BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: SB 1192
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|Author: |Hill |
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|Version: |April 6, 2016 Hearing |
| |Date: April 20, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Olgalilia Ramirez |
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Subject: Private postsecondary education: California Private
Postsecondary Education Act of 2009
SUMMARY
This bill makes various changes to the Private Postsecondary
Education Act of 2009 to improve the effectiveness of the Bureau
for Private Postsecondary Education (Bureau); It:
1) Establishes the Office of Student Assistance and Relief.
2) Provides for an enforcement monitor to evaluate the
Bureau's enforcement efforts.
3) Authorizes the Bureau to give extensions for obtaining
accreditation according based on specified criteria.
4) Requires certain out-of-state institutions offering
distance education to California students to register with
the Bureau, among other things.
BACKGROUND
Existing law:
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Establishes the California Private Postsecondary Education Act
of 2009 (Act) until January 1, 2017, and requires the Bureau for
Private Postsecondary Education (Bureau) within the Department
of Consumer Affairs (DCA) to, among other things, review,
investigate and approve private postsecondary institutions,
programs and courses of instruction pursuant to the Act and
authorizes the Bureau to take formal actions against an
institution/school to ensure compliance with the Act and even
seek closure of an institution/school if deemed necessary.
The Act requires unaccredited degree granting institutions to be
accredited by an accrediting agency recognized by the United
States Department of Education (USDE) by 2020. The Act also
provides for specified disclosures and enrollment agreements for
students, requirements for cancellations, withdrawals and
refunds, and that the BPPE shall administer the Student Tuition
Recovery Fund (STRF) to provide refunds to students affected by
the possible closure of an institution/school.
(Education Code § 94800, et seq.)
ANALYSIS
This bill:
Office of Student Assistance and Relief
1) Establishes an Office of Student Assistance and Relief to
serve as the primary contact to address the needs of
private postsecondary students and:
a) Specifies that the duties of the Office include
but are not limited to:
i) Providing assistance to private
postsecondary students.
ii) Conducting proactive outreach to these
students.
iii) Administering the Student Tuition
Recovery Fund.
iv) Overseeing the registration of private
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postsecondary institutions that do not have a
physical presence in California but offer
distance education to California students. These
institutions are required to register with the
Bureau and file a surety bond, as specified.
b) Requires the Office to:
i) Establish and maintain a website to
provide information to students
about their rights and protections available to
them.
ii) Provide information on its website
about free services offered by a
local nonprofit community service organization
with demonstrated
experience in assisting students in areas related
to legal services
and student loan matters.
iii) Work, in consultation with state and
federal agencies to determine
the resources and protections available to
private postsecondary
students in the event of a school closure as
specified.
Student Tuition Recovery Fund (STRF)
2) Makes changes to STRF provisions. Specifically it,
a) Removes the Bureau's authority to establish
regulations related to STRF.
b) Makes specified California students
enrolled at a campus or in an out-of-state online
program of a Corinthian Colleges Inc., institution
eligible for STRF.
c) Declares the intent of the Legislature
to require a private postsecondary education
institution that does not maintain a physical presence
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in this state and offers distance education to
California students to file a surety bond for the
benefit of students suffering from economic loss.
Enforcement Monitor
3) Requires the Department of Consumer Affairs to supervise
and appoint an enforcement monitor for a period of two
years in order to:
a) Monitor Bureau for Private
Postsecondary Education's (Bureau) enforcement efforts
with a specific concentration on the adequacy of
bureau compliance inspections, handling and processing
of student complaints and timely application of
sanctions or discipline imposed on institutions and
persons.
b) Submit specified reports to the Director of
Consumer Affairs and
Legislature and be available to deliver oral reports.
4) Sunsets the provisions related to the enforcement monitor
on March 1, 2019.
Licensure
5) Expands licensure specifications to include required
certification or registration that a person must hold to
lawfully engage in a profession, occupation, trade, or
career field and makes related conforming changes
throughout the act.
Compliance, Enforcement, Process, and Penalties
6) Expands the authority of the Bureau to enforce the
provisions of the Act:
a) Authorizes Bureau staff to issue citations, with
a fine not to exceed
$5,000 before leaving an institution when non-minor
violations of the Act
are found during an inspection, as specified.
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b) Provides due process procedures for
institutions contesting alleged violations.
7) Increases the penalty for operating an institution without
Bureau approval from $50,000 to $100,000.
