BILL ANALYSIS Ó
HR 49
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Date of Hearing: August 25, 2014
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Das Williams, Chair
HR 49 (Jones-Sawyer) - As Introduced: August 4, 2014
SUBJECT : Higher education: tuition and fees: pilot program.
SUMMARY : Encourages the Legislative Analyst as the lead, and
the California Student Aid Commission (CSAC) to conduct a study,
as specified, on the effects of enacting a "Pay it Forward, Pay
it Back Pilot Program" (Pilot Program) as an alternative to
existing student financial aid programs. Specifically, this
resolution :
1)Makes numerous declarations and findings, including, but not
limited to, the following:
a) The Legislature recognizes that postsecondary education
has expanded opportunities for Californians to qualify for
high-quality jobs and entry into the middle class,
providing clear benefits to this state's economy;
b) The increasing unaffordability of a college education
has forced students to borrow more money to pay for higher
education, causing 51% of students graduating from
four-year institutions of higher education in California to
borrow an average of $18,879;
c) Tuition at California's public institutions of higher
education has been rising far more rapidly than family
incomes. In 2000, the cost of attendance for a UC student
living on campus was 25% of California's median family
income. In 2009, this cost had grown to 39% of median
family income. Costs at the CSU also grew relative to
incomes, increasing from 19% of median family income in
2000 to 29% of median family income in 2009;
d) By 2025, California is projected to have a shortage of
2.3 million college graduates in the state's workforce if
the number of young and older adults who go to college and
complete a higher education is not significantly increased;
and,
e) That the Legislature must halt the decrease in the
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state's support for public education and, over time, must
increase its contribution to the funding of higher
education; and, it must immediately seek another approach
to financing a student's share of the cost of higher
education in the state that will not result in students
graduating from California colleges and universities
burdened with debt; and, that the Legislature intends for a
"Pay it Forward, Pay it Back" pilot program to be studied
that would not replace existing forms of financial aid,
including grants, scholarships, and loans, but would
instead serve as an additional option for students to
finance their education.
2)Encourages the Legislative Analyst and CSAC to conduct a study
of the effects of enacting, in future legislation, the Pilot
Program, with the Legislative Analyst encouraged to be the
lead in charge of preparing the study.
3)Specifies that the study should evaluate the pilot program
designed to provide an additional option for students to
finance the costs of their education, including the costs of
upfront tuition, fees, and room and board, for enrollment at
institutions of higher education.
4)Establishes that the Pilot Program would allow a resident
student qualified for admission to enroll without paying
upfront tuition/fees, and instead would sign a binding
contract to, upon graduation, pay a specified percentage of
his or her annual adjusted gross income to the state or the
institution for a specified number of years.
5)Establishes that the Pilot Program could vary by institution
in regards to the student costs and repayment terms and the
portion of cost paid by the state.
6)Specifies that the study of the Pilot Program:
a) Identify at least one campus of the UC, CSU, and
California Community Colleges, and at least one campus of a
nonprofit private postsecondary educational institution
that would participate in the pilot;
b) Specify the number of years and percentage of annual
adjusted gross income for a contract at each participating
institution that would reimburse the nonstate cost of a
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student's attendance;
c) Establish an immediate source of funding for the first
15 to 20 years of the Pilot Program including the
establishment of a revolving fund for depositing payments,
and consider the use of social impact bonds as an immediate
funding source.
7)Specifies that the study of the Pilot Program should be
presented for consideration to the Legislature.
8)Encourages the Legislative Analyst to submit a report on the
study of the pilot to the specified Legislative Committees no
later than September 30, 2015.
FISCAL EFFECT : Unknown
COMMENTS : Purpose of this measure . According to the author,
"California's current financial aid system is broken into
basically three parts, loans, grants and scholarships. If a
student's parents cannot pay for college, nor do they qualify
for grants or scholarships and he/she does [not] want to take
out loans then that person will not be able to attend college.
This legislation is necessary in order to study a fourth type of
financial aid, Pay it Forward Pay it Back. This policy will
allow a student to attend a public college or four year
university in California without paying tuition, room and board.
Upon graduating they pay 2%-4% of their gross income to a state
or college trust fund for a specified number of years."
Background . The Pay it Forward (PIF) model-allowing students to
attend college without upfront payments by signing a contract to
agree to pay a portion of their income for a designated amount
of time after graduation-appears to have originated from a
student-led project at Portland State University in December
2012. This proposal is similar to ideas from the Economic
Opportunity Institute in Washington and income-based payment
programs in Australia and the United Kingdom. In July 2013,
Oregon became the first state to pass legislation related to the
proposal, specifically requiring the state's higher education
coordinating commission to study and consider proposing a pilot
program. If the Oregon commission determines a PIF pilot model
is feasible, a proposal is due to the Legislature next year.
The State of Washington is also conducting a study of this
model. In addition to California, at least 19 states have or
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are considering legislation that appears based on the PIF model.
Two measures were introduced in Congress that would direct the
U.S. Department of Education, the Treasury and the Consumer
Financial Protection Bureau to study the feasibility of the
model.
Proponents of PIF argue the model increases access to college by
providing an alternative to up-front payments and loan-financed
education that will ultimately result in predictable, stable and
manageable post-graduation contribution requirements. Critics
of PIF contend that the model reinforces the concept of higher
education as an individual transaction rather than a public
good, and reduces the burden on states to sustain/increase
funding of higher education. Critics point to the Australian
contribution model, which they argue resulted in cost shifting
from government to the students themselves.
College Affordability and Student Debt in California . In the
past decade, with the significant increases in student fees,
students' share of educational costs have also increased-from
20% to 45% at CSU and to over 50% at UC. California's financial
aid programs have grown in tandem with tuition and fees and as a
result many students have been protected from fee increases.
Between Cal Grants and institutional aid, many lower- and
middle-income families pay no tuition.
State financial aid programs focus on tuition, however, and
generally do not cover cost of living expenses, which in
California are about 20% higher than national averages. The
average total cost of attendance for a full-time student is
about $29,700 at UC, $20,100 at CSU, and $14,700 at CCC.
Relatively few California students report high debt levels.
According to the Legislative Analyst's Office, in 2010-11, about
half of UC and CSU baccalaureates graduated with no student loan
debt. Among students who borrowed, the average debt upon
graduation for UC students was about $18,300 for UC students and
$16,600 for CSU students. The national average student debt for
students who left school in 2012 was $29,400.
Related legislation . AB 1456 (Jones-Sawyer) of 2014, which was
held in Senate Rules Committee, was virtually identical to this
resolution.
REGISTERED SUPPORT / OPPOSITION :
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Support
None on file.
Opposition
None on file.
Analysis Prepared by : Jeanice Warden / HIGHER ED. / (916)
319-3960