LAO on Debt-Free College

Executive Summary of Legislative Analyst's Office report: [excerpts]

Report Considers Design and Cost of a “Debt Free College” Program. The Supplemental Report of the 2016-17 Budget Act directs our office to provide the Legislature with options for creating a new state financial aid program intended to eliminate the need for students to take on college debt. The reporting language envisions a program under which the state covers all remaining college costs (tuition and living expenses) after taking into account available federal grants, an expected parent contribution, and an expected student contribution from work earnings. Though not specified in the reporting language, our understanding of the intent is for the program to focus on resident undergraduate students attending public colleges in California.

Program Likely to Limit but Not Eliminate Student Loan Debt. The debt free college program described in the reporting language is based upon what some financial aid experts refer to as shared responsibility. Shared responsibility programs can be designed to provide students a pathway to debt free college. Importantly, however, these programs do not necessarily eliminate loan debt for all students. Unless programs require students to make their contribution through work, some students might prefer to borrow. Also, some students might borrow if they experience difficulty finding employment or if their parents fail to provide their full contribution...

Program Estimated to Cost Additional $3.3 Billion Dollars Annually. Of this amount, $2.2 billion is for CCC students, $800 million is for CSU students, and $300 million is for UC students. (These amounts are on top of all existing gift aid.) Costs vary by segment primarily due to differences in the number of students they serve, as well as some variation in current levels of gift aid per student. Though our estimate of the initial cost of a new debt free college program is based upon the best available information to us at the time this report was prepared, actual program costs over the longer term could turn out to be notably higher or lower...

Full report at http://lao.ca.gov/reports/2017/3540/Debt-Free-College-013117.pdf