8) Provides the Bureau the authority to give extensions on
deadlines for unaccredited degree granting institutions to
become accredited according to certain evidentiary criteria
being met.
9) Makes other various technical changes.
STAFF COMMENTS
1) Need for the bill. According to the author, this bill is
necessary in order to ensure continued oversight of private
postsecondary institutions that supports quality,
innovative programs, which are approved in a timely manner,
while also ensuring a robust regulatory structure to
prevent predatory practices and promotes student success.
The author asserts that it is important to ensure that
students are provided proper recourse through the Bureau
for Private Postsecondary Education (Bureau) and the vast
array of tools the Bureau has to assist students, in the
event that they are not provided all the opportunities
afforded to them. This bill seeks to incorporate changes as
outlined in the Business, Professions and Economic
Development Committee (BPED Committee) background paper for
the recent Bureau Sunset Hearing.
2) California Private Postsecondary Education Act. The
state's program for regulation of private postsecondary and
vocational education institutions has historically been
plagued with problems. During the late 1980's, California
developed a reputation as the "diploma mill capital of the
world."
After numerous legislative attempts to remedy the laws and
structure governing regulation of private postsecondary
institutions, AB 48 (Portantino, Chapter 310, Statutes of
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2009) was enacted to establish the California Private
Postsecondary Education Act of 2009 (Act), which took
effect January 1, 2010. The Act provided the regulatory
framework for oversight of private postsecondary
educational institutions operating with a physical presence
in California.
The Act requires all unaccredited colleges in California to
be approved by the Bureau, and all nationally accredited
colleges to comply with numerous student protections. It
also establishes prohibitions on false advertising and
inappropriate recruiting. The Act requires disclosure of
critical information to students such as program outlines,
graduation and job placement rates, and license examination
information, and ensures colleges justify those figures.
The Act also guarantees students can complete their
educational objectives if their institution closes its
doors while providing the Bureau with enforcement powers
necessary to protect consumers.
In 2014, SB 1247 (Lieu, Chapter 840, Statutes of 2014)
amended the Act to require degree-granting institutions to
be accredited, prohibit an institution that participates in
federal veterans' aid funding from claiming an exemption
from the Act, and expanded the use of Student Tuition
Recovery Fund payments to cover economic loss.
This bill makes changes to the Act based upon information
from a Joint oversight hearing of the BPED Committee,
Senate Education, Assembly Committees on Higher Education
and Business, Professions and Consumer Protection. Staff
notes that the act is currently scheduled to sunset on
January 1, 2017. This bill makes no provisions for the
extension of the sunset date.
3) Joint Oversight Hearing. On March 28, 2016, the Business,
Professions and Economic Development Committee (BPED
Committee) convened a joint hearing that included the
specified committees in both houses. The background paper
for the hearing identified 18 different issues for
consideration at the hearing, including administrative,
budget, licensing, and exemption, enforcement, outreach and
accountability issues. Recommendations relevant to the
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provisions in this bill include the following:
a) Provide Bureau the discretionary authority to
extend the deadline for accreditation. Accreditation
is a baseline measure used to determine academic
quality for educational or professional institutions
and programs. During prior sunset reviews, concerns
were raised about the ongoing approval by the Bureau
for Private Postsecondary Education (Bureau) of
unaccredited institutions offering degrees as these
institutions are unlikely to be recognized by
accredited institutions for purpose of transfer, or by
many employers. In response to these concerns, SB
1247 amended the Act to require degree granting
institutions to be accredited by an agency recognized
by the United States Department of Education by July
1, 2020. Institutions are required to submit an
accreditation plan to obtain pre-accreditation and
full accreditation by specified dates.
Numerous unaccredited intuitions expressed concerns
with the 2020 timeframe citing that it is "too short,"
for the lengthy and rigorous accreditation process.
The Bureau attempted to establish regulations for
those schools close to achieving the stated goal but
needing a few more months. The limitations in the Act
prevented the Bureau from establishing the regulation.
This bill provides the Bureau the authority to give a
2-year extension on the timeline if certain evidence
is provided, including documentation from an
accrediting agency demonstrating the institution's
ability to achieve accreditation.
b) Establish a single point of contact for students
of private postsecondary education institutions. The
background paper notes that the Bureau has focused
significant efforts to provide outreach to schools,
including new workshops to assist with application
completion and web-based tools to inform institutions
how to be compliant with the Act and Bureau
regulations. The Bureau does not appear to focus
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similar efforts on student outreach to inform students
about the Bureau's work and available resources for
students.
