BILL ANALYSIS Ó
AB 25
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Date of Hearing: March 17, 2015
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Medina, Chair
AB
25 (Gipson) - As Introduced December 1, 2014
SUBJECT: Financial aid: Cal Grant program: renewal
SUMMARY: Would require the California Student Aid Commission
(CSAC) to establish an appeal process for institutions that fail
to meet specified Cal Grant participation criteria.
Specifically, this bill:
1)Requires CSAC to establish an appeal process for an otherwise
qualifying institution that fails to satisfy the three-year
cohort default rate and the graduation rate requirements.
2)Instructs CSAC to consider, in the determination of granting
an appeal, cohort size and the likelihood of the institution
to regain eligibility in the next academic year following the
institution's loss of eligibility.
3)Establishes Legislative intent that CSAC define a specific
cohort size or range of sizes that constitute a small cohort
for the purposes of the appeals process.
EXISTING LAW:
1)Authorizes the Cal Grant program, administered by CSAC, to
provide grants to financially needy students to attend
college. The Cal Grant programs include both the entitlement
and the competitive Cal Grant awards. The program consists of
the Cal Grant A, Cal Grant B, and Cal Grant C programs, and
eligibility is based upon financial need, grade point average,
residency, and other eligibility criteria, as specified.
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(Education Code Section 69430-69433.9)
2)Requires institutions to meet specified criteria in order to
participate in the Cal Grant program, including, for
institutions with more than 40% of undergraduate students
borrowing federal student loans, (a) a three-year cohort
default rate (CDR) equal to or below 15.5%; and, (b) a
graduation rate above 20% for the 2015-16, 2016-17 and the
2017-18 academic years, and above 30% for subsequent academic
years. (EDC 69432.7)
3)Requires CSAC to notify initial and renewal Cal Grant
recipients of changes and the impact to their awards and to
provide affected Cal Grant recipients with a complete list of
all California postsecondary educational institutions at which
the student would be eligible to receive an unreduced Cal
Grant Award.
FISCAL EFFECT: Unknown. However, according to the Senate
Appropriations Committee analysis of the fiscal impact of
significantly similar legislation proposed in 2014:
1)Appeals Process: Potentially significant costs for CSAC to
administer an appeals process for institutions that have lost
eligibility for participation in the Cal Grant program, and
are seeking reinstatement as an exception to Cal Grant cohort
default and graduation rate requirements.
2)Reinstatement: Potentially substantial ongoing costs, likely
in the millions (General Fund) to the extent that institutions
successfully appeal, and have their eligibility reinstated.
As a point of reference, prior to the University of Phoenix
losing eligibility under the restrictions, students used more
than $20 million in Cal Grants at that institution.
COMMENTS: Background. In an effort to increase accountability
over public financial aid expenditures and address the budget
deficit, as a part of the 2011-12 Budget Act, California
established requirements linking an institution's participation
in the Cal Grant Program to the percentage of students borrowing
federal loans and the number of students defaulting on those
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federal loans within three years of entering repayment. To
participate in the Cal Grant program in the 2011-12 academic
year, an institution was required to have a CDR of less than
24.6%. In 2011-12, 76 institutions failed to meet the CDR
requirements.
According to information provided by the Legislative Analyst's
Office (LAO), about 3,200 students offered new Cal Grant awards
in 2011-12 were planning to attend schools deemed ineligible.
About 550 of these students instead attended eligible schools,
and another 450 requested leaves of absence to preserve their
award for later use. The remaining 2,200 students did not claim
their Cal Grants and information concerning college attendance
is unavailable. For students receiving renewal Cal Grant
awards, of the 1,700 attending ineligible institutions
approximately 60% remained at their institution and received a
reduced award (an option no longer available to students), 9%
transferred to eligible colleges, and another 4% took leaves of
absence. No information is available on the remaining students.
