BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 573|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 573
Author: Medina (D) and McCarty (D), et al.
Amended: 8/31/15 in Senate
Vote: 27 - Urgency
SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 7-0, 6/29/15
AYES: Hill, Block, Galgiani, Hernandez, Jackson, Mendoza,
Wieckowski
NO VOTE RECORDED: Bates, Berryhill
SENATE EDUCATION COMMITTEE: 7-0, 7/15/15
AYES: Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
NO VOTE RECORDED: Runner, Vidak
SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NO VOTE RECORDED: Bates, Nielsen
ASSEMBLY FLOOR: 74-0, 5/14/15 - See last page for vote
SUBJECT: Higher education: campus closures: Corinthian
Colleges
SOURCE: Author
DIGEST: This bill provides financial and other assistance to
students impacted by the recent closing of all Heald, Everest,
and WyoTech campuses in California, which were owned by
Corinthian Colleges, Inc. (CCI).
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ANALYSIS:
Existing law:
1)Establishes the California Private Postsecondary Education Act
of 2009 (Act) until January 1, 2017, and requires the Bureau
of Private Postsecondary Education (Bureau) within the
Department of Consumer Affairs to, among other things, review,
investigate and approve private postsecondary institutions,
programs and courses of instruction pursuant to the Act and
authorizes the Bureau to take formal actions against an
institution/school to ensure compliance with the Act and even
seek closure of an institution/school if determined necessary.
The Act also provides for specified disclosures and
enrollment agreements for students, requirements for
cancellations, withdrawals and refunds, and that the Bureau
shall administer the Student Tuition Recovery Fund (STRF) to
provide refunds to students affected by the possible closure
of an institution/school. (Education Code (EC) §§ 94800 et
seq.)
This bill:
1)Appropriates $100,000 from the General Fund (GF) to the
California Community Colleges (CCC) Chancellor, from GF
revenues appropriated for community college districts (Prop
98), for the purposes of a CCC district conducting a statewide
media campaign to inform students affected by the CCI closure
of educational opportunities available at CCCs.
2)Provides a CCC board of governors (BOG) fee waiver, until July
1, 2018, to a student who was enrolled at a California campus
of a CCI institution, was unable to complete an educational
program offered by the campus due to the campus' closure on
April 27, 2015, and has demonstrated financial need as
determined by the enrolling campus.
3)Provides a BOG fee waiver to a student who was enrolled at a
California campus of a CCI institution, withdrew from an
education program offered by the campus after the earlier of
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either: 120 days before the April 27, 2015 closure or an
earlier date determined by the Bureau, or the date set by the
United States Department of Education (USDE) for closed school
loan discharge eligibility and has demonstrated financial need
as determined by the enrolling campus.
4)Provides that Cal Grant recipient students enrolled at a Heald
College campus that were unable to complete their educational
program due to the closure shall not have the award years
utilized at Heald College campus included in the limitation on
the number of award years of Cal Grant Awards eligibility.
Clarifies that a student shall be eligible for the restoration
of award years if the student was enrolled at a Heald College
campus on April 27, 2015, or withdrew from enrollment between
July 1, 2014 and April 27, 2015.
5)Increases the maximum allowable fund balance in the STRF from
$25 million to $50 million, and requires the Bureau, if it
stops collecting STRF assessments because the fund has
approached the new maximum balance, to resume collecting
assessments when the fund balance falls below $40 million
(instead of $20 million currently).
6)Requires, until January 1, 2020, the Governor to establish a
single point of contact (POC) to respond to each closure of an
institution that does not comply with closure and related
requirements established under state and federal law.
7)States that the goal of the POC is to ensure that students who
were enrolled at, or in an online program offered by, an
institution that has closed, receive accurate and timely
information regarding the school closure process and the
students' rights and responsibilities, and states that the
POC's primary duty shall be to advocate on behalf of and
represent the interest of California students who attended the
closed institution.
8)Provides that consideration should be given to establishing
the POC within the Attorney General (AG)'s office for unlawful
closures of large institutions regarding which the AG has a
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pending investigation or ongoing litigation.
6)Provides grant funds to eligible nonprofit community service
organizations offering free counseling on student financial
aid and loan debt problems upon the unlawful closure of an
institution to assist students according to the following:
a) Services provided by the organizations shall include
assistance with loan discharge and other student financial
aid, veteran's education benefits, loan-related relief and
tuition recovery claims.
b) The organization is a 501 (c)(3) tax-exempt organization
in good standing with the Internal Revenue Service and in
compliance with all applicable laws and requirements; the
organization demonstrates expertise in assisting students
with, and currently provides, free direct legal services or
will work in partnership with or under the supervision an
attorney or nonprofit legal services organization with this
expertise; and the organization does not charge students
for services.
c) Grant funds shall be made available from the STRF and
shall be calculated by multiplying the number of students
affected by the institution's closure by $100.
