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Sacramento Bee op-ed on Cal Grant

Students vs. Shareholders

By Pamela A. Eibeck


The future of 38,000 California college students is in jeopardy. While the first round of cuts to close the state's nearly $27 billion budget gap protected funding for Cal Grants, a second round could cut Cal Grants to students at California's private colleges and universities. But the legislature may also be targeting students at private non-profit colleges and universities in error-a mistake that could devastate access to higher education in California.

Legislators may be unaware of the crucial differences between for-profit schools-an industry sector currently under serious scrutiny by federal lawmakers-and private non-profit schools. In an effort to control the flow of state money into dubious for-profit institutions, we may unknowingly gut financial aid for thousands of students at private non-profit colleges and universities throughout the state.

The difference between private non-profit schools and the for-profits is simple: students vs. shareholders. At private non-profits such as Pacific, USC, Stanford and Pepperdine, any leftover revenue from our carefully balanced budget is reinvested in the school to increase its quality and service to students. At the for-profits, such as University of Phoenix, excess revenues line the pockets of CEOs and get paid out in dividends to shareholders.

Many of the for-profits generate the bulk of their revenues by attracting students with loans or grants. Indeed, they are fighting in Washington to change something called the 90:10 rule, which prohibits universities from receiving more than 90 percent of their resources from publicly funded student aid. Yet many of the same for-profits have low graduation rates and high student loan default rates. Recent data from the US Department of Education shows that though students at for-profit schools make up only 15 percent of college students nationally, they are responsible for almost half of all federal student loan defaults.

So the legislature should indeed be leery about investing state resources in for-profit higher education. But don't throw the baby out with the bath water. Private non-profit schools have served their students and their communities for decades, and are markedly different.

The private non-profits have a long history in California and a record of excellence. In fact, they were here first.

In 1851, Methodist ministers established our state's first chartered university, University of the Pacific, as a private school. Today there are more than 75 private non-profit colleges and universities throughout California. They are a vital part of higher education in the state.

The private non-profits educate 22 percent of our state's undergraduates, 40 percent of its teachers, 69 percent of its dentists, and 78 percent of its pharmacists. Ten thousand more minority or underprivileged students attend private non-profit schools than attend the University of California. The private non-profit sector works very hard to raise funds to supplement what our students receive in state or federal grants. For example, at Pacific, 49 percent of our students' financial aid comes directly from the University.

California's decision in 1955 to establish the Cal Grant was bold and farsighted. By investing in California's students, they invested in California's future.

The Cal Grants made it possible for bright students with financial need to achieve the dream of a better life, and it enriched the talent of California's workforce. Our state's commitment to higher education played a big part in making California a powerful world economy.

Today Cal Grants are a major part of the financial aid packages of thousands of students at private non-profit colleges and universities. Without them, a staggering number of these students are likely to drop out. And we can't count on the UC, CSU or community college systems to take them in; the tough economy is forcing them to turn students away.

Our state needs every college-educated member of the workforce it can get. The last thing we should do is cut Cal Grants to private non-profits and eliminate the opportunity for thousands of Californians to earn their degree.

I sympathize with the painful position our legislature is in. They have cut to the bone and now they must cut some more. But they have a good option. If cuts need to be made, then carve dividends away from the for-profits' shareholders. Make for-profit higher education institutions ineligible for Cal Grants.

Choose students, not shareholders, by leaving the Cal Grants in place for students at private non-profit colleges and universities.


For more information: See the AICCU brochure "Understanding the Difference Between the Private Sectors of Higher Education"