LAO report: Debt free college

The Legislative Analyst’s Office has issued the following report:

Creating a Debt Free College Program
The Supplemental Report of the 2016-17 Budget Act directs our office to estimate the cost of 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.

We estimate such a program for resident undergraduate students attending public colleges in California would cost $3.3 billion annually. Of this amount, $2.2 billion is for California Community College (CCC) students, $800 million is for California State University students, and $300 million is for University of California students. These amounts are on top of all existing gift aid. The cost varies 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. Adding certain eligibility requirements to the program could reduce these costs notably. For instance, excluding part-time students or assuming a higher work expectation from such students could decrease CCC program costs by $1.6 billion.

The new program likely would reduce but not eliminate student loan debt. This is because some students might prefer to borrow instead of working, some might borrow if they experience difficulty finding employment, and some might borrow if their parents fail to provide their full contribution. Additionally, the new program could create behavioral changes not factored into our estimate. For instance, students living at home might choose to live off campus due to the increased state support.

This report is available using the following link: