BILL ANALYSIS Ó AB 25 Page 1 Date of Hearing: April 15, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 25 (Gipson) - As Amended April 8, 2015 ----------------------------------------------------------------- |Policy |Higher Education |Vote:|11 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 AB 25 Page 2 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 AB 25 Page 3 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 AB 25 Page 4 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 Page 5