BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: AB 640
AUTHOR: Hall
AMENDED: June 19, 2014
FISCAL COMM: Yes HEARING DATE: June 25, 2014
URGENCY: No CONSULTANT: Kathleen
Chavira
NOTE : This bill was recently amended to delete its
original contents. In its current form, the bill has not
been heard by any policy or fiscal committee in the
Assembly.
SUBJECT : Cal Grant Renewal Awards.
SUMMARY
This bill requires the California Student Aid Commission
(CSAC) to implement an appeal process for schools that fail
to meet the requirements to be a qualifying Cal Grant
institution because they do not meet cohort default or
graduation rate requirements, and specifically authorizes
the CSAC to consider cohort size and the likelihood of the
institution regaining eligibility in the following academic
year, in assessing whether an appeal should be granted.
BACKGROUND
Current law authorizes the Cal Grant program, administered
by the California Student Aid Commission (CSAC), to provide
grants to financially needy students to attend college.
The Cal Grant programs include both the entitlement and the
competitive Cal Grant awards. The program consists of the
Cal Grant A, Cal Grant B, and Cal Grant C programs, and
eligibility is based upon financial need, grade point
average, California residency, and other eligibility
criteria, as specified in Education Code � 69433.9.
(Education Code � 69430-69433.9)
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The 2012 and 2013 Budget Acts established new requirements
for institutional participation in the Cal Grant program
(SB 70, Chapter 7, Statutes of 2011, and SB 1016, Chapter
38, Statutes of 2012) by providing that:
1 For the 2011-12 academic year, an otherwise
qualifying institution for the Cal Grant program must
maintain a three-year cohort default rate equal to or
below 24.6 percent to be eligible for Cal Grant awards
at the institution.
2 For 2012-13, and every academic year thereafter,
colleges must maintain three year cohort default rates
below 15.5 percent in order to be eligible for initial
and renewal Cal Grant awards at the institution.
3 For 2012-13 and every academic year thereafter, an
institution must maintain a graduation rate above 30
percent to be eligible for Cal Grant awards at the
institution.
4 There is an exception to these requirements for an
institution with a three- year cohort default rate of
below 10 percent and a graduation rate above 20
percent through the 2016-17 academic year.
In addition, the budget required that, until July 1, 2013,
an institution that is ineligible for initial or renewal
Cal Grant awards because it fails to meet cohort default
rate or graduation rate requirements is eligible for a Cal
Grant award for 20 percent less of the fee portion of the
maximum Cal Grant A and B awards for those students who
were enrolled at the institution in the academic year prior
to the institution's ineligibility. It also prohibited the
reductions from impacting the access costs covered by the
Cal Grant B award.
Finally, the budget required that the California Student
Aid Commission (CSAC) notify initial and renewal Cal Grant
recipients of these changes and the impact to their awards,
as appropriate. In addition, the CSAC is required to
provide affected Cal Grant recipients with a complete list
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of all California postsecondary educational institutions at
which the student would be eligible to receive an unreduced
Cal Grant Award.
Current law provides that the cohort default rate and
graduation requirements do not apply to institutions with
40 percent or less of its students borrowing federal
student loans.
Current law requires the Legislative Analyst to submit a
report on the implementation of the changes to Cal Grant
eligibility implemented by the Budget Act of 2012 by
January 1, 2013. (EC � 69432.7)
ANALYSIS
This bill :
1) Requires the CSAC to establish an appeal process for
an otherwise qualifying institution that fails to
satisfy the 15.5 percent three-year cohort default
rate and 30 percent graduation rate requirements.
2) Authorizes the CSAC to consider cohort size and the
likelihood of an otherwise qualifying institution
regaining eligibility in the academic year next
following the institution's loss of eligibility in its
consideration of an appeal.
3) Repeals obsolete provisions extending a reduced award
amount in the first two years of the implementation of
the new cohort default and graduation rate
requirements.
4) Makes other technical changes.
STAFF COMMENTS
1) Need for the bill . Current law requires that an
otherwise qualifying institution is ineligible for an
initial or renewal Cal Grant award at the institution
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if the institution does not meet cohort default and
graduation rate requirements. According to the
author, current law has had the unintended consequence
of penalizing programs that primarily enroll
non-traditional or transfer students by basing Cal
Grant Program participation eligibility solely on the
graduation rate of first time, full-time students.
Specialized training in the health professions is
often provided by smaller, specialized, non-profit
colleges and universities, such as the Charles R. Drew
University school of Medicine and Science. However,
these programs attract students that are entering the
health professions as a second career, or they attract
transfer students that already have college experience
and, therefore, enroll few first time, full time
undergraduate students. The risk to Cal Grant
eligibility introduced by the variations inherent in
small sample sizes can lead institutions to stop
enrolling first time full time students who would
otherwise be eligible to enroll, or to completely
eliminate programs that may attract these students.
