BILL ANALYSIS �
AB 1538
Page 1
Date of Hearing: April 9, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1538 (Eggman) - As Amended: March 26, 2014
Policy Committee: Higher
EducationVote:10-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides alternative criteria for an otherwise
ineligible postsecondary education institution to maintain
eligibility for participation in the Cal Grant program.
Specifically, this bill:
1)Provides that an institution that is ineligible for initial
and renewal Cal Grant awards under existing cohort default
and/or graduation rate requirements shall maintain eligibility
if the following conditions are met:
a) At least two-thirds of the student body receive federal
Pell Grants, as certified by the California Student Aid
Commission (CSAC) by November 1 of the prior academic year.
b) If the institution is ineligible under the cohort
default rate requirements, the institution's average
three-year cohort default rate over the most recent three
years, as certified by the Commission, meets the
requirements of existing law (under 15.5%);
c) If the institution is ineligible under graduation rate
requirements, the institution's average rate for the most
recent three years, as certified by the Commission, meets
the requirements of existing law (over 30%).
2)Requires CSAC to adopt any rules and regulations necessary to
implement this section by March 1, 2015, and to review and
make recommendations regarding additional criteria that would
be appropriately considered in determining institutional
eligibility, including, but not limited to, cohort size,
AB 1538
Page 2
alternative debt measures, and additional student outcome and
institutional quality metrics by January 1, 2016.
FISCAL EFFECT
1)Additional Cal Grant costs are unknown, and would depend on
the number and amounts of Cal Grant awards made to those
students attending an institution made eligible under the
alternative criteria who would not have otherwise attended an
institution already eligible under the existing criteria.
However, if only 20 additional students received the maximum
award at a WASC-accredited for-profit college ($8,056 for
2014-15), GF costs would be $161,000.
2)Minor additional GF administrative costs for CSAC to adopt any
regulations, implement to alternative eligibility criteria,
and review and consider other eligibility criteria.
COMMENTS
1)Background . As part of the 2011-12 Budget Act, the state
established requirements linking a postsecondary education
institution's participation in the Cal Grant Program to the
percentage of students borrowing federal loans and the number
of students defaulting on those federal loans within three
years of entering repayment. In the 2012-13 Budget Act, the
requirements regarding loan defaults were tightened and a
graduation rate requirement was established. For 2014-15, 122
institutions (primarily for-profit colleges) are ineligible to
participate. Cal Grant students attending or seeking to
attend ineligible institutions are required to transfer to an
eligible institution in order to receive their Cal Grant
award.
According to information provided by the Legislative Analyst's
Office (LAO), about 3,200 students offered new Cal Grant
awards in 2011-12 were planning to attend schools deemed
ineligible. About 550 of these students instead attended
eligible schools, and another 450 requested leaves of absence
to preserve their award for later use. The remaining 2,200
students did not claim their Cal Grants and information
concerning college attendance is unavailable.
2)Purpose . According to the author, Humphreys College, a Western
AB 1538
Page 3
Association of Schools and Colleges (WASC) accredited
nonprofit institution, was ineligible for Cal Grants for the
2013-14 academic school year. The institution had a cohort
default rate of 15.6% (just above the 15.5% threshold for Cal
Grant participation). The institution's graduation rate
exceeded 90%. (Humphries has since regained eligibility for
2014-15.)
The author contends that the current requirements, which do
not take into account disadvantaged student populations,
unfairly target institutions with volatile student populations
regardless of their academic practices. This bill is intended
to narrowly allow institutions that serve large populations of
students with disadvantaged backgrounds to qualify for Cal
Grants if their three-year average cohort default rate or
graduation rate meet the state's eligibility requirements.
3)LAO Report . In January 2013, the LAO reported to the
Legislature on CSAC implementation of the Cal Grant
requirements and provided recommendations for refining the
standards. According to the LAO, in the absence of broad
agreement on direct, quantifiable measures,. The LAO noted
that, while default rates and graduation rates provide rough
proximities of how well an institution is serving students,
these current standards have notable drawbacks, such as
failing to take into account institutions serving
disadvantaged students.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081