BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      AB 25


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          Date of Hearing:  April 15, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          25 (Gipson) - As Amended April 8, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill authorizes the California Student Aid Commission  
          (CSAC) to grant an appeal, for one academic year, to  
          institutions failing to meet Cal Grant program participation  
          criteria if the commission determines that the cohort of  








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          students used to determine the ineligibility for participation  
          comprised 20 individuals or less and that cohort is not  
          representative of overall institutional performance.  


          FISCAL EFFECT:


          1)Given the small number of schools that would likely appeal in  
            any given year, CSAC's administrative costs will be minor and  
            absorbable.



          2)To the extent institutions determined ineligible for Cal Grant  
            participation are able to regain eligibility through the  
            appeals process, Cal Grant costs would increase for the  
            academic year of reinstatement, assuming students at these  
            institutions who had received Cal Grant awards would not  
            otherwise have re-enrolled at another Cal Grant eligible  
            institution. For example, students at the four small-cohort  
            schools most recently deemed ineligible for Cal Grant  
            participation received Cal Grant awards totaling about  
            $200,000 in the prior academic year. The actual annual costs  
            would likely be less than this amount, as not every school  
            would necessarily regain eligibility. Moreover, in prior  
            years, fewer small-cohort schools have been deemed in  
            eligible.



          COMMENTS:


          1)Background. 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 federal loans within three years of  








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            entering repayment, i.e the cohort default rate (CDR). To  
            participate in the Cal Grant program in the 2011-12, an  
            institution was required to have a CDR of less than 24.6%.  In  
            that year, 76 institutions failed to meet the CDR  
            requirements.



            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%, using federal data  
            calculated as 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.) 





            For 2015-16, 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; 17 of  
            these institutions are for-profit, four are non-profit.


            
          2)Purpose. 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.  As an example, the Charles R.  
            Drew University of Medicine and Science (CDU) was deemed  
            ineligible for participation in the Cal Grant program for the  








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            2014-15 and 2015-16 academic years for failing to meet  
            graduation rate requirements. CDU had a graduation rate of 0%  
            in these award years.  However, as CDU notes, the federal data  
            is based on very small student cohorts.  For 2014-15, CDU  
            graduation rate data is based on eight students that began in  
            fall 2005; none of whom graduated before Spring 2011. For  
            2015-16, graduation rate data is based on only four 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.



            Because such 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 process for  
            institutions that fail to meet eligibility requirements and  
            have a cohort size of 20 or fewer students.





          3)Prior Legislation. Last year, AB 1538 (Eggman), which 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, was held on this committee's Suspense file.
          


          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081











                                                                      AB 25


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