California Legislature—2015–16 Regular Session

Assembly Bill No. 2581

Introduced by Assembly Member Medina

February 19, 2016

An act to add Sections 69433.61, 69999.19, 94051, and 94926.5 to the Education Code, relating to higher education, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 2581, as introduced, Medina. Higher education: campus closures: Corinthian Colleges, Inc.

(1) 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 also 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 appropriate the sum of $1,300,000 from the Student Tuition Recovery Fund to the Attorney General for the purposes of providing grants to eligible nonprofit community service organizations to assist eligible students affected by the closure of Corinthian Colleges, Inc., as defined, with loan discharge and other student loan-related requests and tuition recovery-related claims, and to pay an amount not to exceed $150,000 for the reasonable administrative costs of the Attorney General’s office related to these grants, as specified. The bill would require the bureau to notify the Attorney General of all unlawful Corinthian Colleges closures within 15 days of the effective date of these provisions. The bill would require the Attorney General to, among other things, within 90 days of the notification, solicit grant applications from eligible nonprofit community service organizations, select one or more of these organizations deemed to be qualified, and set additional terms and conditions of the grants as necessary. The bill would set a schedule for how grant funds are to be distributed. The bill would require the grantee to submit specified information to the Attorney General on a quarterly basis, and require the Attorney General to make these reports available to the Legislature and the bureau upon request. The bill would require the Attorney General to provide the Legislature and the bureau a final report summarizing all the information submitted to it by grantees, promptly following the time when all funds are expended by the grantees, or by January 1, 2019, whichever is earlier. The bill would authorize the Attorney General to contract with another qualified entity to perform the Attorney General’s duties under these provisions.

(2) This bill would, until July 1, 2017, authorize state agencies that provide licensure to consider for licensure students who were enrolled in an educational program of Corinthian Colleges, Inc., designed to lead to licensure from that state agency, and who did not receive that licensure due to the institution’s closure.

(3) The Cal Grant Program prohibits an applicant from receiving Cal Grant awards totaling in excess of the amount equivalent to the award level for a total of 4 years of full-time attendance in an undergraduate program, except as provided.

This bill would partially exempt from this limitation on Cal Grant awards a student who was enrolled and received a Cal Grant award at a California campus of Heald College, and who was unable to complete an educational program offered by the campus due to its closure.

(4) The California National Guard Education Assistance Award Program authorizes the renewal of California National Guard Education Assistance Awards, for a maximum of the greater of either 4 years of full-time equivalent enrollment or the duration for which the qualifying member would otherwise be eligible pursuant to the Cal Grant Program, if specified conditions are met.

This bill would partially exempt from this limitation on California National Guard Education Assistance Awards a student who was enrolled and received a California National Guard Education Assistance Award at a California campus of Heald College, and who was unable to complete an educational program offered by the campus due to its closure.

(5) This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Corinthian Colleges, Inc., was the target of consumer and
taxpayer protection enforcement efforts by the federal government,
the Attorney General, and other state and federal authorities.

(b) Based on findings of harm to students enrolled at Corinthian
Colleges campuses, the United States Department of Education
announced debt relief programs to assist students, including all of
the following:

(1) A student who attended a Corinthian Colleges campus that
closed on April 27, 2015, and withdrew any time after June 20,
2014, is eligible to apply for a closed school loan discharge, so
long as the student does not transfer earned credit and subsequently
complete a comparable program at another institution.

(2) A student who believes he or she was a victim of fraud or
other violations of state law by Corinthian Colleges can apply for
debt relief under borrower defense to repayment. The United States
Department of Education has determined that Corinthian Colleges
misrepresented job placement rates for a majority of programs at
its Heald College campuses between 2010 and 2014, and California
Everest College and WyoTech campuses between 2010 and 2013,
and is in the process of establishing a specific process for federal
loan discharge for these students.

(3) A Corinthian Colleges student who intends to submit a
borrower defense claim may request loan forbearance while a
claims review process is established and his or her claim is
reviewed.

(c) On December 3, 2015, the United States Department of
Education announced the approval of 1,312 of the 1,670 borrower
defense to repayment loan forgiveness claims received. Of those
claims approved, 1,062 California students will receive student
loan relief. Rough estimates place the number of California students
with valid defense to repayment claims at over 85,000 students.

(d) According to testimony provided at the November 10, 2015,
advisory committee meeting, the Bureau for Private Postsecondary
Education staff indicated that Corinthian Colleges students have
largely needed assistance in working with loan servicers to secure
a closed school loan discharge and in applying to the United States
Department of Education for loan forgiveness based on borrower
defense to repayment. According to that testimony, the Bureau for
Private Postsecondary Education at that time had one employee
responsible for assisting the hundreds of thousands of California
students eligible for loan forgiveness and tuition recovery.

(e) Without assistance, evidence shows that only a small fraction
of students eligible for tuition recovery or federal loan discharge
will file a claim.

