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California delivered a big blow to the For-Profit college industry by tightening eligibility requirements for its Cal Grant program. The California Student Aid Commission decided Tuesday that 137 of the 170 for-profit schools that participate in the state aid program are no longer eligible. That means 80% of the schools will no longer be eligible. And it means 14,500 students at schools such as The University of Phoenix, ITT Technical Institute, Kaplan College and others will see their state grants eliminated or reduced according to an Associated Press reports. Gov. Jerry Brown just signed the law into effect and the state expects it to save an estimated $55 million per year in the state budget. All of the state’s public universities and most nonprofit, private colleges did meet the standards for graduation rates and student loan defaults.  Other states could follow suit, by clamping down on colleges with sub-par graduation rates and high loan default rates.

Students and parents can check the commission’s website to see if their school is eligible or not.

The Associated Press reports:

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.

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The average eligible school in California had a 10 percent student default rate compared to 26 percent for the average ineligible school, according to the commission’s data. University of Phoenix had a 21 percent student default rate and a graduation rate of 18 percent.

Via The San Jose Mercury News