BILL ANALYSIS Ó AB 25 Page 1 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 Page 2 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 AB 25 Page 3 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 AB 25 Page 4 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 Page 5