d) The Bureau shall notify the AG of all unlawful school
closures within
15 days of the closure. The AG shall, within 90 days of
receipt of the notification, solicit grant applications
from eligible nonprofit community service organizations and
may enter into a contract with another qualified entity to
perform duties outlined.
e) Organizations that receive funds shall report to the AG,
or a qualified entity, quarterly through the grant period
on the number of students served. For a closure involving
fewer than 250 students, 100 percent of funds shall be
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distributed within 30 days of the grantee entering into a
grant agreement; for a school closure involving 250 or more
students, 50 percent shall be distributed within 30 days of
the grantee entering into a grant agreement,
25 percent shall be distributed upon the submission of the
grantee's second quarterly report and the final 25 percent
upon the submission of the third quarterly report.
f) Appropriates $1.3 million dollars from the STRF to the
Bureau for purposes of providing grants to organizations to
assist eligible students affected by the CCI closure and to
pay for the reasonable administrative costs of the AG
related to these grants.
1)Declares this bill an urgency statute to take effect
immediately in order to provide immediate educational and
economic relief to the thousands of students harmed by the
closure of CCI.
Background
CCI. CCI institutions offered a range of programs, including
8-12 month certificate programs, with tuition and fees that were
from $13,100-$21,338,
24-month associate's degree programs with tuition and fees that
ranged from $33,120 and $42,820, and bachelor's degree programs
that were between $60,096 and $75,384. According to a 2014
complaint filed by the Consumer Financial Protection Bureau
(CFPB), most students attending CCI were low-income, or the
first in their families to seek an education beyond high school.
In 2012, CCI reported that 85% of its students had family
incomes of less than $45,000 a year. An estimated 57% of CCI
students had household incomes of $19,000 or less, and 35% of
CCI students had a household income of less than $10,000.
Most students attending CCI received federal financial aid;
according to CCIs filing with the Securities and Exchange
Commission, CCI received 84.8% of net revenue from federal
financial aid (Title IV: Pell Grants and Federal Loans).
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Federal rules require that institutions receive at least 10% of
revenues from non-Title IV sources ("90/10 rule"); however, this
can include state aid, veteran's aid, and private loans (among
other sources). According to the allegations in the CFPB
complaint, in order to meet the 90/10 rule, CCI increased
tuition in order to create "funding gaps" so that students would
be required to take out private loans to pay for their
education. CCI offered students their own "Genesis" loans to
cover the funding gaps. According to CFPB, by 2014 the
outstanding balance of Genesis loans totaled $560 million.
In addition to the CFPB complaint, CCI faced a series of legal
actions and investigations into unlawful practices, including by
20 state attorneys general, several federal agencies, and the
USDE. These complaints include allegations largely focused on
misrepresenting career options (promising lifetime placement
services and providing, at best, temporary assistance),
falsifying job placements (including counting 1-day employments,
paying employers to temporarily hire graduates, and falsifying
"self-employment" statistics), and promoting student reliance on
CCIs Genesis loans that required students to begin repaying
loans while still in programs (staff members were provided
bonuses for collecting Genesis loan payments, and were
encouraged to publically remove students from class if they were
behind on Genesis loan payments). CCI closed all campuses on
April 26, 2015, and filed bankruptcy on May 4, 2015.
Options for CCI students. On May 13, the Senate Business,
Professions and Economic Development and Senate Education
Committees convened a joint hearing, Corinthian College
Closures: What's Next for California Students, to examine
options for relief and recourse available to the more than
13,000 students impacted by the sudden and abrupt CCI closure,
particularly in light of the confusing choices, multiple
application processes to multiple government agencies, pressure
from private loan companies to begin paying off loans and the
possibility that credits earned at Heald, Everest and WyoTech
schools may yield few meaningful future educational
opportunities.
USDE provides relief for students of closed schools through a
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loan discharge for students enrolled at the time of closure, or
who withdrew within the previous 120 days, who could not
complete their programs. However, students are ineligible for
loan discharge if they completed their programs, benefitted from
a teach-out agreement through another school or transferred
credits to a similar program. USDE can also discharge loans of
students defrauded by their schools through a defense against
repayment. This provision also applies to students who were no
longer enrolled at the time of their school's closure, including
those who completed programs. Accreditors are supposed to
require schools to have closure policies, including teach-out
policies, policies related to transcript availability and
policies for the transfer of student records, key to assisting
students in moving forward on their path to higher education.
USDE is expanding eligibility for CCI students to apply for a
closed school loan discharge, extending the window of time back
to June 20, 2014, to capture students who attended CCI
institutions at the time CCI entered into an agreement with USDE
to terminate its ownership of schools. USDE also took steps for
all former CCI students who apply for borrower defense to have
the option of having their federal loans immediately placed into
forbearance, which stops their monthly payments to ensure they
do not fall behind or default on their loans while USDE works to
resolve the claim.