During the closure of Corinthian Colleges Inc.,
institutions for example, thousands of California
students were faced with confusing choices, pressure
from private loan companies to begin paying off loans,
and the possibility that credits earned at these
schools would yield few meaningful educational
opportunities. In response to this issue, proposed
legislation AB 573 (Medina, 2015) which was ultimately
vetoed by the Governor, attempted to simplify and
streamline the process by creating an ongoing
dedicated single point of contact to coordinate
efforts of state and federal agencies to assist any
student harmed by a for-profit institution's closure.
During the closure, the Bureau for Private
Postsecondary Education (Bureau) dispatched staff to
provide students with information about Student
Tuition Recovery Fund (STRF) and how to access
transcripts. Of the approximately 4,000 Corinthian
(WyoTech, Everest) college students eligible for
repayment under STRF, 300 filed an application with
the Bureau. Outside of these efforts, it appears that
no other attempts were made to communicate or
follow-up with these students.
This bill establishes an Office of Student Assistance
and Relief to serve as a primary point of contact and
work with various state agencies to address the needs
of private postsecondary education students thereby
emphasizing the Bureau's responsibility to provide
support to students.
c) Require online institutions to obtain a surety
bond to protect against unlawful activities or
closure. There is no structure in California to
monitor the online offerings of out-of-state
institutions. The Bureau is only authorized to
regulate institutions that have a physical presence in
California. As such, California students enrolled in
online programs offered by institutions based in other
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states do not benefit from the oversight provided by
the Act, including access to the STRF.
In recognition of this regulatory gap for online
education programs, the United States Department of
Education issued federal regulations (75 FR 66831)
that among other things, required distance education
programs to have authorization in the student's state.
This specific regulation was vacated by a court ruling
based on a technicality. Institutions, however, are
required to comply with the laws and regulations of
the states in which they operate.
To address this challenge, a group of institutions,
states, and policy organizations developed the State
Authorization Reciprocity Agreement (SARA) whereby
institutions approved to operate in one participating
state will be deemed automatically to have met
approval requirements in other participating states.
The state has not chosen to participate in SARA as
concerns have been raised that the agreement would
undermine California's ability to regulate online
profit programs and provide adequate protection to
California students.
As an alternative to SARA, this bill requires
out-of-state institutions offering online programs to
California students to register with the Bureau and
file a surety bond to provide recourse for students
who have suffered economic loss as a result of a
school closure.
Several states require for-profit institutions to
maintain a surety bond. Surety bonds, which schools
maintain, will typically refund a student's tuition if
the school closes or if the school fails to uphold the
contract it signed with the student.
d) Reduce complaints backlog associated with
internal referrals resulting from compliance
inspections and authorize the Bureau for Private
Postsecondary Education (Bureau) to issue citations
for non-minor violations. In the last few years, a
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number of postsecondary educational corporations have
been cited by federal and state regulators for
engaging in various forms of fraudulent
misrepresentation. Often, these actions originate from
public complaints. Concerns have been raised
regarding the Bureau's growing complaint and
investigation backlog. The Bureau reports 1,045
pending complaints, taking on average one year to
resolve (372 days).
In order to reduce the complaints backlog associated
with internal referrals resulting from compliance
inspections, this bill authorizes the Bureau to issue
citations not to exceed $5,000 for non-minor
violations, which are those that have the potential to
cause student harm.
Additionally, in an attempt to respond to backlog
issues, this bill provides for an Enforcement Monitor
to evaluate the Bureau's handling and processing of
student complaints and timely application of issued
sanctions. The Enforcement Monitor is required to
submit several written reports specifying its findings
to the Department of Consumer Affairs and the
Legislature.
The Enforcement Monitor is appointed by and reports to
the Director of Consumer Affairs which is the agency
that currently oversees the Bureau. The committee may
want to consider whether this structure creates an
opportunity for an objective review of the Bureau.
e) Remove the requirements that the Bureau establish
regulations implementing the Student Tuition Recovery
Fund (STRF) reforms. STRF reimburses "economic loss"
for California residents enrolled in eligible
institutions at the time of closure. Economic loss
includes a student's tuition, cost of required
equipment and materials, and interest on student loan
debt used to pay those costs. It does not include
supplies, living expenses, or consequential damages
such as emotional distress. Although the Act requires
the Bureau to establish regulations providing relief
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for a student whose charges were paid by a third
party, (such as an employer or a financial aid
program) the Bureau has not yet adopted those
regulations.
