BILL ANALYSIS Ó AB 573 Page 1 Date of Hearing: May 6, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 573 (Medina) - As Amended May 4, 2015 ----------------------------------------------------------------- |Policy |N/A |Vote:|N/A | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes SUMMARY: This bill provides financial and other assistance to students impacted by recent closing of all Heald, Everest, and Wyotech campuses in California, which were owned by Corinthian Colleges, AB 573 Page 2 Inc. (CCI). Specifically, this bill: 1)Declares legislative intent that the California Community Colleges (CCC) provide matriculation services, including assessment, counseling, and academic planning to students enrolled at these schools as of the closure date of April 24, 2015 or for a California student enrolled in an online program at an out-of-state campus of a CCI institution. 2)Provides that students enrolled at a CCI campus and unable to complete their educational program due to the closure are exempt from the four-year limitation on receipt of a Cal Grant. 3)Makes students enrolled in a private postsecondary educational institution in California that closes, and students who were enrolled and withdrew within 120 days prior to the closure date, eligible for a CCC Board of Governors (BOG) fee waiver. 4)Provides that students enrolled at a Heald College campus or a California student enrolled in an online program of an out-of-state campus of a CCI institution at the time of closure or who were enrolled and withdrew within 120 days of the closure (or a greater period if determined by the Bureau for Private Postsecondary Education (BPPE)) are eligible for recovery through the Student Tuition Recovery Fund (STRF). These students become eligible despite not having paid any STRF assessment. (Everest and Wyotech students are already eligible for STRF payments because these schools are under BPPE oversight.) 5)Increases the maximum allowable fund balance in the STRF from $25 million to $50 million, and requires the BPPE, if it stops collecting STRF assessments because the fund has approached AB 573 Page 3 the new maximum balance, to resume collecting assessments when the fund balance falls below $45 million (instead of $20 million currently). 6)Requires the BPPE to coordinate a task force, with representatives of the CCC Chancellor's Office, the California Student Aid Commission (CSAC), the Department of Justice, the Department of Veterans Affairs, and legal aid organizations, to ensure that the impacted students receive accurate and consistent information regarding the school closure process and their rights and responsibilities. 7)Requires the BPPE provide grants, not to exceed $100 per impacted student, to local legal aid organizations for assisting the students in completing educational loan discharge requests and tuition recovery claims. 8)Declares legislative intent that any unencumbered funds received by the Attorney General from an action against CCI shall be used to fund the provisions of this bill. FISCAL EFFECT: It has been estimated that approximately 16,000 students have been impacted by the school closures, including almost 12,000 from Heald. 1)BOG Fee Waiver. The reduction in CCC fee revenues would depend on the number of impacted students who enroll at a CCC, how many CCC units these students take to complete their CCC educational goals, and how many of these students would not otherwise qualify for a BOG fee waiver. (About two-thirds of the entire CCC course load is taken by students currently AB 573 Page 4 receiving a BOG waiver.) For every 1,000 full-time equivalent students (FTES) from the impacted schools who would not otherwise obtain a fee waiver, the revenue loss to the community colleges would be $1.4 million annually. 2)Legal Assistance Grants. One-time special fund costs to the BPPE of up to a few hundred thousand dollars, assuming legal aid organizations received grants from the BPPE for assisting around 20% of the impacted students. [Private Postsecondary Education Administration Fund] There is no appropriation in the bill to cover this potential cost. 3)STRF Payments. The STRF mitigate a student's economic losses, defined as tuition and institutional charges plus the cost of equipment and supplies needed for student's educational program. STRF costs will depend on the number of impacted Heald students making STRF claims and the amounts of those claims eligible for reimbursement. If a Heald student transfers no credits to another educational institution and in turn receives forgiveness of their federal loans, the state will incur costs only to the extent that the loan forgiveness does not cover the student's economic loss. If a student transfers some or all of their credits to another institution, their federal loan will not be forgiven, and they may be eligible for a STRF payment equivalent to the value of the loan associated with those credits earned at Heald that are not accepted for transfer. STRF payments could be in the low tens of millions of dollars. In the past, STRF payments have averaged around $6,000 per student. If around one-half of the impacted Heald students received the average payment, costs would total $36 million. According to the Governor's Budget, the STRF will have an estimated fund balance of $28 million as of June 30, 2015. AB 573 Page 5 4)Cal Grants. According to CSAC, almost 2,800 of the impacted Heald students were awarded and used their Cal Grants. Because Heald was ineligible to participate in the Cal Grant program for several years, virtually all of these students have used one year or less of their Cal Grant eligibility. Almost two-thirds of these students were awarded a Cal Grant C, 30% were award Cal Grant B, and the remaining 4% were awarded a Cal Grant A. Costs will depend on how many of these students continue their education and what type of institution they attend. One additional award year of eligibility for these students would equate to a General Fund cost of around $10 million. 5)Costs for CCC counseling and the BPPE task force should be minor and absorbable. COMMENTS: Background and Purpose. On April 26, 2015, Corinthian Colleges, Inc. (CCI) announced that it has "ceased substantially all operations and discontinued instruction" at all Heald, Everest, and WyoTech campuses in California, which together had enrollment totaling an estimated 16,000 students. (CCI filed for bankruptcy on May 4, 2015.) Existing state and federal law provides certain relief to some of the students harmed by the CCI closure: federal loan forgiveness is available to students who qualify, but only if they do not transfer any educational credits to another institution; the state's Student Tuition Recovery Fund (STRF) is available to California Everest and WyoTech students, as those school are regulated by the state. An exemption from state oversight for Heald students and students enrolled in out-of-state online programs makes them ineligible for relief through the STRF. This bill, as described above, is intended to ensure that all students harmed by these closures have access to other educational opportunities. AB 573 Page 6 Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081