BILL ANALYSIS Ó
AB 2581
Page 1
Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2581 (Medina) - As Amended April 18, 2016
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|Policy |Higher Education |Vote:|11 - 0 |
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| |Business and Professions | |15 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY:
The bill provides financial and other assistance to students of
Heald, Everest, and WyoTech campuses in California, which were
owned by Corinthian Colleges, Inc. (CCI) and closed unlawfully
on April 27, 2015. Specifically, this bill:
1)Restores up to two years of Cal Grant and National Guard
Education Assistance awards for students who enrolled at Heald
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and received awards in the 2013-14 or 2014-15 academic years,
were unable to complete their educational programs, and
withdrew between July 1, 2014, and April 27, 2015. An
eligible student must notify the California Student Aid
Commission (CSAC) of his or her intent to use this restoration
by July 1, 2018.
2)Authorizes, until July 1, 2020, a state agency providing
licensure to consider for licensure any student who was
enrolled in an educational program of CCI designed to lead to
licensure from that state agency, and who did not receive that
licensure due to the institution's closure.
3)Appropriates $1.3 million from Student Tuition Recovery Fund
(STRF) to the Attorney General (AG) to provide grants, as
specified, to eligible nonprofit community service
organizations (CSOs) in order to assist eligible CCI students
by relieving or mitigating the economic and educational
opportunity loss incurred by those students. The AG may use
up to $150,000 of this appropriation for administrative costs.
4)Requires that any unused funds per (3) be returned to the
STRF, except upon approval of the AG, these funds may be used
by nonprofits to assist students, who were enrolled by any
other private postsecondary institution that was approved to
operate in California, and were harmed by the closure of that
institution.
FISCAL EFFECT:
1)Based on very similar legislation last year, General Fund
costs for Cal Grant restoration for affected students for two
years was estimated at $9.6 million one-time ($7.9 to restore
one year and $1.7 to restore the second year).
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2)One-time $1.3 million appropriation from the STRF, including
up to $150,000 for the AG's administrative costs.
COMMENTS:
1)Background. CCI institutions (Heald, WyoTech, and Everest)
offered a range of programs, including certificate programs,
with tuition and fees that ranged from $13,100 to $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. 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). CCI closed all campuses on April 26, 2015,
and filed bankruptcy on May 4, 2015.
On March 23, 2016, the AG announced that the San Francisco
County Superior Court of California issued a $1.1 billion
default judgment against CCI, finding, among other things:
many of CCI's representations and advertisements related to
job placement were untrue and/or misleading, dating back to at
least 2009; CCI knowingly advertised programs, since 2010,
that it did not offer; CCI unlawfully used military seals;
enrollment agreements contained unlawful clauses; CCI engaged
in unlawful debt collection and failed to disclose its role in
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the Genesis Private Student Loan Program; and, CCI
misrepresented the transferability of credits.
2)Relief for Students.
a) STRF. The STRF is funded by students enrolled in
institutions regulated by the Bureau for Private
Postsecondary Education (BPPE) and provides for
reimbursement to students for economic loss due to the
closure or illegal activity of a regulated institution.
According to BPPE, California students enrolled in a
California WyoTech and Everest campus within 120 days of
closure are eligible for STRF. California CCI students
enrolled in Heald and Everest Online are not covered by
STRF as those CCI institutions were not regulated by BPPE.
According to BPPE data, of the estimated 1,586 WyoTech
students eligible for STRF, only 34 STRF applications have
been approved. Of the estimated 4,336 Everest students
eligible for STRF, only 75 applications have been approved.
Fewer than 350 total students have applied.
b) Federal Loan Forgiveness. On March 25, 2016, USDE
announced it had received 11,740 closed school loan
forgiveness claims, and, as of March 1, 2016, granted
relief for 6,838 students; and has received 11,000 borrower
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defense claims (8,501 from CCI students) and has approved
2,048. Rough estimates place the number of students
eligible for loan forgiveness at about 350,000 students.
3)Prior Legislation. Last year, AB 573 (Medina), which was
substantially similar to this bill, was vetoed. The Governor
stated, in part, that USDE "has taken the matter of loan
discharge seriously. In recent months, it has greatly eased
the burden of filings for many students, and its work to
provide a simple, swift and fair process for students
continues. As such, it appears premature to create an
attorney grant program, especially one that provides little
direction on how funds should be used. While the bill's
provisions to extend Cal Grant eligibility for Heald students
are well-intentioned, I am not comfortable creating new
General Fund costs outside of the budget process, particularly
given the Cal Grant augmentations already included in this
year's budget."
4)Purpose. According to the author, "this bill will provide
vital funding to local organizations to help students with the
loan forgiveness and tuition recovery process. Since Governor
Brown's veto of AB 573, only a fraction of students eligible
for loan discharge and tuition recovery have submitted claims;
of those who have submitted claims, even fewer students have
had claims successfully approved. This is clear evidence that
existing efforts by USDE and BPPE are insufficient to ensure
students receive the benefits to which they are entitled."
According to the author, "helping California students cancel
as much of their student debt burden as possible will be good
for these students, cost the state of California very little,
and provide benefits now and in the future to California's
economy."
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Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081