In the 2012-13 Budget Act, the requirements regarding loan
defaults were tightened to require a CDR of less than 15.5%, and
a graduation rate of greater than 30%, as reported by the
Integrated Postsecondary Education Data System (IPEDS). IPEDS
graduation data calculates the percentage of first-time,
full-time students who began in the fall term and graduate
within 150% of the published program length. For example, the
2012 graduation rate for bachelor's degree programs is based on
the number of students who began their pursuit as a full-time,
first-time student in the fall of 2006.
In the 2015-16 academic year, institutions are required to
maintain a CDR of less than 15.5% and a graduation rate of
greater than 20%. As reported by CSAC, 301 institutions have
been deemed Cal Grant eligible; an additional 23 institutions
have been identified as potentially eligible, pending receipt of
additional data. CSAC has published a list of 21 ineligible
institutions; seventeen of these institutions are for-profit,
four are non-profit.
Legislative Analyst's Office (LAO) report. In January 2013, the
LAO reported to the Legislature on CSAC implementation of the
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Cal Grant requirements and provided recommendations for refining
the standards. According to the LAO, in the absence of broad
agreement on direct, quantifiable measures, default rates and
graduation rates provide rough proximities of how well an
institution is serving students. The LAO noted, however, that
current standards have notable drawbacks. Among the LAO's
recommendations, the existing system does not take into account
institutions that serve disadvantaged students. The LAO
indicated that the Legislature could consider adjusting
requirements and establishing other outcome measures that
account for student characteristics. LAO noted that CSAC is
required to collect and report on additional student outcome
data that could be used as an additional proxy for institutional
quality; however, until there is broader agreement about
measuring outcomes, LAO did not recommend using additional
measures to determine school eligibility.
Charles R. Drew University of Medicine and Science (CDU). For
the 2014-15 and 2015-16 academic years, CSAC deemed CDU
ineligible for participation in the Cal Grant program for
failing to meet graduation rate requirements. According to
IPEDS data, CDU had a graduation rate of 0.0% in these award
years. However, as CDU notes, IPEDS data is based on very small
student cohorts. In the 2014-15 award year, CDU graduation rate
data is based on 8 students that began in fall 2005; none of
whom graduated before Spring 2011. In the 2015-16 award year,
graduation rate data is based on 4 students that began in the
fall of 2006; none of whom graduated before Spring of 2012.
According to CDU, the university is providing institutional aid
to students who lost their Cal Grant award due to institutional
ineligibility; approximately 24 students in 2014-15.
Purpose of this bill. According to the author, the Cal Grant
program requirements have exposed the vulnerability of smaller,
specialized non-profit universities that attract people coming
to study for a second career or who transfer to the campus with
some college experience. Because these institutions enroll a
lower number of first-time, full-time students due to the nature
of their program, their Cal Grant eligibility status is more
volatile. This bill would require CSAC to establish an appeal
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process for institutions that fail to meet eligibility
requirements, and authorizes CSAC to consider cohort size and
the likelihood of the institution regaining eligibility in the
following academic year, in assessing whether an appeal should
be granted.
Existing CSAC appeal process. Institutions deemed ineligible to
participate in the Cal Grant program have appealed to CSAC.
There is currently no statutory authorization provided to CSAC
regarding institutional appeals. For the 2012-13 academic year,
approximately six institutions appealed based on the cohort
default rate/graduation rate disqualification. These appeals
were not brought before the commissioners as staff believed
commissioners had no authority to deviate from the statutory
requirements. Two subsequent lawsuits by institutions seeking
to use preliminary qualifying data resulted in the Academy of
Art and Argosy/Art Institute regaining eligibility.
In 2013, CSAC staff brought to commissioners an appeal filed by
Menlo College; commissioners granted the appeal finding that a
calculation error had been made by USDE in publishing rates and
a correct calculation resulted in the institution meeting the
CDR requirements. In 2014, CSAC commissioners heard three
appeals relating to the 2014-15 academic year eligibility.
Commissioners granted Marymount California's appeal based on
factors similar to Menlo College; CDU and National Hispanic
University were denied because the Commission determined it did
not have flexibility to consider factors beyond those CDR and
graduation rate thresholds established in law.
