BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: SB 1069
AUTHOR: Torres
AMENDED: March 26, 2014
FISCAL COMM: Yes HEARING DATE: April 24, 2014
URGENCY: No CONSULTANT:Kathleen Chavira
NOTE : This bill has been referred to the Committees on
Education and Business, Professions, and Economic Development.
A "do pass" motion should include referral to the Committee
on Business, Professions, and Economic Development.
SUBJECT : Student Tuition Recovery Fund (STRF).
SUMMARY
This bill requires the Bureau for Private Postsecondary
Education (BPPE) to adopt regulations to make students who
utilize a Cal Grant, a Pell Grant, or both, eligible to apply
for payment from the Student Tuition Recovery Fund, contingent
upon the amendment or continuation of the California Private
Postsecondary Education Act of 2009.
BACKGROUND
Current law, until January 1, 2015, establishes the California
Private Postsecondary Education Act (Act) of 2009, which
provides for the approval, regulation, and enforcement of
private postsecondary educational institutions by the Bureau
for Private Postsecondary Education (BBPE) within the
Department of Consumer Affairs (DCA). (Education Code �
94800-94950)
Among other things, the Act requires the BPPE to adopt
regulations and procedures governing the administration and
maintenance of the Student Tuition Recovery Fund (STRF),
including requirements relating to assessments on students and
student claims against the STRF. The STRF exists to relieve or
mitigate economic losses suffered by a student in an
educational program at a qualifying institution if the student
was a California resident (or was enrolled in a residency
program).
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Current law limits the amount in the STRF to no more than
twenty-five million dollars ($25,000,000) at any time.
(Education Code � 94923)
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
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.
(Education Code � 69430-69433.9)
ANALYSIS
This bill :
1) Requires the Bureau for Private Postsecondary Education
to adopt regulations regarding the administration and
maintenance of the Student Tuition Recovery Fund to make
students who utilize a Cal Grant, Pell Grant, or both,
eligible to apply for payment from the fund.
2) Makes its provisions operative only if the California
Private Postsecondary Education Act of 2009 is amended or
repealed to delay or eliminate the January 1, 2015 repeal
date of the Act.
STAFF COMMENTS
1) Need for the bill . This bill is prompted by the January
2014 closure of Career Colleges of America due to
financial problems which resulted in its loss of
accreditation. Unable to negotiate a "teach-out" plan
prior to closure, credits earned by enrolled students
were not transferred to another institution, forcing
students who paid substantial amounts for their programs
to start over.
While some students do have recourse to recoup economic
loss suffered as the result of a school closure by
applying for reimbursement from the STRF fund
administered by the BPPE, current eligibility regulations
do not allow students to seek relief for costs paid by
third parties, including costs covered through Pell and
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Cal Grants.
2) Current status of the STRF . As noted in the background
of this analysis, the STRF balance is statutorily capped
at $25 million. A recent report on the Bureau for
Private Postsecondary Education by the Bureau of State
Audits, indicates a balance of $33.6 million in the STRF.
3) What does the STRF reimburse ? The STRF exists to
mitigate economic losses suffered by a student at an
institution regulated by the BPPE. Regulations define
"economic loss" as the sum of the student's tuition, cost
of equipment and materials required for the educational
program, and interest on any student loan used to pay for
such charges, collection costs and penalties.
4) Current regulatory language . As required by the Act, the
BPPE has adopted regulations regarding the administration
of the STRF. Currently, these regulations prohibit a
student whose total charges were paid by a third-party
payer to be eligible to make a claim against the STRF
fund.
As a result, a student who used a portion of their Cal
Grant eligibility at a now ineligible institution is not
able to seek repayment from the STRF. Cal Grants are
limited to the equivalent of four full-time academic
award years. The institution would no longer be eligible
to receive future Cal Grant payments, but no mechanism
currently exists for the student, nor the State, to
recoup the award payments previously paid to the
institution.
5) Pending regulatory language . According to the BPPE, the
agency has recently proposed regulations to enable a
student whose costs were paid by a third party (a person,
business, or agency who pays any portion of an
institutional charge on a student's behalf) to be
eligible to apply for reimbursement from the STRF. These
regulations are currently being reviewed and prepared for
public comment. While the regulations appear to begin to
address the issue this bill intends to address, the
proposed regulations make no provision for how, or to
whom the funds would be paid.
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6) Cal Grant reimbursements . As currently drafted, it is
unclear who would receive the funds if a Cal Grant
recipient successfully claimed reimbursement from the
STRF. Would a student receive the funds directly? As
the funds were initially paid by the state, and not the
student, would such action be considered a gift of public
funds? Would the BPPE retain the funds on a student's
behalf and pay them directly to an alternate institution
of the student's choice? Only institutions that meet
specified criteria, as determined by the CSAC, are
eligible to participate in the Cal Grant program. Should
an agency other than the CSAC be authorized to
re-distribute Cal Grant funds?
Current regulations authorize the BPPE to pay a student's
claim directly to the lender, holder, guarantee agency or
the US Department of Education, as appropriate. Staff
recommends the bill be amended to similarly require the
payment of a student's claim directly to the California
Student Aid Commission, if the STRF claimant's
educational costs were paid with a Cal Grant.
7) Alternate legislation ? The provisions of this bill are
contingent upon legislation that delays or eliminates the
repeal of the California Private Postsecondary Education
Act of 2009. The Business, Professions and Economic
Development Committee is currently undertaking a sunset
review of the Act and will consider a number of changes
to the Act, to be contained in SB 1247 (Lieu). SB 1247
is currently scheduled to be heard by this Committee on
April 30, 2014. Should the provisions of this bill be
incorporated into the more comprehensive reform of the
Act anticipated in SB 1247?
SUPPORT
Legal Aid Foundation of Los Angeles
OPPOSITION
None received.