As a result, this bill relieves the Bureau of any
requirement to establish regulations related to STRF.
This will allow the Bureau, without further delay, to
begin administering these provisions of the program as
provided by current law.
f) Clarify the definition of licensure and enhance
disclosures to students. The Act provides that if an
institution offers an educational program in a
profession, occupation, trade, or career field that
requires licensure in California, the institution must
have educational program approval from the appropriate
state licensing agency for any student who completes
that program to sit for any required licensure exam.
The definition of "licensure" under the Act does not
specify certification or registration programs that
may also be required for some professions.
This bill expands licensure to include required
certification or registration that a person must hold
to engage in certain professions and requires
institutions offering an educational program in
certain professions that require a certificate or
registration to have approval from the appropriate
agency.
4) Corinthian Colleges, Incorporated (CCI) students. The
Student Tuition Recovery Fund (STRF) is supported by fees
collected from each student at regulated schools. STRF
payments are available to California Wyotech and Everest
students who have suffered economic losses. However, as a
Western Association of Schools and Colleges (WASC)
accredited school, Heald Colleges were exempt from Bureau
for Private Postsecondary Education (Bureau) oversight, and
as such STRF payments are not available to Heald students
nor are they available to students enrolled in out-of-state
online programs.
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This bill would provide these additional sources of relief to
students who were enrolled in an online program offered by an
out-of-state campus of a CCI institution, if the student was
enrolled or withdrew from enrollment within 120 days of the date
of the Corinthian closures. The net effect is that Heald
students and certain CCI students enrolled in out-of-state
online programs would become eligible for STRF payments. Prior
proposed legislation, AB 573 (Medina, 2015) provided similar
provisions but was vetoed by the Governor.
5) Related legislation.
SB 1281 (Block) requires law schools that are not ABA approved
to publicly disclose on its website, with a link on its home
page under "Admissions" information about the institution,
including, among other items, outcomes for graduates and bar
passage data. Requires the information to be complete, accurate
and not misleading. SB 1281 is currently pending in the Senate
Committee on Judiciary.
AB 1916 (Irwin) requires a private postsecondary institution to
file a surety bond with the Bureau before January 1, 2019, in an
amount no less than the total amount of tuition and fees charged
by the institution for the immediately preceding academic year,
divided by 4. AB 1916 is currently pending in the Assembly
Committee on Business and Professions.
AB 1996 (Gordon) exempts a nonprofit institution that is
accredited by WASC, that does not award degrees or diplomas, and
is paid from state or federal student financial aid programs for
fewer than 20 percent of its students who receive vocational
training from the Act. AB 1996 is currently pending in the
Assembly floor.
AB 2581 (Medina) provides financial and other assistance to
students of Heald, Everest, and WyoTech campuses in California,
which were owned by Corinthian Colleges, Incorporated and closed
unlawfully on April 27, 2015. AB 2581 is currently pending in
the Assembly floor.
AB 1835 (Holden) exempts institutions that grant doctoral
degrees in psychoanalysis from the provisions of the Act
requiring unaccredited degree granting institutions to be
accredited if all of the institution's students hold master's or
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doctoral degrees before enrollment in the institution. AB 1835
is currently pending in the Assembly Committee on Business and
Professions.
AB 2652 (Eggman) requires a private entity with no physical
presence in this state, that would be subject to the
requirements of the Act if the entity was located in this state,
to register with the Bureau for Private Postsecondary Education
(Bureau) and participate in Student Tuition Recovery Fund
(STRF). AB 2652 is currently pending in the Assembly Committee
on Higher Education.
6) Prior legislation.
SB 81 (Committee on Budget and Fiscal Review, Chapter 22,
Statutes of 2015) included numerous statutory changes
intended to implement the Budget Act of 2015 related to
postsecondary education. Among those changes is a
provision that allows the Bureau to enter into a contract
with any independent institution of higher education, as
defined, to review and act on student complaints against
the institution.
SB 634 (Block, 2015) would have authorized the Department
of Consumer Affairs to enter into a multistate regional
reciprocity agreement on behalf of this state for
interstate offering of distance education courses and
oversight of postsecondary institutions in states which
they maintain no physical presence. SB 634 was held at the
request of the author in the Senate Committee on Education.
