CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1313

Author:(Luz Rivas)

As Amended Ver:June 6, 2019

Majority vote

SUMMARY:

Enacts the Educational Debt Collection Practices Act to prohibit any postsecondary educational institution from withholding a student’s request for a transcript because that student owes money to the institution.

The Senate Amendments:

Make clarifying and technical changes

COMMENTS:

There is currently no federal law regarding transcript withholding. In the 1990s, the federal Department of Education issued guidance encouraging the withholding of academic transcripts in the context of obtaining repayment of federal student loans, though the department recognized such action is under an institution’s authority.

While this bill addresses unpaid debt that students owe to the schools, as opposed to loan repayments owed the federal government, schools can apply the same means to collect such debt. State law is silent on this matter, with the exception of authority provided to colleges and universities to withhold releasing records, including transcripts, of transferring students who owe debts to the school.

While not taking a position on the bill at this time, the University of California (UC) and the California State University (CSU) have expressed a concern with regard to students transferring to another school – a situation where the school provides an official transcript for the exiting student to the student’s new school. Without the ability to withhold the transcript, as a method of debt collection, the student could move between colleges without paying their fees/debts at their time of exit, and the colleges would have to either attempt more costly means of debt collection or write-off that debt.

According to the Author:

The Department of Justice has documented instances where schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. Given the growing cost of higher education and high costs of living, students struggle to pay off debts. The problem with withholding transcripts is that it can be a barrier to a student getting a job or license, or furthering their education at another institution, thereby potentially leading the student into a greater cycle of debt.

This bill will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.

Arguments in Support:

This bill is sponsored by the Attorney General, who maintains that the withholding of transcripts is an undesirable way to collect debt from students, wherever it is authorized or utilized, because it potentially handcuffs students in pursuing educational and career opportunities.

Arguments in Opposition:

No opposition has been received; however, the Association of Independent California Colleges and Universities (AICCU) submitted an "Opposed Unless Amended" position letter on July 12, 2019. According to AICCU, "In the absence of the ability to withhold transcripts, the only remaining enforcement mechanism would be to refer these debts to collections agencies. In exchange for collecting the debt, collection agencies often receive between 35% to 50% of the total amount. For an institution, it means that for every $100,000 in debt they refer, they can only expect to recoup between $50,000 and $65,000."

FISCAL COMMENTS:

According to the Senate Appropriations Committee:

1. Community college districts could incur unknown but potentially significant costs to the extent that this bill limits their ability to collect debt which they would then have to absorb. While the Chancellor's Office does not uniformly track student debt information systemwide, these costs would vary by district depending on the amount of debt currently owed. To the extent that the Commission on State Mandates determines the bill's requirements to be a mandate, the state would need to reimburse these costs.
2. This bill could also result in unknown but potentially significant costs to CSU and UC campuses and to private postsecondary institutions to the extent that the bill limits their ability to collect debt. While the segments indicate they do not uniformly track student debt information systemwide, the UC indicates that if transcripts can no longer be used as leverage to collect on delinquent balances, they could incur statewide costs of $10 to $12 million each year after the delinquent accounts are sent to collection agencies.

VOTES:

ASM HIGHER EDUCATION: 12-0-0

YES: Medina, Choi, Gloria, Bloom, Gabriel, Irwin, Kiley, Gonzalez, Low, Patterson, Santiago, Weber

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ASSEMBLY FLOOR: 78-0-2

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie‑Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Cooley, Eduardo Garcia

SENATE FLOOR: 40-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

UPDATED:

VERSION: June 6, 2019

CONSULTANT: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0002050

 THIRD READING  

Bill No: AB 1313

Author: Luz Rivas (D)

Amended: 6/6/19 in Senate

Vote: 21

SENATE EDUCATION COMMITTEE: 5-0, 6/19/19

AYES: Leyva, Chang, Glazer, McGuire, Pan

NO VOTE RECORDED: Wilk, Durazo

SENATE JUDICIARY COMMITTEE: 9-0, 7/2/19

AYES: Jackson, Borgeas, Durazo, Lena Gonzalez, Jones, Monning, Stern, Umberg, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/30/19

AYES: Portantino, Bates, Bradford, Durazo, Hill, Jones, Wieckowski

ASSEMBLY FLOOR: 78-0, 5/23/19 - See last page for vote

SUBJECT: Higher education: prohibited debt collection practices

SOURCE: California Department of Justice

DIGEST:

This bill establishes the Educational Debt Collection Practices Act and prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt.

