BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: AB 1590
AUTHOR: Wieckowski
AMENDED: March 24, 2014
FISCAL COMM: Yes HEARING DATE: June 4, 2014
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Cal Grant Program.
SUMMARY
This bill changes the requirements for being a "qualifying
institution" institutional eligibility 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) revises the federal loan
program participation requirements for private and independent
institutions.
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)
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:
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.
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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.
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.
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 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 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 Office (LAO) 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
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This bill :
1) Makes changes to the requirements which must be met in
order to be a "qualifying institution" for purposes of the
Cal Grant program.
a) Replaces the requirement that a
California private or independent postsecondary
educational institution that participates in the Pell
Grant Program also participate in the Perkins Loan
Program with the Stafford Loan Program.
b) Requires that the CSAC certify the
institution's official three-year cohort default rate
and graduation rate.
c) Changes the date by which the CSAC must
certify an institution's latest official three-year
cohort default rate and graduation rate, from October
1 to November 1.
d) Consolidates the definition of
graduation rate within a single subdivision.
2) Makes other technical and conforming changes.
3) Delete's obsolete LAO reporting requirements.
STAFF COMMENTS
1) History . In response to concerns about institutional
effectiveness, and budget deficits, the Budget Acts of 2011
and 2012 implemented new measures of institutional quality
for purposes of participation in the Cal Grant program.
These included the three-year cohort default rate (CDR),
defined as the percentage of student borrowers who default
on their federal student loans within the first three years
of graduation, and the graduation rate. Initially, the CDR
had to be below 24.6 percent, and ultimately had to be
below 15.5 percent for participation in the Cal Grant
program. Graduation rates generally had to be above 30
percent.
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According to the LAO, 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.
2) Related Legislative Analyst Office (LAO) report . In
January 2013, the LAO issued its report, An Analysis of New
Cal Grant Eligibility Rules, in compliance with the
statutory reporting requirements on CSAC implementation of
the new Cal Grant requirements. Among its
recommendations, LAO suggested changes to the process for
CSAC certification of default rate and graduation data.
Consistent with these recommendations, this bill moves the
certification date from October 1 to November 1 to coincide
with U.S. Department of Education (USDE) schedule for
posting graduation rates to the Integrated Postsecondary
Education Management System (IPEDS), and requires CSAC to
use the most recently available graduation rate data
published by the USDE. These changes will ensure that the
most current information is used to determine institutional
Cal Grant participation.
3) Federal loan program references . Existing law requires
private Cal Grant qualifying institutions to participate in
at least two of three specified federal campus-based
student aid programs (Federal Work-Study, Perkins Loan
Program, or Supplemental Educational Opportunity Grant
Program). This bill removes the Perkins Loan Program and
replaces it with the Stafford Loan (Direct Loan) Program.
According to the author, the Perkins Loan Program is
limited to those schools who already participate, and no
new institutions may enroll. The federally backed Stafford
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Loan Program, however, is offered at more institutions and
available to more students. In 2012-13, nearly 500
California institutions participated in the Stafford Loan
Programs, while only 121 California institutions
participated in the Perkins Loan Programs.
4) Conflicting legislation . Legislative Counsel has
identified a potential conflict between this bill and the
provisions of SB 1149 (Galgiani), which was heard and
passed by this committee by a vote of 7-0 on April 19,
2014, but was subsequently held under submission in the
Senate Appropriations Committee.
SUPPORT
None received.
OPPOSITION
None received.