BILL NUMBER: AB 1916	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Irwin

                        FEBRUARY 11, 2016

   An act to add Section 94886.5 to the Education Code, relating to
private postsecondary education.


	LEGISLATIVE COUNSEL'S DIGEST


   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 1.  Section 94886.5 is added to the Education Code, to
read:
   94886.5.  (a) Before January 1, 2019, an institution shall file
with the bureau a surety bond in the amount determined pursuant to
subdivision (b). The bond shall be executed by the institution as
principal and by a surety company authorized to do business in this
state. The bond shall be continuous unless the surety is released
pursuant to this section.
   (b) The amount of the bond shall be equal to a reasonable estimate
of the maximum amount of tuition and fees to be returned to students
of the institution for the most expensive period of attendance
during the applicable academic year. Following the initial filing of
the bond with the bureau, the amount of the bond shall be
recalculated annually by the bureau based upon a reasonable estimate
of the maximum amount of tuition and fees to be returned to students
anticipated by the school for that period of attendance. The bond
shall, to the extent practicable, cover potential administrative
costs incurred by the bureau in an amount no less than 5 percent of
the total amount of the bond. In no case shall the amount of the bond
be less than five thousand dollars ($5,000).
   (c) (1) In the event that an institution ceases operation, the
bureau shall make demand on the surety of the institution upon the
request for a refund by a student or the implementation of the
teach-out for the students of the institution according to the plan
provided to the bureau pursuant to Section 94926, and the surety
shall pay the claim due within 45 days. The bureau shall use the bond
to pay claims, to the extent practicable, filed by students who have
not otherwise recovered their tuition and fees through a teach-out,
or from the Student Tuition Recovery Fund established in Section
94923. The bureau shall use the bond to reimburse the Student Tuition
Recovery Fund for all moneys paid from the fund for claims that
would have been otherwise recoverable under the bond, except as
provided in paragraph (4).
   (2) The bureau shall develop and implement a process, and
necessary forms, for students enrolled in an institution ceasing
operation to file claims to the bureau to recover their tuition and
fees not recovered through a teach-out.
   (3) Any student enrolled in an institution ceasing operation who
does not file a claim to recover tuition and fees pursuant to
paragraph (2) may recover through a teach-out provided to students of
the institution ceasing operation through a contract with a
community college or any other arrangement approved by the bureau.
The teach-out provided to the student shall replace the enrollment
agreement or contract between the institution ceasing operation and
the student, except that fee and tuition payments shall be made by
the student as required by the enrollment agreement or contract.
   (4) If the amount of the bond is less than the total tuition and
fees paid by all students declining the teach-out at the time the
institution ceased operation, the amount of the bond shall be
prorated among those students.
   (5) The Student Tuition Recovery Fund shall be used to cover
economic loss incurred by a student while enrolled at an institution
ceasing operation, including any prepaid tuition and fees not
recovered by the student under the bond.
   (6) The bond shall be used to provide recovery for students
enrolled in an institution at the time it ceases operation, within
121 days of the institution ceasing operation, and, if applicable,
within a period of a declining quality of education, as determined by
the bureau, longer than 120 days before the institution ceases
operation.
   (d) Once an institution ceases operation, no new students shall be
enrolled.
   (e) An institution's approval to operate shall be suspended by
operation of law when the institution is no longer covered by a
surety bond as required by this section. The bureau shall give
written notice to the institution at the last-known address, at least
45 days prior to a release of a surety, to the effect that approval
shall be suspended by operation of law until another surety bond is
filed in the same manner and like amount as the bond being released.
   (f) A surety on any bond filed under the provisions of this
section may be released after the surety serves written notice to the
bureau at least 60 days prior to the release. The release shall not
discharge or otherwise affect any claim filed by any student for loss
of tuition or any fees that occurred while the bond was in effect or
that occurred under any note or contract executed during any period
of time when the bond was in effect, except when another bond is
filed in a like amount and provides indemnification for any loss.
   (g) For purposes of this section, and notwithstanding Section
94858, "institution" means, to the extent authorized by federal law,
a private postsecondary educational institution that offers
postsecondary education to the public in this state for an
institutional charge, but does not include an independent institution
of higher education, as defined in Section 66010, that has operated
in California for no less than 15 academic years.
   (h) Tuition and fees for purposes of this section are both of the
following:
   (1) Paid tuition and fees not recovered by the receipt of academic
credits.
   (2) Paid tuition and fees recovered by the receipt of academic
credits that are nontransferable to accredited institutions.