Committee considerations. This bill provides CSAC significant
authority to establish, and assumedly ultimately authorize, an
appeal to allow a non-qualifying institution to continue
participation in the Cal Grant program. While the bill provides
Legislative guidance to CSAC to consider a small cohort or
whether the institution is likely to regain eligibility in the
subsequent academic year, the bill does not limit CSAC's ability
to grant an appeal to an ineligible institution. The
limitations currently in statute were established by the
Legislature. This bill aims to provide CSAC authority to waive
those limitations whenever CSAC deems appropriate.
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Committee staff recommends, and the author's office has
indicated agreement to, amendments to clarify the circumstances
under which CSAC is authorized to grant an institutional appeal.
The amendments would specify that CSAC may grant an appeal for
an academic year only when (1) an institution has been
determined by CSAC to have a small cohort, of 20 or less, and
the cohort is not representative of overall institutional
performance; and/or (2) the institution has provided evidence to
CSAC that the institution is anticipated to meet the Cal Grant
participation requirements in the next academic year.
Related legislation.
AB 573 (Medina), pending in the Assembly Higher Education
Committee, would require CSAC to publish online a complete list
of eligible and ineligible Cal Grant institutions.
Prior legislation.
SB 70 (Committee on Budget and Fiscal Review), Chapter 7,
Statutes of 2011, required all institutions of higher education,
with more than 40% undergraduate students borrowing federal
student loans, to maintain their CDR below 24.6% in 2011-12, and
30% in 2012-13 and thereafter, in order to continue meeting
eligibility to participate in the Cal Grant Program for initial
awards. Reduced by 20% the renewal Cal Grants at institutions
with three-year cohort default rates above 24.6%. Required the
LAO to review and report on this policy and potential
alternatives by January 1, 2013.
AB 1637 (Weickowski) of 2012, held in the Assembly Higher
Education Committee, would have established the student default
risk index, by multiplying the percentage of borrowers and the
CDR, and limited institutional participation in the Cal Grant
program based on risk index scores above 15.
SB 1016 (Committee on Budget and Fiscal Review), Chapter 38,
Statutes of 2012, implemented a maximum CDR of 15.5% and a
minimum graduation rate of 30% for institutions to be eligible
to participate in the Cal Grant program. For institutions with
a CDR of less than 10% and graduation rates between 20 and 30%,
provided five years for these institutions to increase their
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six-year graduation rates to the 30% threshold. Eliminated
renewal awards for recipients who choose to remain at ineligible
institutions.
AB 640 (Hall) and SB 1149 (Galgiani) of 2014, both held in the
Senate Appropriations Committee, would have required CSAC to
establish an appeal process for institutions institution that
becomes ineligible for Cal Grant participation for failing to
satisfy the CDR and graduation rate requirements.
SB 860 (Committee on Budget and Fiscal Review), Chapter 34,
Statutes of 2014, authorized, through the 2016-17 academic year,
an institution with a CDR of less than 15.5% and a graduation
rate above 20% to be eligible for participation in the Cal Grant
program.
AB 1538 (Eggman) of 2014, held in the Assembly Appropriations
Committee, would have provided an alternative pathway for Cal
Grant qualification for institutions serving low-income students
that maintain a three-year average CDR and graduation rate that
meets requirements.
SB 860 (Committee on Budget and Fiscal Review), Chapter 34,
Statutes of 2014, authorized, for the 2015-16, 2016-17, and
2017-18 academic years, institutions with a graduation rate
above 20% to meet the graduation rate requirements for
participation in the Cal Grant program.
REGISTERED SUPPORT / OPPOSITION:
Support
Association of Independent California Colleges and Universities
Charles R. Drew University of Medicine and Science
St. Lawrence of Brindisi Church
Watts/Century Latino Organization
4 individuals
Opposition
None on File
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Analysis Prepared
by: Laura Metune/HIGHER ED./(916) 319-3960