(f) Pursuant to Section 94923, the Student Tuition Recovery
Fund exists to relieve or mitigate a student’s economic loss caused
by a documented violation of certain laws or by institutional
closure, as specified.

(g) It is consistent with the purpose of the Student Tuition
Recovery Fund to provide assistance to Corinthian Colleges
students to obtain federal and private loan discharge and other
financial aid relief.

(h) It is the intent of the Legislature that unencumbered
restitution funds awarded to the state from a lawsuit involving
Corinthian Colleges and its affiliate institutions, including Heald
College, be used to repay any funds provided to students pursuant
to this act.

SEC. 2.  

Section 69433.61 is added to the Education Code, to
read:

69433.61.  

(a) Notwithstanding any other law, a student who
was enrolled and received a Cal Grant award in the 2013-14 or
2014-15 academic year at a California campus of Heald College,
and was unable to complete an educational program offered by
the campus due to the campus’ closure on April 27, 2015, shall
not have the award years used at a Heald College campus
considered for purposes of the limitation on the number of years
of Cal Grant award eligibility. This restoration of award years for
Cal Grant eligibility shall not exceed two years.

(b) A student shall be eligible for the restoration of award years
if the student was enrolled at a campus of Heald College on April
27, 2015, or withdrew from enrollment between July 1, 2014, and
April 27, 2015. The Bureau for Private Postsecondary Education
shall provide the commission with information, if available, to
confirm student enrollment for purposes of this section.

(c) An eligible student shall, before July 1, 2018, notify the
commission of his or her intent to use the restoration of award
years provided under this section and to enroll in an institution
eligible for initial and renewal Cal Grant awards to be eligible for
that restoration.

SEC. 3.  

Section 69999.19 is added to the Education Code, to
read:

69999.19.  

(a) Notwithstanding any other law, a student who
was enrolled and received a California National Guard Education
Assistance Award in the 2013-14 or 2014-15 academic year at a
California campus of Heald College, and was unable to complete
an educational program offered by the campus due to the campus’
closure on April 27, 2015, shall not have the award years used at
a Heald College campus considered for purposes of the limitation
on the number of years of California National Guard Education
Assistance Award eligibility. This restoration of award years for
California National Guard Education Assistance Award eligibility
shall not exceed two years.

(b) A student shall be eligible for the restoration of award years
if the student was enrolled at a campus of Heald College on April
27, 2015, or withdrew from enrollment between July 1, 2014, and
April 27, 2015. The Bureau for Private Postsecondary Education
shall provide the commission with information, if available, to
confirm student enrollment for purposes of this section.

(c) An eligible student shall, before July 1, 2018, notify the
commission of his or her intent to use the restoration of award
years provided under this section and to enroll in an institution
eligible for initial and renewal California National Guard Education
Assistance Awards to be eligible for that restoration.

SEC. 4.  

Section 94051 is added to the Education Code, to read:

94051.  

Notwithstanding any other law, until July 1, 2017, a
state agency that provides licensure may consider for licensure
any student who was enrolled in an educational program of
Corinthian Colleges, Inc., designed to lead to licensure from that
state agency, and who did not receive that licensure due to the
institution’s closure. This consideration shall be provided at the
discretion of the state agency in accordance with its public
protection mandate and applicable criteria established by the
agency for consumer safety.

SEC. 5.  

Section 94926.5 is added to the Education Code, to
read:

94926.5.  

(a) Upon appropriation by the Legislature from the
Student Tuition Recovery Fund, in response to the student harm
caused by the practices and unlawful closure of Corinthian
Colleges, Inc., grant funds shall be timely provided in accordance
with this section to eligible nonprofit community service
organizations to assist the eligible students of that closed institution
by relieving or mitigating the economic and educational
opportunity loss incurred by those students.

(b) (1)   The terms and conditions of the grant agreements shall
ensure that grant funds are used for the exclusive purpose of
assisting eligible students with federal and private loan discharge
and other financial aid relief, and that students eligible to claim
recovery through the Student Tuition Recovery Fund are referred
to the bureau for assistance with claim processing.

(2) This subdivision is not intended to prohibit a nonprofit
community service organization from using grant funds to screen
student requests for assistance in order to determine if a student
meets assistance eligibility requirements.

(c) Services provided by eligible nonprofit community service
organizations may include, but are not to be limited to, outreach
and education, screening requests for assistance, referring students
for additional legal assistance through pro bono referral programs,
and legal services.

(d) For purposes of this section, an “eligible nonprofit
community service organization” is an organization that satisfies
all of the following conditions:

(1) 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.

(2) The organization demonstrates expertise in assisting students
with, and currently provides free direct legal services to students
for, or will work in partnership with or under the supervision of
an attorney or a nonprofit legal services organization that has
demonstrated expertise in assisting students with, student loan and
tuition recovery-related matters.

(3) The organization does not charge students for services,
including services provided pursuant to this section.

