About nine out of ten parents expect their children to go to college. Less than a third actually do so.

Many of California's students who complete high school and start some kind of postsecondary program do not go on to earn a degree or certificate (see the previous lesson). This leaky bucket is a concern for the state and a focus for a wide variety of organizations. Why do students stop their education before they reach these completion milestones, when reaching them is so clearly in their interest?

Some of the reasons are financial. There's a good chance that a college degree will help you earn more down the road… but you can know for sure that it's going to cost you in the short run.

It's not just money

The financial strain is not the only obstacle to completing college. Applying, enrolling, scheduling, attending and obtaining transcripts are all logistical hurdles, each with their own opportunities to derail an education. Most colleges provide only limited support for these processes, and many of the reasons why students leave college have little or nothing to do with academics.

In 2014, Starbucks began offering college scholarships as a benefit for its employees, naively expecting thousands to take advantage of it. In a widely read feature story in the Atlantic, Amanda Ripley describes the practical barriers that stood in the way, and how the company improved the benefit by providing counseling support. (In 2023 the company celebrated its 10,000th graduate.)

Beyond12, a non-profit organization, works with high schools and colleges to help them effectively provide students with the academic, social, and emotional support they need to succeed in higher education. Beyond12 acts as a data and service bridge between lower and higher education systems to help them support low-income students so that more of them persist and succeed in college. Other organizations, like the Career Ladders Project focus on helping students complete career technical programs in the state’s community colleges, preparing them for well-paid careers that don’t necessarily require a four-year university degree.

California's Colleges for All

Compared to other states, California provides students with easy and inexpensive options to continue their education after high school. California’s community colleges are open access institutions — they accept all comers. About a third of California’s high school graduates go on to immediately attend a community college, which is by far the most economical option. When they take placement tests for transfer to a four-year institution, unfortunately, most students are found unready, particularly in math. Students can earn credit for remedial course work (thanks to a change in law), but remedial study can feel dispiriting, especially for students who dream of transfering to a four-year university.

...Yes, money matters. A lot.

Most California residents who attend a public college qualify to receive significant financial aid from state and federal programs. After taking this aid into account, the actual net cost for students to attend college varies significantly, largely depending on family income. This practice makes it hard to compare the cost of college in California with other states. The Legislative Analyst Office (LAO) periodically reports on this subject in its analysis of the state budget.

The cost of college is a topic of intense political interest, and there is enormous pressure to keep net costs low. In general, California has a history of holding tuition and fees flat for extended periods, followed by significant jumps when the budget faces a shortfall.

California's college tuition and fees are lower than those in most other states, especially for state residents. Even so, college is dramatically more expensive than it was a generation ago. Tuition is only part of the price tag — for most, the biggest challenge is the cost of housing. College is a major financial burden for most families, many of whom must fund short-term college costs through long-term debt.

California's college tuition and fees are lower than those in most other states.

Faced with rising tuition and declining aid, students have taken on loans in unprecedented amounts, especially for four-year degrees. In California, over half of students who graduate from a four-year degree degree program emerge with debt. For those who incur debt, the average burden exceeds $28,000.

As always, averages conceal extremes. Some students carry ruinous debt burdens. In 2022, aggregate, college loans in America surpassed 1.76 trillion dollars, exceeding the outstanding balance for credit cards, auto loans, and home equity loans. A 2019 analysis of US Department of Education data by the Center for American Progress (CAP) found that among those who borrow for college, one in three carries more than $40,000 in debt. The think tank published a blistering rebuke of the way that the US Department of Education measures student loan defaults under the title "The Student Debt Problem Is Worse Than We Imagined."

Which is bigger, America’s credit card debt or college debt?

The challenges of college affordability are not limited to four-year institutions. In 2019 the California Budget and Policy Center released a "data hit" comparing the average cost of attending community college in California on a full-time basis with 2018-19 financial aid. Even though California's community college costs are lower than other states, they are still a real stretch or out of reach for many:

Source: California Budget and Policy Center, May 2019. Assumes student earns $11 per hour and works 15 hours per week during school year and 40 hours per week during summer. Reflects deductions for taxes and some summer expenses. For more see the full data hit.

The problems of loan distress and student bankruptcy are substantially worse at for-profit private colleges than at public colleges.

When you take out a college loan, you are the collateral

College loans have become popular with lenders because earning a degree enhances a student's future earning potential. These debts are unlike home loans or car loans, in which an asset can serve as collateral to be forfeited in a default. If you take out a college loan, you are the collateral. In order to encourage lenders to make loans to students, college loans have been made difficult to discharge through bankruptcy.

Student loans can provide necessary assistance for students looking to pay for college, but the debt problem is real. Students who take out large loans may remain in debt for decades. Such financial struggles tend to hit students of color and students from low-income backgrounds the hardest. Among students who began college in 2011, the default rate for student loans among white students was approximately 13 percent by 2017. Among Latinx students, the default rate was approximately 20 percent, and among Black students, it was approximately 34 percent. Default rates remain especially high at for-profit institutions, which disproportionately serve poor and minority students.

The Biden administration made a policy priority out of college debt in 2022, extending the timeline for students to repay federal loans.

What is FAFSA?

Federal financial aid for college costs is available to US citizens with financial need, if they can navigate the application for the Free Application for Federal Student Aid (FAFSA).

These applications are complex, but they are also standardized, and there are a lot of people who can help fill them out. Today's students should take at least some comfort in the knowledge that the process is much easier than it used to be. The state’s Cal Grant program helps hundreds of thousands of California families pay for higher education, incorporating federal and state sources of support.

The availability of financial aid varies from year to year depending on federal and state budget choices. Aid programs tend to favor students who are willing to make a commitment to work as teachers in high-need communities.

Under the California Dream Act, non-citizen resident students also became eligible for financial aid in California colleges in 2013. To qualify, they must graduate from a California high school after three full years of attendance and file a statement that they intend to apply for citizenship when the law allows it.

To encourage college-going, some American school districts decided to make FAFSA submission a high school graduation requirement. This simple policy change boosts college enrollment rates so strongly that in 2021, California passed a bill to require all high school seniors to fill out the FAFSA, though they can opt out. Adding the requirement boosted California's FAFSA completion rate from among the worst in America to among the best.

How Scholarships Drive Tuition… Up?

Scholarships, or discounted tuition rates, are a cherished dream for college applicants. Selective colleges offer them to snag particularly attractive applicants. These financial incentives have an unavoidable dark side, of course: if Peter pays less, Paul must pay more.

Next Steps

Many organizations want to help boost the number of students who complete college.

• FAFSA (Free Application for Federal Student Aid)
• The ACT web site provides an overview of the various types of financial aid and how to apply for them.
• The California Community College system provides financial advice through its page I Can Afford College!
• The College Board (makers of the SAT and AP tests) provides tips on paying for college.

Updated April 2018
June 2019
October 2021
May 2023.