IMO, yes, he would lose the funds if he doesn’t qualify at the time he goes to use them. The FAFSA is filed every year and the FA awarded for that year based on that filing. If he were at the 4 year UC now, and got the Cal A now, but then was still in college in two years, his qualification would be for that school year based on the FAFSA.
They really aren’t holding the money for him. You have to qualify for the year you want to use the grant.