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Most Calif. For-Profit Colleges Lose State Grants

California's move to tighten eligibility requirements for its Cal Grant program will eliminate or reduce awards to 14,500 students, most of them enrolled in for-profit colleges such as the University of Phoenix, the California Student Aid Commission announced Tuesday.

The commission released a list of colleges that are no longer eligible to receive Cal Grants under tougher standards passed by the Legislature and signed by Democratic Gov. Jerry Brown in June. The rules were adopted to save an estimated $55 million and address the state's budget deficit.

California's public universities and most nonprofit, private colleges met the new standards for graduation rates and student loan defaults.


Of the 170 for-profit schools that participate in the state financial aid program, 137 could not meet them. They include the University of Phoenix, ITT Technical Institute, Kaplan College, Heald College and others.

More than a dozen private colleges, including Christian colleges, also could not meet the higher standards.

Overall, about 4 percent of the 354,500 students eligible for Cal Grants will be affected. According to the commission, the change will eliminate aid to 7,800 new students and reduce 20 percent of the awards to 6,700 returning students this fall.

California is the first state to set such high benchmarks, which are tougher than federal requirements, said Diana Fuentes-Michel, executive director of the commission.

"In a tight budget situation, the Legislature was prudent in terms of looking at how we fund not only students but institutions," she said.


The state now requires a graduation rate of at least 30 percent and a federal student loan default rate of less than 15.5 percent for one year. By comparison, Fuentes-Michel said the federal government requires a higher education institution to have a student default rate of less than 30 percent for three years.

University of Phoenix spokesman Ryan Rauzon said the change disproportionately hurts working adults, many of whom attend for-profit schools because they better accommodate their work schedules. He said between 2,000 and 3,000 of the university's students will see their Cal Grants eliminated or cut.

"It's a really unfortunate policy choice," Rauzon said.

California community colleges, California State University, the University of California and most nonprofit, private colleges such as Stanford and the University of Southern California met the tougher state requirements.

Nevertheless, all Cal Grant recipients will feel the pinch because of a 5 percent, across-the-board cut to financial aid this fall. The top Cal Grant award will be reduced from $9,708 to $9,223.

The commission's announcement of ineligible schools comes on the heels of a report requested by Democrats in the U.S. Senate that criticizes for-profit colleges for putting revenue above education.

A full list of ineligible schools is posted on the commission's website,