2) Effect on institutions ? According to an LAO report An
Analysis of New Cal Grant Eligibility Rules, the CSAC
identified 76 schools as ineligible for 2011-12, 42 of
which would remain ineligible for 2012-13. Following
enactment of the stricter cohort default rate standard
(15.5 percent), the CSAC revised the list of
ineligible institutions for 2012-13 to include 154
schools, comprising 35 percent of all institutions,
and more than 80 percent of for-profit schools,
participating in the Cal Grant programs in recent
years. The rule changes had limited impact on the
private nonprofit sector and no impact on the public
sector. At the beginning of the 2013-14 academic
year, there were 435 institutions of higher education
seeking to participate in the Cal Grant program. Of
the 435 institutions, the commission determined that
304 institutions are eligible and 131 institutions are
ineligible to participate in the Cal Grant program.
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3) Effect on students ? According to the LAO, of the 1700
or so renewal Cal Grant students at ineligible schools
in 2011-2012, about 60 percent remained at their
schools and received a reduced award, 9 percent
transferred to eligible colleges, and another 4
percent took a leave of absence. The LAO reports that
no further information was available for more than
one-quarter of the renewal recipients at ineligible
schools. According to the CSAC, in 2012-13, 63
percent of students remained at the ineligible school
and received a reduced award, 11 percent took a leave
of absence, 1 percent transferred to eligible
colleges, and 25 percent provided no new information.
4) Intent of the budget actions . The adoption of the
graduation and cohort default rate requirements in the
2012 Budget Act were intended to provide some measure
of the effective use of limited Cal Grant dollars by
participating institutions. These provisions allowed
an institution that did not meet these requirements to
be eligible for reduced renewal grants for its
students until July 2013. Arguably, the intent was to
ensure that students in attendance at an ineligible
school at the time that the new requirements were
implemented would face limited disruption to their
education, while still creating a consequence for the
institution. In addition, the extension of these
"allowances" for two years was intended to provide an
opportunity to transition to a policy which would
ultimately no longer provide renewal grants to
students attending ineligible institutions.
This bill repeals the obsolete provisions allowing for
the extension of a reduced renewal award during this
transition period.
5) Appeals for unusual circumstances ? While some
institutions deemed ineligible to participate in the
Cal Grant program have appealed to the California
Student Aid Commission (CSAC), there is currently no
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statutory or regulatory guidance provided regarding
such a process. Since the 2012-13 academic year,
approximately nine institutions have appealed based
upon the cohort default rate/graduation rate
disqualification. Only 2 or 3 have been successful,
primarily on the basis of calculation errors at the
federal level. In its January 2013 report on the CSAC
implementation of the Cal Grant requirements, the LAO
opined that while default and graduation rates provide
rough proximities of how well an institution is
serving students, these standards do have drawbacks as
they do not measure, for example, whether the student
population being served is disadvantaged.
This bill, rather than create broad ongoing
eligibility for institutions that fail to meet cohort
default or graduation rate requirements, or
statutorily anticipating and prescribing every
instance of exception that might occur, requires the
CSAC to implement an appeal process for schools that
fail to meet the these requirements and authorizes
consideration of cohort size and the likelihood of the
institution regaining eligibility in the following
academic year, in assessing whether an appeal should
be granted.
It is the intent of this bill to recognize that
institutions with smaller student populations may be
more susceptible to volatility in their cohort default
and graduation rates, with the result that minor
fluctuations in student performance have great effects
on the stability of their Cal Grant eligibility. Staff
recommends the bill be amended to declare the
Legislature's intent that the CSAC identify the
specific cohort size, or range of sizes which
constitute a small cohort for the purposes of the
appeals process.
6) Similar legislation .
SB 1149 (Galgiani) was heard by this Committee and
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amended with language that was identical to the
contents of this bill. SB 1149 was heard and passed
by this Committee, as amended in April 2014 by a vote
of 9-0, but was subsequently held in the Senate
Appropriations Committee.
AB 1590 (Wieckowski) changes the requirements for
being a "qualifying institution" to participate in
the Cal Grant Program by (1) changing the date by
which the California Student Aid Commission (CSAC)
must certify the latest official three year cohort
default rates and graduation rates from October 1 to
November 1, and (2) revising the federal loan program
participation requirements for private and independent
institutions. AB 1590 was heard and passed by
this Committee in June 2014 by a vote of 7-0, and is
currently awaiting action in the Senate Appropriations
Committee.
AB 1538 (Eggman) authorized continued eligibility for
Cal Grants for institutions with an average three year
cohort default rate and graduation rate that met the
current requirements, if the institution had a
specified level of low-income students enrolled. AB
1538 was held in the Assembly Appropriations
Committee.
SUPPORT
Charles R. Drew University of Medicine and Science
OPPOSITION
None received.