California Democrats unveil a sweeping financial aid plan to help students avoid debt

Reporting from Sacramento —  Seizing on growing concerns over college affordability, California lawmakers proposed what would be the most generous college aid plan in the nation Monday, covering not just tuition but also living expenses that have led to spiraling student debt.

The plan would supplement California’s existing aid programs with the aim of eradicating the need for student loans for nearly 400,000 students in the Cal State and University of California systems. It also would boost grants to community college students and give those attending them full time a tuition-free first year.

“Lower-income students … are able to many times, through our great programs in California, get help to pay for tuition. But they’re still graduating with a tremendous amount of debt,” said Assemblyman Kevin McCarty (D-Sacramento), who is spearheading the plan. “The cost of living, the books, the transportation — that’s [what] we really need to tackle.”

At a Capitol news conference Monday morning, Assembly Speaker Anthony Rendon (D-Paramount) said that with the introduction of the proposal, “California is taking the boldest step in the nation for making college debt-free.”

The plan’s high price tag means success is hardly guaranteed. But it comes at a time when college costs are facing increased scrutiny. Nearly 60% of Californians in a recent survey said affordability was a big problem for the state’s higher education system. Bernie Sanders’ presidential bid last year catapulted his call for tuition-free college into the national spotlight.

Under the new plan, students still would have access to existing financial aid, including federal Pell Grants, state programs such as Cal Grants, university grants and Middle Class Scholarships (if they are not eliminated as Gov. Jerry Brown has proposed). Parents making more than $60,000 would be expected to make a contribution, and students also would be expected to chip in by holding part-time jobs year-round.

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The new scholarship would cover the rest of the average annual cost of college, which is around $21,000 at Cal State and $33,000 at UC.

“It’s by far the most comprehensive and wide-reaching proposal in the country,” said Lupita Cortez Alcalá, executive director of the California Student Aid Commission.

Already, she says, the $2.1 billion in annual state financial aid that her commission administers is the most generous in the nation. The Assembly proposal would make it more so by expanding coverage of living expenses — which accounts for 60% of the total cost of attendance at UC. Other “free college” programs in Oregon and Tennessee and a proposal in New York cover only tuition and fees.

“This additional plan would really help close some of the gaps in the current financial aid,” Cortez Alcalá said.

Fully implemented, the new aid program would cost around $1.6 billion per year, although proponents expect that price tag would come down as the state minimum wage increased and students earned more in their jobs. Assembly Democrats are proposing phasing in the new scholarships over five years, with an initial cost of $320 million and an additional $100 million for the community college provisions.

The bulk of the money would come out of the state’s general fund. McCarty said they expect tax revenues to come in higher than the governor’s projections, giving legislators more money to spend.

The total cost is far less than the $3.3-billion price tag the Legislative Analyst’s Office estimated for fully debt-free college. That report, released in February, included covering the living expenses for community college students, which this latest proposal would not do.

The lawmakers’ proposal faces steep odds in making it into the state’s final budget plan, which is due in June. Brown, who has been reluctant to approve new spending even in cash-flush years, forecast a slight budget deficit next year. His initial spending plan would phase out the Middle Class Scholarships, a program championed by former Assembly Speaker John A. Pérez (D-Los Angeles).

And lawmakers already have other vexing policy issues on their plates.

“We have transportation to do. We have housing to do,” said Assemblyman Jose Medina (D-Riverside), who chairs the Assembly higher education committee. “But maybe, finally, college and higher education is rising to the top.”

The proposal is backed by Rendon, the top Democrat in the Assembly, whose support may help its prospects in budget negotiations with Brown and Senate leader Kevin de Léon (D-Los Angeles), who has proposed his own bill to boost aid at community colleges.

But Rendon stopped short of calling the package the top Assembly priority in the budget this year and took pains to temper expectations of its place in the final plan.

“It’s going to follow the normal budget process,” he said. “Am I going to guarantee we’re going to get this across the finish line? No, I’m not. But it’s a hugely important issue to a lot of our caucus members.”

H.D. Palmer, spokesman for the state Department of Finance, noted Brown’s administration has worked to clamp down on college costs by keeping tuition and fees flat for the last five years “while continuing to work with both systems to make improvements such as time to graduation that have a direct effect on cost to students as well as their parents.”

The Assembly proposal “is certainly a noble goal, but one that clearly has to be paid for,” Palmer said.

The state’s three public systems of higher education, which educate the largest number of low-income students in the nation, welcomed the proposal.

“As an institution committed to expanding educational access for low-income and first-generation students … we look forward to studying the proposal and working with the Legislature on this important issue,” the University of California said in a statement.

UC already covers tuition and some living expenses for students whose families earn less than $80,000 a year. But the 10-campus system requires that students, regardless of income, contribute about $9,700 annually. That “self-help” requirement — which the debt-free proposal would retain at some level — may be one reason that even low-income students covered by financial aid still graduate with an average $20,000 in debt, according to Ralph Washington Jr., UC Student Assn. president. That’s lower than the national average of $28,950, a UC spokesman said.

Washington said some students take out loans to cover their self-help portion rather than work long hours, which can affect their grades. Some also need to send some of their job earnings to help their struggling families. Rent also is very high in some areas where UC campuses are located, such as Westwood, Berkeley, San Diego and Santa Cruz.

At Cal State, which is considering a 5% tuition increase to fill a looming gap in state funding, Chancellor Timothy P. White said administrators welcomed the chance to work with legislators to make college more affordable.

Paul Feist, spokesman for the California Community Colleges Chancellor’s office, said the Assembly plan could help more of the system’s 2.1 million students who struggle with high levels of unmet financial need.

The system’s fee of $47 per unit is the lowest among colleges in the nation, and 45% of students received fee waivers in 2015-16. But students also have less financial aid available to them than those at UC and CSU.

About 38,000 students took out loans, averaging $5,500, in 2015-16, California Community Colleges data show.

Debbie Cochrane, vice president of the Institute for College Access and Success, said the Assembly proposal would not adequately help those students who most need it.

“In many regions across the state, community college students face higher college costs than UC or CSU students,” Cochrane said.

Cortez Alcalá said it was financially unrealistic to cover the full cost of college for all students.

“We have to pick and choose,” she said.

To read the article in Spanish, click here.

Times staff writer Rosanna Xia contributed to this report.

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Updates from Sacramento

UPDATES:

1:55 p.m.: This article was updated with a quote from the state Department of Finance.

11:58 a.m.: This article was updated with details about Monday’s press conference.

This article was originally published at 1 a.m. Monday.