AB 573 (Medina, 2015) would have extended Cal Grant
eligibility for former students of Heald College and create
a grant program within the Attorney General's office to
fund nonprofit organizations providing free legal services
to former students of Corinthian Colleges. AB 573 was
vetoed by Governor Brown whose veto message read in part:
I am sympathetic to the many students who were
enrolled at Corinthian Colleges when the company
abruptly shuttered its doors earlier this year. The
USDE has taken the matter of loan discharge seriously.
In recent months, it has greatly eased the burden of
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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. For these reasons, I am returning this
bill without my signature.
AB 2099 (Frazier, Chapter 676, Statutes of 2014) stipulated
new Title 38 veterans funding eligibility standards for
postsecondary institutions in California. The bill also
provided that, in order for a postsecondary institution to
be determined eligible to accept Title 38 monies,
determined by California State Approving Agency for
Veterans Education, the postsecondary institution, whether
it offers degrees or not, must either be a public school, a
nonprofit school, approved by the Bureau for Private
Postsecondary Education (Bureau) or be regionally
accredited.
SB 1247 (Lieu, Chapter 840, Statutes of 2014) extended the
sunset date for the Bureau and the Act until January 1,
2017 and made statutory changes to the protections provided
to students and the requirements placed on private
postsecondary educational institutions, including
prohibiting an institution from claiming an exemption from
the Act if the institution is approved to participate in
Title 38 programs.
AB 2296 (Block, Chapter 585, Statutes of 2012) expanded the
disclosure requirements for institutions under the Bureau
related to unaccredited programs; expanded disclosure
requirements for all regulated institutions; established
more stringent criteria for determining gainful employment
and calculating job placement rates; and increased
institutional documentation and reporting requirements
around completion rates, job placement/license exam passage
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rates, and salary/wage information for graduates.
SB 498 (Liu, 2011) would have abolished the Bureau and
transferred the Bureau's powers and duties under the Act to
the California Postsecondary Education Commission. SB 498
was held in the Senate Committee on Business, Professions
and Economic Development.
AB 611 (Gordon, Chapter 103, Statutes of 2011) set forth
certain disclosure requirements pertaining to accreditation
status, licensure, and related limitations for unaccredited
doctoral programs.
AB 773 (Block, 2011) would have allowed the Bureau to
revoke an exemption of an institution which was exempt
based on accreditation, but still required to comply with
the Student Tuition Recovery Fund requirements, if it
determined that the institution had not in fact complied
with those requirements. AB 773 was never heard in a
policy committee.)
AB 1013 (Assembly Committee on Higher Education, Chapter
167, Statutes of 2011) made clarifying changes to the Act
and related Bureau oversight.
AB 1889 (Portantino, 2010) contained provisions regarding
doctoral degrees offered by unaccredited institutions, the
calculation of placement rates, and Bureau employment
requirements. AB 1889 was vetoed by Governor Brown whose
veto message read in part:
This bill would require an Executive Branch agency to
follow specific Staffing requirements prescribed by
the Legislature. This is both an inappropriate and
unacceptable action to micro-manage and burden the
implementation of regulatory policy.
AB 48 (Portantino, Chapter 310, Statutes of 2009)
established the California Private Postsecondary Education
Act of 2009.
SB 1568 (Dunn, Chapter 534, Statutes of 2006) transferred
regulation and oversight of unaccredited law schools and
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correspondence law schools from the California Bureau for
Private Postsecondary and Vocational Education to the State
Bar Committee of Bar Examiners. SB 1568 also required
correspondence law schools to be required to disclose their
faculty-to-student ratio and their Baby Bar and general bar
exam passage rates to prospective students in the same
manner required of unaccredited schools.
SB 1544 (Figueroa, Chapter 740, Statutes of 2004) extended
the operation of the former Bureau for Private
Postsecondary Education to 2007 and directed the Department
of Consumer Affairs to appoint an Education Operations and
Administrative Monitor to assess the administrative
operations and enforcement processes and procedures of that
Bureau with the primary goal of improving the Bureau's
overall efficiency and compliance with state laws.
SUPPORT
Center for Public Interest Law
Children's Advocacy Institute
Consumer Federation of California
East Bay Community Law Center
Housing and Economic Rights Advocates
Public Advocates
Veterans Legal Clinic
OPPOSITION
California Association of Private Postsecondary Schools.
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