BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                        AB 25


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          ASSEMBLY THIRD READING


          AB  
          25 (Gipson)


          As Amended  April 8, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                  |Noes                |
          |                |      |                      |                    |
          |                |      |                      |                    |
          |----------------+------+----------------------+--------------------|
          |Higher          |11-0  |Medina, Baker, Bloom, |                    |
          |Education       |      |Harper, Irwin,        |                    |
          |                |      |Levine, Linder, Low,  |                    |
          |                |      |Santiago, Weber,      |                    |
          |                |      |Williams              |                    |
          |                |      |                      |                    |
          |----------------+------+----------------------+--------------------|
          |Appropriations  |17-0  |Gomez, Bigelow,       |                    |
          |                |      |Bonta, Calderon,      |                    |
          |                |      |Chang, Daly, Eggman,  |                    |
          |                |      |Gallagher,            |                    |
          |                |      |                      |                    |
          |                |      |                      |                    |
          |                |      |Eduardo Garcia,       |                    |
          |                |      |Gordon, Holden,       |                    |
          |                |      |Jones, Quirk, Rendon, |                    |
          |                |      |Wagner, Weber, Wood   |                    |
          |                |      |                      |                    |
          |                |      |                      |                    |
           ------------------------------------------------------------------- 









                                                                        AB 25


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          SUMMARY:  Would require the California Student Aid Commission  
          (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, and would authorize  
          CSAC to grant an appeal for an academic year if the commission has  
          determined the institution has a cohort size of 20 individuals or  
          less and that the cohort is not representative of the overall  
          institutional performance.
          EXISTING LAW:  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:  1) a three-year cohort default  
          rate (CDR) equal to or below 15.5%; and, 2) a graduation rate  
          above 20% for the 2015-16, 2016-17 and the 2017-18 academic years,  
          and above 30% for subsequent academic years. (Education Code (EDC)  
          Section 69432.7)


          FISCAL  
          EFFECT:  According to the Assembly Appropriations Committee, 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:  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  








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          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 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.    


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


          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 eight  
          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 four students that began in the fall of 2006; none of  








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          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.


          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 United States Department of  
          Education 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 CSAC determined it did not  
          have flexibility to consider factors beyond those CDR and  
          graduation rate thresholds established in law.    




          Analysis Prepared by:                                               
                          Laura Metune / HIGHER ED. / (916) 319-3960  FN:  
          0000686










                                                                        AB 25


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