BILL ANALYSIS Ó
AB 2581
Page 1
ASSEMBLY THIRD READING
AB
2581 (Medina)
As Amended May 27, 2016
2/3 vote (Urgency)
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Higher |11-0 |Medina, Bloom, | |
|Education | |Chávez, Irwin, | |
| | |Jones-Sawyer, Levine, | |
| | |Linder, Low, | |
| | |Santiago, Weber, | |
| | |Williams | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Business & |15-0 |Salas, Brough, Bloom, | |
|Professions | |Campos, Chávez, | |
| | |Dahle, Dodd, Eggman, | |
| | |Gatto, Gomez, Holden, | |
| | |Jones, Mullin, Ting, | |
| | |Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
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| | |Gallagher, Eduardo | |
| | |Garcia, Roger | |
| | |Hernández, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: 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)Establishes numerous findings and declarations, including
Legislative intent that grant funds be made available from
Student Tuition Recovery Fund (STRF) to assist former students
of CCI 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 $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.
2)Restores up to two years of Cal Grant and National Guard
Education Assistance awards for students who enrolled at Heald
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. Requires
an eligible student to notify the California Student Aid
Commission (CSAC) of his or her intent to use this restoration
by July 1, 2018.
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3)Authorizes, until July 1, 2017, a state agency that provides
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.
4)Provides $1.3 million from STRF to the Attorney General (AG)
to provide grants 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. Authorizes
$150,000 for AG administrative costs.
5)Declares this bill an urgency statute to take effect
immediately.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
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).
2)One-time $1.3 million appropriation from the STRF, including
up to $150,000 for the AG's administrative costs.
COMMENTS: Background on CCI. 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
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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).
In October of 2013, AG Kamala Harris filed a lawsuit against CCI
(that contained a range of allegations about deceptive marketing
and job-placement claims, in violation of a 2007 judgment. In
August of 2014, the California State Approving Agency for
Veterans Education (CSAAVE) withdrew institutional approval at
all institutions owned and operated in California by CCI. The
23 campuses (Heald, WyoTech and Everest) were prohibited from
receiving GI bill benefits. In order to continue using Title 38
benefits, veteran students were required to transfer/enroll in a
CSAAVE eligible school.
On April 14, 2015, the United States Department of Education
(USDE) announced a $30 million fine against Heald's Salinas and
Stockton campuses for fraudulent placement and other advertising
(CCI appealed this fine). The decision effectively barred all
Heald campuses from receiving federal funds for new enrollments.
On April 16, 2015, the California Student Aid Commission (CSAC)
permanently terminated Heald's eligibility for the Cal Grant
program (Everest and WyoTech were already not eligible). On
April 17, 2015, the Bureau for Private Postsecondary Education
(BPPE) issued an emergency decision prohibiting Everest and
WyoTech campuses from enrolling new students. 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
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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 the Genesis
Private Student Loan Program; and, CCI misrepresented the
transferability of credits.
Background on relief options for students.
1)STRF. The STRF, administered by the BPPE, is funded by
students enrolled in institutions regulated by the 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. Unlike
federal loan forgiveness, STRF provides for partial refunds if
students transfer some of their credits to another
institution.
In 2015, USDE took action to expand the closed school loan
discharge eligibility to students enrolled as far back as June
20, 2014. The USDE action made California veteran students
eligible for closed school loan discharge. BPPE has not yet
taken such a similar action.
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For the CCI students that are eligible for STRF (enrolled
within 120 days of closure) application and approval rates are
low. 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.
2)Federal loan forgiveness. The USDE has announced expanded
loan forgiveness options for CCI students who were affected by
the closure or by the unlawful practices of the institution.
As it currently stands, the following students are eligible to
apply for student loan discharge: 1) students who can show
that CCI violated state law (Heald students in most programs
between 2010 and 2014 have been deemed eligible by USDE to
apply through an expedited loan forgiveness pathway; Everest
and WyoTech students in most programs between 2010 and 2013,
an expedited application pathway is pending); and, 2) students
who were enrolled after June 20, 2014. The USDE has indicated
additional eligibility and financial aid relief may be
established.
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 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. Since the time of CCI closure, USDE has sent email
communications to over 54,000 former-Heald students to inform
them of their loan discharge eligibility; the average open
rate for these email campaigns is approximately 40%. USDE is
in the process of starting similar email campaigns for former
WyoTech and Everest students.
Local assistance grants. CSOs are currently working to assist
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students harmed by the fraudulent activities and illegal closure
of CCI (and other closed institutions such as Four-D College and
Marinello Schools of Beauty). Unfortunately, funding cuts to
these programs have reduced the ability of local organizations
to meet student demand for services. This bill would provide
$1.3 million in funding to local community based organizations
to provide services to students.
Prior Legislation and Governor's Veto. AB 573 (Medina) of 2015
was substantially similar to this bill. In vetoing AB 573,
Governor Brown 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."
Author's statement. 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
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provide benefits now and in the future to California's economy."
The author further notes that this bill "will restore California
education grant eligibility for students by providing up to 2
years of restoration in the Cal Grant and California National
Guard Educational Assistance programs. This will ensure
approximately 3,400 Heald students are not harmed by the award
year limitations in these programs." In response to the
Governor's veto statement, the author and other members of the
Legislature are concurrently working to request this provision
be included in the Budget Act.
Analysis Prepared by:
Laura Metune / HIGHER ED. / (916) 319-3960 FN:
0003153