BILL ANALYSIS Ó
AB 2652
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Date of Hearing: April 19, 2016
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Jose Medina, Chair
AB 2652
(Eggman) - As Introduced February 19, 2016
SUBJECT: California Private Postsecondary Education Act of
2009: applicability
SUMMARY: Requires a private distance education provider to
register with the Bureau for Private Postsecondary Education
(BPPE) and participate in the Student Tuition Recovery Fund
(STRF). Specifically, this bill:
1)Establishes that it is the intent of the Legislature that
appropriate stakeholders work collaboratively to address how
best to regulate educational programs offered to the public by
means of distance education by institutions with no physical
presence in California.
2)Requires, effective July 1, 2017, to the extent authorized by
federal law, a private entity with no physical presence in
this state that, if the entity was geographically located in
this state, would be subject to the requirements of this act
to do both of the following:
a) Register with BPPE; and,
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b) Participate in STRF for its California students.
3)Provides that these provisions shall remain in effect only
until July 1, 2018.
EXISTING LAW:
1)Establishes the BPPE within the Department of Consumer Affairs
with the primary function of providing protection of
students/consumers through the regulation and oversight of
private postsecondary educational institutions. BPPE
oversight activities are funded by licensing fees paid by
regulated institutions. (Education Code Sec. 94800 et seq.)
2)Establishes the STRF, administered by the BPPE, to relieve or
mitigate economic loss suffered by students enrolled at a
non-exempt private postsecondary education institution due to
the institutions' closure, the institutions' failure to pay
refunds or reimburse loan proceeds, or the institutions'
failure to pay students' restitution award for a violation of
the Private Postsecondary Education Act (Act). STRF is capped
in statute at $25 million. Institutions are required to
assess students an amount established in regulation by the
BPPE and remit fund to the BPPE for STRF. In 2010, that
amount was established at $2.50 per $1000 of tuition charged.
In 2013, that amount was reduced to $0.50 per $1000. In 2015,
this amount was reduced to $0.00, as the STRF had exceeded the
statutory cap (STRF is currently at approximately $28
million). (EC Sec. 94923 - 94925)
FISCAL EFFECT: Unknown.
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COMMENTS: Purpose of this bill. According to the author, "this
bill is seeking to establish consumer protections for
Californian students enrolled in distance education. Many
students are enrolled in online education programs and the
number is only going to continue to increase. As a state,
Governor Brown has declared he is supportive of online education
and views it as a tool to increase access to higher education.
As online education continues to grow, California should ensure
that we are protecting students as they are protected in brick
and mortar institutions."
Background. The Act defines private postsecondary educational
institutions as private entities with a physical presence in
California offering postsecondary education programs to the
public for a charge. California students enrolled in
distance/online programs offered by institutions located outside
of California do not benefit from the oversight provided by the
Act, including access to the STRF. Additionally, some
institutional owners maintain physical campuses in California as
well as online campuses housed in other states. For example,
the recently closed Anthem College Online and Corinthian
Colleges, Inc.'s Everest Online Campus enrolled California
students in online courses through campuses accredited in other
states. Unlike their counterparts attending physical campuses
in California, online students, despite being California
residents, were not provided BPPE protections or tuition
reimbursement under STRF when their campuses abruptly closed.
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Recognizing the need for oversight of the growing online
education field, the initial federal Title IV "program
integrity" regulations by the United States Department of
Education (USDE) issued in 2010 required distance education
programs to have authorization in the student's state of
residence. The USDE regulations specific to distance education
were subsequently vacated by federal court ruling.
Institutions, however, are still required to comply with the
laws and regulations of the states in which they operate.
In response to concerns over the complexity and cost of
navigating differing requirements in multiple states, a group of
institutions, states, and policy organizations developed the
State Authorization Reciprocity Agreement (SARA). SARA provides
that accredited, degree-granting institutions approved by an
oversight body in one participating state will be deemed
automatically to have met approval requirements in other
participating states. The institution's "home" state is
required to respond to student complaints only after the student
has worked through the institution's standard complaint process.
As of January 2016, 36 states agreed to participate in SARA.
In California, SB 634 (Block, 2015) would have authorized state
participation in SARA through the BPPE. The bill was supported
by public and private higher education institutions, but was
ultimately held without hearing in the Senate Education
Committee at the request of the author. Several organizations
representing students, veterans and consumers raised concerns
that California participation in SARA would undermine the
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state's authority to regulate risky online for-profit colleges,
and that SARA's provisions largely focused on decreasing
regulation for institutions rather than providing adequate
protections for students.
Legislative options. It is clear that by limiting BPPE's
authority to only those institutions with a physical presence in
this state, some California students are not properly protected.
As discussed in the Committee Background Paper of the Sunset
Review of BPPE, there are several possible approaches to
rectifying this deficiency:
1)The Legislature could amend the Act to remove the physical
presence requirement and task the BPPE with full regulatory
powers over out-of-state private distance education providers
enrolling California students. This would enhance the student
protections and recourse for students in the event of a school
closure. However, there may be BPPE staffing and workload
issues associated with full oversight of out-of-state
institutions.
2)The Legislature could amend the Act to provide some oversight
of out-of-state distance education providers, such as
disclosures to students, participation in STRF, and BPPE
student complaint procedures and enforcement powers. The BPPE
would not be responsible for conducting compliance
inspections, for example.
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3)The Legislature could participate in SARA. However, relying
on other states' laws, regulations and enforcement may not
provide these students the same protections as those attending
brick and mortar schools. As such, if the BPPE is granted
authority at some point in the future to enter into
reciprocity agreements for purposes of regulating distance
education programs, it may be necessary to clarify that the
other states' regulatory structure is comparable to California
and provides the same opportunities for students as the Act.
Temporary solution. This bill, as currently drafted, proposes a
one-year temporary solution to require institutions with no
physical presence to participate in STRF. Committee staff
understands that this is intended to provide stakeholders
sufficient time to identify a permanent solution to ensure
students are protected in the event of a school's illegal
practices and/or school closure. This model is based on
previous California law. From 2010 through 2016, non-WASC
regionally accredited institutions (including the California
campuses of the University of Phoenix) were required to
participate in STRF but not follow all other provisions of the
Act.
Suggested amendment. Committee staff recommends adding language
to clarify that this requirement is notwithstanding the
definition of private postsecondary educational institution
contained in ED Code Section 94858. Additionally, Committee
staff recommends extending the sunset of this bill from
18-months to 3 years to allow additional time for stakeholders
to discuss and recommend an alternative approach to regulating
online colleges and universities.
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BPPE Sunset Review. BPPE is currently undergoing the Sunset
Review process. The issue of ensuring protection for students
not covered by STRF and the possibility of a surety bond and/or
STRF coverage is raised in the BPPE Sunset Review report,
prepared by Committee staff. The author and Committee may wish
to raise this issue through the 2016 Sunset Review process.
REGISTERED SUPPORT / OPPOSITION:
Support
Center for Public Interest Law
Children's Advocacy Institute
Consumer Federation of California
Consumers Union
Housing and Economic Rights Advocates
Public Advocates Inc.
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Public Law Center
SEIU California
Veterans Legal Clinic
Opposition
University of Phoenix
Analysis Prepared by:Laura Metune / HIGHER ED. / (916) 319-3960