AB 1916, as introduced, Irwin. Private postsecondary education: school closure bonds.
Existing law, the California Private Postsecondary Education Act of 2009, provides for the regulation of private postsecondary educational institutions by the Bureau for Private Postsecondary Education in the Department of Consumer Affairs. The act exempts an institution from its provisions, if any of a list of specific criteria are met.
The act establishes the Student Tuition Recovery Fund and requires the bureau to adopt regulations governing the administration and maintenance of the fund, including requirements relating to assessments on students and student claims against the fund, and establishes that the moneys in this fund are continuously appropriated to the bureau for specified purposes.
This bill would require a private postsecondary institution, as defined, to file a surety bond before January 1, 2019, with the department in the amount equal to a reasonable estimate of the maximum amount of tuition and fees imposed on students of the institution for a period of attendance of greatest expense during the applicable academic year.
In the event the institution ceases operation, this bill would require the bureau, upon request for a refund by a student or the implementation of a teach-out for students of the institution, to make a demand on the bond to: (1) issue a refund of tuition and fees for student claims, (2) implement a teach-out for students of the institution, and (3) reimburse the Student Tuition Recovery Fund for moneys paid from the fund for student claims that would have been otherwise recoverable under the bond.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 94886.5 is added to the Education Code,
2to read:
(a) Before January 1, 2019, an institution shall file
4with the bureau a surety bond in the amount determined pursuant
5to subdivision (b). The bond shall be executed by the institution
6as principal and by a surety company authorized to do business in
7this state. The bond shall be continuous unless the surety is released
8pursuant to this section.
9(b) The amount of the bond shall be equal to a reasonable
10estimate of the maximum amount of tuition and fees to be returned
11to students of the institution for the most expensive period of
12attendance during the applicable academic year. Following the
13initial filing of the bond with the bureau, the amount of the bond
14shall be recalculated annually by the bureau based upon a
15reasonable estimate of the
maximum amount of tuition and fees
16to be returned to students anticipated by the school for that period
17of attendance. The bond shall, to the extent practicable, cover
18potential administrative costs incurred by the bureau in an amount
19no less than 5 percent of the total amount of the bond. In no case
20shall the amount of the bond be less than five thousand dollars
21($5,000).
22(c) (1) In the event that an institution ceases operation, the
23bureau shall make demand on the surety of the institution upon
24the request for a refund by a student or the implementation of the
25teach-out for the students of the institution according to the plan
26provided to the bureau pursuant to Section 94926, and the surety
27shall pay the claim due within 45 days. The bureau shall use the
28bond to pay claims, to the extent practicable, filed by students who
29have not otherwise recovered their tuition and fees through a
30teach-out, or from the Student Tuition
Recovery Fund established
P3 1in Section 94923. The bureau shall use the bond to reimburse the
2Student Tuition Recovery Fund for all moneys paid from the fund
3for claims that would have been otherwise recoverable under the
4bond, except as provided in paragraph (4).
5(2) The bureau shall develop and implement a process, and
6necessary forms, for students enrolled in an institution ceasing
7operation to file claims to the bureau to recover their tuition and
8fees not recovered through a teach-out.
9(3) Any student enrolled in an institution ceasing operation who
10does not file a claim to recover tuition and fees pursuant to
11paragraph (2) may recover through a teach-out provided to students
12of the institution ceasing operation through a contract with a
13community college or any other arrangement approved by the
14bureau. The teach-out provided to the student shall replace the
15enrollment agreement
or contract between the institution ceasing
16operation and the student, except that fee and tuition payments
17shall be made by the student as required by the enrollment
18agreement or contract.
19(4) If the amount of the bond is less than the total tuition and
20fees paid by all students declining the teach-out at the time the
21institution ceased operation, the amount of the bond shall be
22prorated among those students.
23(5) The Student Tuition Recovery Fund shall be used to cover
24economic loss incurred by a student while enrolled at an institution
25ceasing operation, including any prepaid tuition and fees not
26recovered by the student under the bond.
27(6) The bond shall be used to provide recovery for students
28enrolled in an institution at the time it ceases operation, within 121
29days of the institution ceasing operation, and, if
applicable, within
30a period of a declining quality of education, as determined by the
31bureau, longer than 120 days before the institution ceases operation.
32(d) Once an institution ceases operation, no new students shall
33be enrolled.
34(e) An institution’s approval to operate shall be suspended by
35operation of law when the institution is no longer covered by a
36surety bond as required by this section. The bureau shall give
37written notice to the institution at the last-known address, at least
3845 days prior to a release of a surety, to the effect that approval
39shall be suspended by operation of law until another surety bond
P4 1is filed in the same manner and like amount as the bond being
2released.
3(f) A surety on any bond filed under the provisions of this
4section may be released after the surety serves written notice to
5the
bureau at least 60 days prior to the release. The release shall
6not discharge or otherwise affect any claim filed by any student
7for loss of tuition or any fees that occurred while the bond was in
8effect or that occurred under any note or contract executed during
9any period of time when the bond was in effect, except when
10another bond is filed in a like amount and provides indemnification
11for any loss.
12(g) For purposes of this section, and notwithstanding Section
1394858, “institution” means, to the extent authorized by federal
14law, a private postsecondary educational institution that offers
15postsecondary education to the public in this state for an
16institutional charge, but does not include an independent institution
17of higher education, as defined in Section 66010, that has operated
18in California for no less than 15 academic years.
19(h) Tuition and fees for purposes of this section
are both of the
20following:
21(1) Paid tuition and fees not recovered by the receipt of academic
22credits.
23(2) Paid tuition and fees recovered by the receipt of academic
24credits that are nontransferable to accredited institutions.
O
99