BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: SB 1149
AUTHOR: Galgiani
INTRODUCED: February 20, 2014
FISCAL COMM: Yes HEARING DATE: April 2, 2014
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Cal Grant Renewal Awards.
SUMMARY
This bill requires that an institution that is ineligible for
initial Cal Grant awards because it fails to meet cohort
default rate or graduation rate requirements continue to be
eligible for a full renewal award for students who were
enrolled at the institution in the academic year immediately
prior to the institution's loss of eligibility.
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.
For 2012-13, and every academic year thereafter,
colleges must maintain three year cohort default rates
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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, 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 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) Deletes the July 1, 2013, sunset on the ability of an
ineligible institution to receive renewal Cal Grant awards
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at the institution.
2) Requires that an institution that is ineligible for
initial Cal Grant awards at the institution as the result
of its three-year cohort default rate or its graduation
rate continue to be eligible for full renewal Cal Grant
awards for recipients enrolled at the institution during
the academic year prior to the academic year for which the
institution is ineligible.
3) Deletes the conditions established on a renewal award for
institutions that failed to meet cohort default or
graduation rate requirements. More specifically it:
a) Deletes the requirement that the
renewal Cal Grant award be reduced by 20 percent.
b) Deletes the prohibition on the
reduction's impact on Cal Grant access awards.
STAFF COMMENTS
1) What is the problem ? According to the author, current law
goes beyond punishing institutions and has a negative
impact on the individual students currently in attendance.
A student may spend their first year(s) at an institution
with the assistance that Cal Grant provides, and then be
left with few options when it comes to finishing their
degree requirements. By contrast, incoming students will
be notified that they cannot receive Cal grants if they
decide to attend an ineligible institution, giving these
students the ability to exercise other options.
2) Absent this change ? Current law permitting a phase out of
the renewal award for ineligible institutions sunset on
July 1, 2013. Currently, an institution that fails to
meet the cohort default or graduation requirements is
ineligible to receive renewal Cal grant awards for
students enrolled at the institution. An institution that
improves its default rate or graduation rate would be able
to receive initial and renewal Cal Grants for those years
in which it meets the requirements. The CSAC certifies
both measures every year by October 1 for the following
academic year. Current law provides that an ineligible
institution regains its eligibility for the academic year
in which it satisfies the requirements. For example, for
an institution that failed the standards for the 2012-13
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academic year but meets the standards for the 2013-14
academic year, students would be able to use their Cal
Grants at the institution in the 2013-14 academic year.
3) The effect of this bill . If enacted, this bill would
result in public funds being provided to students for
payment of tuition at an institution at which greater than
40 percent of the students access students loans in order
to attend, and that:
a) Has greater than 15.5 percent of its students
over the last three years in default on their student
loans.
b) Graduates less than 30 percent of its enrolled
students.
As drafted, the bill would allow for ongoing Cal grant
eligibility for those students until the student's full
Cal Grant eligibility was used, with no consequence to the
institution. Newly enrolled students would be unable to
use Cal Grants at the institution. However, for an
institution that hovers slightly above and below the
eligibility requirements, those cohorts of students who
begin during a period of eligibility would continue to be
able to receive renewal awards.
4) 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 leaves 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.
5) Effect on institutions ? According to an LAO report An
Analysis of New Cal Grant Eligibility Rules, 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), CSAC revised the list of ineligible
institutions for 2012-13 to include 154 schools,
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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.
6) 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.
Since the enactment of the relevant budget provisions, AB
2296 (Block, Chapter 585, Statutes of 2012) was enacted to
require, among other things, that the School Performance
Fact Sheet and the enrollment agreement that are required
to be provided by an institution to a prospective student,
include the institution's most recent three-year cohort
default rate and the percentage of currently enrolled
students receiving federal student loans. Implementing
regulations are expected to be promulgated by July 2014.
In addition, the award amount for attendance at for-profit
institutions was reduced to $4,000 annually in the 2012
Budget Act.
The committee may wish to consider:
a) Do students receive enough information to make
informed decisions about whether or not to enroll in
a school that may not be able to guarantee Cal Grant
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eligibility for the entire length of the program?
b) Should the state continue to provide public
funds to a school at which greater than 15.5 percent
of its students are in default on their student
loans, and at the same time, has 40% of its students
accessing federal loans to pay for the education they
are receiving?
c) Should the state continue to provide public
funds to a school that fails to graduate 70% of its
students?
SUPPORT
American Federation of State, County and Municipal Employees
(AFSCME) AFL-CIO
OPPOSITION
None received.