BILL ANALYSIS Ó
AB 2652
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ASSEMBLY THIRD READING
AB
2652 (Eggman)
As Amended April 21, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Higher |10-3 |Medina, Bloom, |Baker, Linder, |
|Education | |Chávez, Irwin, |Olsen |
| | |Jones-Sawyer, Levine, | |
| | |Low, Santiago, Weber, | |
| | |Williams | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, |
| | |Bonilla, Bonta, |Gallagher, Jones, |
| | |Calderon, Daly, |Obernolte, Wagner |
| | |Eggman, Eduardo | |
| | |Garcia, Roger | |
| | |Hernández, Holden, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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AB 2652
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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,
b) Participate in STRF for its California students.
3)Provides that these provisions shall remain in effect until
July 1, 2020.
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 Section (EDC) 94800
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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). (EDC 94923 - 94925)
FISCAL EFFECT: According to the Assembly Appropriations
Committee, 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
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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: 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.
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
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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) of 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
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.
Temporary solution. This bill, as currently drafted, proposes a
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
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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-Western Association of Schools and
Colleges (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.
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.
Analysis Prepared by:
Laura Metune / HIGHER ED. / (916) 319-3960 FN:
0003132