At the hearing, the Legislative Analyst's Office highlighted the
high degree of uncertainty for students with private loans, as
there are no standard discharge provisions and payments are
subject to the requirements of lenders. STRF may reimburse
these students for interest and penalties on loans used to pay
tuition and other required educational program charges, but
there are concerns that there is no guarantee students will be
assisted as they navigate through this process.
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 CCI. Federal loan
forgiveness is available to students who qualify, but only if
they do not transfer any educational credits to another
institution. The STRF is available to California Everest and
WyoTech students, but due to an exemption from state oversight,
STRF is not available to Heald students and students enrolled in
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out-of-state online programs. The author states that not only
are existing relief programs insufficient to support all
California students harmed by the CCI closure, evidence is
surfacing that students are being provided inaccurate and
inconsistent information regarding their rights and options.
For example, a published list of "viable transfer opportunities"
released by USDE upon the CCI closure includes more than a dozen
other for-profit schools that are also currently under
investigation by federal and state authorities. This bill will
ensure that California students harmed by the closure of
private, for-profit colleges have access to economic relief and
educational opportunity.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee:
CCCs: $100,000 for allocation to a community college district
to conduct a statewide media campaign targeting students
affected by the closure of CCI. Potential cost pressures to
backfill the loss of an unknown amount of fee revenue to the
extent there is an increase in the statewide proportion of
students receiving fee waivers due to this bill. This bill
also allows campuses to determine their own criteria for
financial need which qualifies affected CCI students to be
exempt from fees. (Proposition 98)
Restoration of Financial Aid Award Years: Approximately $9.6
million to restore Cal Grant awards for affected students for
two years ($7.9 to restore one year and $1.7 to restore the
second year). (General Fund)
STRF Claims Payout to Affected Students: $8.2 million
annually, until fiscal year 2018-19, for a total of $32.7
million in STRF to be offset by increases in fees that
generate $6.9 million in the 2015-16 fiscal year and $9.2
million annually, until the 2018-19 fiscal year. (Special
funds)
STRF Claims Processing: $1.5 million in the 2015-16 fiscal
year and $1.3 million annually until the 2018-19 fiscal year
to support 15 positions to process approximately 1,800 claims
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at the Bureau. (Special funds)
Single Point of Contact: Unknown cost pressures to the
Department of Justice potentially in the hundreds of thousands
to low millions for additional staff to be single POC for
specified institutions to the extent it is designated as the
single POC by the Governor. Potential significant additional
costs for the entity designated by the Governor to be the
single POC for all other institutions. (General Fund)
Legal Assistance Grants: $1.3 million appropriation from the
STRF. (Special funds)
SUPPORT: (Verified8/31/15)
Bay Area Legal Aid
Board of Governors of the California Community Colleges
California Community College League
California Competes
California Federation of Teachers
California Rural Legal Assistance Foundation
California SEIU
California Student Aid Commission
Center for Responsible Lending
Consumer Federation of California
Public Advocates
Public Law Center
The Institute for College Access and Success
University of San Diego Center for Public Interest Law
University of San Diego Children's Advocacy Institute
University of San Diego Veterans Legal Clinic
Western Center on Law and Poverty
OPPOSITION: (Verified8/31/15)
California Association of Private Postsecondary Schools
ARGUMENTS IN SUPPORT: Supporters believe that this bill is
an incredibly important bill that will help make sure that
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students have meaningful access to consumer protections if their
school closes. Supporters note that students who were enrolled
at CCI campuses at or near the point of closure have had their
dreams dashed, unable to complete the programs they borrowed
loans to attend. Supporters state that in many cases, given
widespread concerns about the quality of Corinthian-owned
institutions, the credits students earned at the closed schools
will not transfer to more reputable colleges. According to
supporters, the students at the shuttered Corinthian campuses
were taken advantage of by an unscrupulous company. California
cannot let these students be victimized again by robbing them of
the chance to understand their options and seek and receive
needed relief.
ARGUMENTS IN OPPOSITION: The California Association of
Private Postsecondary Schools (CAPPS) states that the overriding
priority of this bill must be the resolution of student issues
that arise from the CCI closure and as such, this bill needs to
acknowledge that if the students' first desire is to finish
their education, then all possible efforts should be made to
ensure that the student can do just that and CAPPS supports the
CCC and Cal Grant provisions of this bill. CAPPS believes that
there is no justification to double the STRF from $25 million to
$50 million. According to CAPPS, the appropriation of money to
legal aid is unnecessary given the resources already provided to
students and should be removed from this bill.
ASSEMBLY FLOOR: 74-0, 5/14/15
AYES: Achadjian, Alejo, Baker, Bigelow, Bloom, Bonilla, Bonta,
Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein,
Mathis, McCarty, Medina, Melendez, Mullin, Nazarian,
Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Travis Allen, Harper, Linder, Mayes,
Steinorth, Wagner
Prepared by:Sarah Mason / B., P. & E.D. / (916) 651-4104
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8/31/15 16:32:55
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