BILL ANALYSIS Ó
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Date of Hearing: May 11, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2652 (Eggman) - As Amended April 21, 2016
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|Policy |Higher Education |Vote:|10 - 3 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill requires, from July 1, 2017, to July 1, 2020, to the
extent authorized by federal law, for a private distance
education provider with no physical presence in this state, if
the entity was geographically located in this state and would be
subject to the requirements of the Private Postsecondary
Education Act of 2009, to:
a) Register with Bureau for Private Postsecondary Education
(BPPE); and,
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b) Contribute to the Student Tuition Recovery Fund for its
California students.
FISCAL EFFECT:
Administrative costs for the bureau should be minor, assuming
the bureau would simply contact out-of-state distance education
providers, inform those with California-based students of their
requirement to register with the bureau and to collect and remit
STRF assessments from these students. (There is currently no
STRF assessment because the fund balance exceeds a $25 million
statutory cap.) Regardless of whether an out-of-state online
institution complies with the STRF requirements, its
California-based students would be eligible to recover from STRF
for losses suffered due to their institution's closure. By
bringing more students under the protections provided by STRF,
this bill increases potential liabilities on the fund. As a
result, a future payout from the fund could exceed $150,000.
Based on actual data from fall 2013, there are about 900,000
students currently enrolled exclusively in distance education
courses offered by private, for-profit schools nationwide.
Assuming 13% of these students are in California yields a total
of 117,000 students. The number of these student taking online
courses at in-state versus out-of-state institutions is unknown,
but given the universal accessibility of distance education, the
number served by out-of-state institutions could easily exceed
10%.
COMMENTS:
1)Purpose. According to the author, "this bill is seeking to
establish consumer protections for Californian students
enrolled in distance education. Many students are enrolled in
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online education programs and the number is only going to
continue to increase?As online education continues to grow,
California should ensure that we are protecting students as
they are protected in brick and mortar institutions."
2)Background. The STRF, administered by the BPPE, is intended 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). Institutions are required to assess
students an amount established in regulation by the BPPE and
remit funds to the BPPE for STRF.
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.
3)SARA. In response to concerns over the complexity and cost of
navigating differing requirements in multiple states, a group
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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 author
decided to hold the bill in the Senate Education Committee due
to concerns that SARA did not provide adequate student
protections similar to the Act.
4)Temporary Solution. This bill, as currently drafted, proposes
a three-year temporary solution to require institutions with
no physical presence to participate in STRF. 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 current California law, which from 2010
through 2016 requires non-WASC regionally accredited
institutions (including the California campuses of the
University of Phoenix) to participate in STRF but not follow
all other provisions of the Act.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081
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