BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 573


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          Date of Hearing:  May 6, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          573 (Medina) - As Amended May 4, 2015


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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill provides financial and other assistance to students  
          impacted by recent closing of all Heald, Everest, and Wyotech  
          campuses in California, which were owned by Corinthian Colleges,  








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          Inc. (CCI). Specifically, this bill:


          1)Declares legislative intent that the California Community  
            Colleges (CCC) provide matriculation services, including  
            assessment, counseling, and academic planning to students  
            enrolled at these schools as of the closure date of April 24,  
            2015 or for a California student enrolled in an online program  
            at an out-of-state campus of a CCI institution.


          2)Provides that students enrolled at a CCI campus and unable to  
            complete their educational program due to the closure are  
            exempt from the four-year limitation on receipt of a Cal  
            Grant.


          3)Makes students enrolled in a private postsecondary educational  
            institution in California that closes, and students who were  
            enrolled and withdrew within 120 days prior to the closure  
            date, eligible for a CCC Board of Governors (BOG) fee waiver.


          4)Provides that students enrolled at a Heald College campus or a  
            California student enrolled in an online program of an  
            out-of-state campus of a CCI institution at the time of  
            closure or who were enrolled and withdrew within 120 days of  
            the closure (or a greater period if determined by the Bureau  
            for Private Postsecondary Education (BPPE)) are eligible for  
            recovery through the Student Tuition Recovery Fund (STRF).  
            These students become eligible despite not having paid any  
            STRF assessment. (Everest and Wyotech students are already  
            eligible for STRF payments because these schools are under  
            BPPE oversight.)


          5)Increases the maximum allowable fund balance in the STRF from  
            $25 million to $50 million, and requires the BPPE, if it stops  
            collecting STRF assessments because the fund has approached  








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            the new maximum balance, to resume collecting assessments when  
            the fund balance falls below $45 million (instead of $20  
            million currently).


          6)Requires the BPPE to coordinate a task force, with  
            representatives of the CCC Chancellor's Office, the California  
            Student Aid Commission (CSAC), the Department of Justice, the  
            Department of Veterans Affairs, and legal aid organizations,  
            to ensure that the impacted students receive accurate and  
            consistent information regarding the school closure process  
            and their rights and responsibilities.


          7)Requires the BPPE provide grants, not to exceed $100 per  
            impacted student, to local legal aid organizations for  
            assisting the students in completing educational loan  
            discharge requests and tuition recovery claims.


          8)Declares legislative intent that any unencumbered funds  
            received by the Attorney General from an action against CCI  
            shall be used to fund the provisions of this bill.


          FISCAL EFFECT:


          It has been estimated that approximately 16,000 students have  
          been impacted by the school closures, including almost 12,000  
          from Heald.


          1)BOG Fee Waiver. The reduction in CCC fee revenues would depend  
            on the number of impacted students who enroll at a CCC, how  
            many CCC units these students take to complete their CCC  
            educational goals, and how many of these students would not  
            otherwise qualify for a BOG fee waiver. (About two-thirds of  
            the entire CCC course load is taken by students currently  








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            receiving a BOG waiver.) For every 1,000 full-time equivalent  
            students (FTES) from the impacted schools who would not  
            otherwise obtain a fee waiver, the revenue loss to the  
            community colleges would be $1.4 million annually.


          2)Legal Assistance Grants. One-time special fund costs to the  
            BPPE of up to a few hundred thousand dollars, assuming legal  
            aid organizations received grants from the BPPE for assisting  
            around 20% of the impacted students. [Private Postsecondary  
            Education Administration Fund] There is no appropriation in  
            the bill to cover this potential cost.


          3)STRF Payments. The STRF mitigate a student's economic losses,  
            defined as tuition and institutional charges plus the cost of  
            equipment and supplies needed for student's educational  
            program. STRF costs will depend on the number of impacted  
            Heald students making STRF claims and the amounts of those  
            claims eligible for reimbursement. If a Heald student  
            transfers no credits to another educational institution and in  
            turn receives forgiveness of their federal loans, the state  
            will incur costs only to the extent that the loan forgiveness  
            does not cover the student's economic loss. If a student  
            transfers some or all of their credits to another institution,  
            their federal loan will not be forgiven, and they may be  
            eligible for a STRF payment equivalent to the value of the  
            loan associated with those credits earned at Heald that are  
            not accepted for transfer.


            STRF payments could be in the low tens of millions of dollars.  
            In the past, STRF payments have averaged around $6,000 per  
            student. If around one-half of the impacted Heald students  
            received the average payment, costs would total $36 million.  
            According to the Governor's Budget, the STRF will have an  
            estimated fund balance of $28 million as of June 30, 2015.










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          4)Cal Grants. According to CSAC, almost 2,800 of the impacted  
            Heald students were awarded and used their Cal Grants. Because  
            Heald was ineligible to participate in the Cal Grant program  
            for several years, virtually all of these students have used  
            one year or less of their Cal Grant eligibility. Almost  
            two-thirds of these students were awarded a Cal Grant C, 30%  
            were award Cal Grant B, and the remaining 4% were awarded a  
            Cal Grant A. Costs will depend on how many of these students  
            continue their education and what type of institution they  
            attend. One additional award year of eligibility for these  
            students would equate to a General Fund cost of around $10  
            million.


          5)Costs for CCC counseling and the BPPE task force should be  
            minor and absorbable.


          COMMENTS:


          Background and Purpose. On April 26, 2015, Corinthian Colleges,  
          Inc. (CCI) announced that it has "ceased substantially all  
          operations and discontinued instruction" at all Heald, Everest,  
          and WyoTech campuses in California, which together had  
          enrollment totaling an estimated 16,000 students. (CCI filed for  
          bankruptcy on May 4, 2015.) Existing state and federal law  
          provides certain relief to some of the students harmed by the  
          CCI closure: federal loan forgiveness is available to students  
          who qualify, but only if they do not transfer any educational  
          credits to another institution; the state's Student Tuition  
          Recovery Fund (STRF) is available to California Everest and  
          WyoTech students, as those school are regulated by the state. An  
          exemption from state oversight for Heald students and students  
          enrolled in out-of-state online programs makes them ineligible  
          for relief through the STRF. This bill, as described above, is  
          intended to ensure that all students harmed by these closures  
          have access to other educational opportunities.









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          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081