(e) For purposes of this section, an “eligible student” is a student
who was enrolled at a California campus of, or a California student
who was enrolled in an online campus of, a Corinthian Colleges
institution, and who has been screened by the nonprofit community
service organization and determined to be eligible for debt relief
from the United States Department of Education or other student
financial aid relief.

(f) (1)   The bureau shall notify the Attorney General of all
unlawful Corinthian Colleges closures within 15 days of the
effective date of this section.

(2) The notification shall include the name and location of the
school, the programs, and the number of students affected at each
site of the school, as appropriate. The bureau shall provide the
Attorney General with all additional information that the Attorney
General may request, if the bureau has access to the requested
information.

(3) The Attorney General shall, within 90 days of receipt of the
notification, solicit grant applications from eligible nonprofit
community service organizations as described in subdivision (d),
select one or more of these organizations from among the
applicants who are deemed to be qualified by the Attorney General,
set additional terms and conditions of the grants as necessary, and
notify the bureau and the recipient organization or organizations
of the selection and the share of grant funds available that the
organization shall receive. The Attorney General may enter into
a contract with another qualified entity to perform the Attorney
General’s duties under this subdivision.

(g) Within 30 days of selection pursuant to paragraph (3) of
subdivision (f), an eligible nonprofit community service
organization that receives funds pursuant to this section shall enter
into a grant agreement with the Attorney General, or a qualified
entity entrusted with this authority pursuant to paragraph (3) of
subdivision (f), as applicable, and shall use grant funds exclusively
for the purposes set forth in this section in accordance with the
agreement. Any unused funds shall be returned to the Attorney
General for return to the Student Tuition Recovery Fund. The
Attorney General, or a contracted qualified entity, may terminate
the grant agreement for material breach, and may require repayment
of funds provided to the nonprofit community service organization
during the time that the agreement was being materially breached.
However, the Attorney General, or a qualified entity, shall provide
the grantee with written notice of the breach and a reasonable
opportunity of not less than 30 days to resolve the breach.

(h) An eligible nonprofit community service organization that
receives a grant may give priority to low-income students if
demand exceeds available grant funds. Otherwise, the organization
may provide assistance regardless of student income level.

(i) (1)   An eligible nonprofit community service organization
that receives a grant shall report to the Attorney General, or a
qualified entity pursuant to paragraph (3) of subdivision (f), as
applicable, quarterly through the grant period on all of the
following:

(A) The number of eligible students served pursuant to the grant
agreement.

(B) A detailed summary of services provided to those students.

(C) The number of Student Tuition Recovery Fund claims
referred to the bureau.

(D) The number of federal loan forgiveness claims filed and
the number of those claims approved, denied, and pending.

(E) The number of students screened by the nonprofit
community service organization who were determined ineligible
for assistance with debt relief pursuant to subdivision (e), a
summary of reasons for ineligibility, and a summary of any services
or referral information provided to those students.

(F) Any other information that is deemed appropriate by the
Attorney General or qualified entity, as applicable.

(2) The Attorney General or qualified entity, as applicable, shall
make the reports submitted pursuant to paragraph (1) available to
the Legislature and the bureau upon request.

(3) The Attorney General or qualified entity, as applicable, shall
provide the Legislature and the bureau a final report summarizing
the information submitted pursuant to paragraph (1) promptly
following the time when all funds are expended by the grantees
or by January 1, 2019, whichever is earlier.

(j) Funds shall be distributed to preapproved nonprofit
community service organizations as follows:

(1) Fifty percent shall be distributed to the grantee within 30
days of the grantee entering into a grant agreement.

(2) Twenty-five percent shall be distributed to the grantee upon
the submission of the grantee’s second quarterly report.

(3) Twenty-five percent shall be distributed to the grantee upon
the submission of the grantee’s third quarterly report.

(k) The adoption of any regulation pursuant to this section shall
be deemed to be an emergency and necessary for the immediate
preservation of the public health and safety, or general welfare.

SEC. 6.  

(a) It is the intent of the Legislature that grant funds
be made available from the Student Tuition Recovery Fund to
assist former students of Corinthian Colleges, Inc., in obtaining
federal and private loan discharge and other financial aid related
relief, that the amount of funds available be calculated by
multiplying the number of students (13,000) enrolled at the time
of the institution’s unlawful closure by one hundred dollars ($100),
and that organizations receiving grants use available funds in ways
that maximize the number of California students that apply for and
receive loan discharge and tuition recovery.

(b) Consistent with subdivision (a), the sum of one million three
hundred thousand dollars ($1,300,000) is hereby appropriated from
the Student Tuition Recovery Fund to the Attorney General for
the purposes of providing grants pursuant to Section 94926.5 of
the Education Code, and to pay an amount not to exceed one
hundred fifty thousand dollars ($150,000) for the reasonable
administrative costs of the Attorney General’s office related to
these grants.

SEC. 7.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to provide immediate educational and economic relief
to the thousands of students harmed by the closure of Corinthian
Colleges, it is necessary for this act to take effect immediately.