover private tuition charges. The Cal Grant awards were increased from $5,252 to $7,164 this year, and Governor Wilson has proposed another boost--to $9,105--for next year.

Jonathan Brown, spokesman for the non-profit private schools, argues that they offer a reasonable alternative to building new public campuses, especially when one considers that each UC undergraduate receives an "indirect" state subsidy of $12,000 a year, each Cal State student $8,000. Brown is referring to state General Fund appropriations to UC and Cal State.

University of California
Although UC undergraduates come from families with the highest median incomes of any of California's higher education sectors--$55,421--the number in need of financial aid increased by 47 percent between 1990 and 1994, according to the latest university report on student aid.

The report attributes the increase to recession, rising costs and the university's efforts to diversify its student body by recruiting more low-income and minority students.

(Kate Jeffery, the statewide financial aid director, would not speculate on the impact that the UC Board of Regents' two-year-old anti-affirmative action policy might have on the characteristics of future first-year classes or their need for financial aid.)

For the first time in the university's history, a majority of undergraduates on the eight general campuses received some form of assistance. Jeffery hopes this trend will flatten out but does not expect a long-term decrease.

Another recent UC study found that "families are becoming increasingly convinced that their children's choice of college will be unaffordable." Financing a college education, the study says, has become a major concern, along with saving enough money for retirement and long-term care for the elderly.

Another survey found that nearly three out of four UC freshmen worry about having enough money to complete their degree work.

Federal loans have become the largest source of financial assistance. In 1990, 39,516 UC undergraduates borrowed $147.7 million, but five years later those numbers jumped to 84,269 students borrowing a total of $362.5 million.

In those same five years, institution-based aid increased 55 percent, from $171.1 million to $268.4 million. Last year, the UC Berkeley campus alone provided $27 million in grants and scholarships, according to Richard Black, campus financial aid director, who said private fundraising for financial aid purposes "will be essential" in coming years.

UC undergraduates receive only about 11 percent of the federal Pell grants (named for retired U.S. Senator Claiborne Pell) that go to California students from low-income families.

California State University
Last year, Cal State students received about 24 percent of the federal Pell grants awarded, for a total of $150.8 million, but only about 15 percent of the state scholarships, worth $35.7 million. Aid provided by individual campuses or by the system amounted to another $139 million.

Student borrowing was the largest source of financial assistance in the 22-campus system--$517.6 million. "Both the number of borrowers and the total volume of borrowing more than tripled at CSU from 1990-91 to 1994-95," The College Board reported.

Cal State Chancellor Barry Munitz thinks the fear of going heavily into debt will keep students from seeking important but low-paying jobs like teaching and social work.

To broaden the effectiveness of student aid, Munitz has proposed more eligibility for students who learn by telecommunications or through correspondence. He also has urged that annual borrowing limits be raised so students can enroll year round. Current rules are designed for the traditional nine-month academic year, penalizing those who want to speed up their studies.

More than half of the Cal State students who receive financial help are over 22 years old. Less than a third of them carry more than 12 units at a time. Many work part-time or full-time, usually at jobs that are not related to their studies. The majority are transfer students from community colleges, or they are resuming their college educations after years of concentrating on work or family obligations.

Lee Kerschner, the former Cal State administrator, said these older, part-time students should receive a greater share of financial aid. "The real public policy question is whether we provide access for (all) Californians or just for 18-year-old Californians," Kerschner said. "Yes, the number of high school graduates will explode early in the next century, and we should be careful to leave enough aid for them. But meantime, there's a rapidly growing older population" whose needs are not being met.

California Community Colleges
Last year, students in the two-year public colleges received 41.7 percent of the federal Pell grants awarded in California, worth more than $264 million. But they received only 6.7 percent of the Cal Grants, worth about $16.4 million. Institutional aid, mostly in the form of fee waivers, provided another $112.3 million.

Community college administrators have succeeded in sharply reducing the number of students who borrow--now down to only 2.8 percent of total enrollment, practically eliminating what had become a serious and growing problem of students defaulting on their loan payments.

"So many of our students have very low incomes and are at such high risk that crippling debts over several years (the time such students typically need to complete their freshman and sophomore-year course work) could block them from upper division studies and degrees," said Linda Michalowski, the statewide financial aid coordinator.

The community college students at greatest risk are the many thousands who receive welfare payments, and their fate lies in the hands of a generally unsympathetic governor and legislature.