ANALYSIS:

Existing law:

1. Regulates the practice of debt collection and the conduct of debt collectors under the Rosenthal Fair Debt Collection Practices Act by prohibiting deceptive, dishonest, unfair, and unreasonable practices. (Title 1.6C of Part 4 of Division 3 of the Civil Code, commencing with § 1788.)
2. Provides that, whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student. However, the community college, college, or university from which the student is transferring may notify the student that the student’s records will be transferred upon payment by the student of all fees and charges due the community college, college, or university. (EC §76225.)
3. Requires the governing boards of University of California (UC), Hastings, California State University (CSU) and the CCC to adopt regulations providing for the withholding of institutional services from students or former students that they are in default, as defined, under the FFEL Program. The services that may be withheld from the student include the provision of grades and transcripts, but not the withholding of registration privileges. (EC § 66022.)

This bill establishes the Educational Debt Collection Practices Act and prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt. Specifically, this bill:

1. Prohibits a public or private postsecondary school from doing any of the following:
   1. Refuse to provide a transcript for a current or former students on the grounds that the student owes debt.
   2. Condition the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript.
   3. Charge a higher fee for obtaining a transcript, or provide less favorable treatment of a transcript request because a student owes debt.
   4. Use transcript issuance as a tool for debt collection.
2. Modifies provisions that authorize the withholding of certain services from a student that have defaulted on a loan under the Federal Family Education Loan (FFEL) program through regulations adopted by the governing bodies of the public postsecondary educational institutions by removing the authority to withhold transcripts from that student. (The FFEL program was replaced by the Federal Direct Student Loan Program in 2010)
3. Deletes provisions that authorize a college or university to withhold a transferring student’s records upon payment of fees or charges due to that college or university.
4. Defines “school,” to mean any public or private postsecondary school, or any public or private entity, responsible for providing transcripts to current or former students of a school.
5. Defines “debt,” to mean any money, obligation, claim, or sum, due or owing, or alleged to be due or owing, from a student, but does not include the fee, if any, charged to all students for the actual costs of providing the transcripts.
6. Makes conforming and technical changes.

Comments

1. Need for the bill. According to the author, “current policies that allow schools to withhold transcripts in order to collect debt threaten to interfere with the employment, licensure, or further education of students in California. Existing law authorizes public and private higher education institutions to adopt these policies, and legislation is needed to make clear that schools should not engage in this particular method of debt collection in the future.

“AB 1313 will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.”

1. Average student loan debt for California graduates. According to The Institute for College Access and Success (TICAS) and its Project on Student Debt, 65 percent of seniors who graduated from public and nonprofit colleges in 2017 had student loan debt, with an average nationally of $28,650 per borrower. TICAS reports that the share of graduates with debt rose steadily from 1996 to 2012. Between 2012 and 2016 the growth stopped. The report notes, that this overall trend for bachelor’s degree recipients masks significant variation in debt burden for different types of students. TICAS also reports that average debt in California is $21,852 at public and private non-profit colleges and that about 50 percent of students graduate with debt, ranking California 46th and 40^th nationally, respectively. California falls below the national average in student loan debt and classified as a low-debt state. The outstanding debt referenced in the bill is not specific to student loan debt and could apply to debt incurred through other means such as owing fees.
2. Withholding of transcripts is common practice. The practice of withholding transcripts for delinquent accounts is a fairly common and effective tool in recouping outstanding funds owed to the institution. According to the UC, the tool is the campus’ primary leverage to engage students about debt repayment when they transfer to another university or apply to graduate degree programs. Promoting debt repayment in this manner reduces the amount of delinquent accounts that UC would otherwise have to report to third-party collection agencies. The withholding policy allows UC campuses to work with students to develop repayment plans and campuses often release transcripts once the student agrees to such a plan. California State University as well as private institutions also use the withholding of transcripts as a method to recoup debt owed to schools. The segments have expressed concerns that this bill would compel them to either attempt more costly means of debt collection or write-off outstanding debt. Could this bill result in institutions choosing to report students with more frequency to a collection agency or credit reporting agency?
3. Does not prohibit withholding of grades, and diplomas for debt owed. This bill prohibits the withholding of transcripts from a student who owes debt including from those in default on a loan under the Federal Family Education Loan Program. A student who defaulted on that federal loan may still withhold grades or diploma from that student under provisions specified in current law. In part, this bill is silent, as is current law with exception of federal loan program mentioned, regarding other tools that may be used to recoup other types of outstanding debt. Presumably, an institution could withhold other services such as grades or a diploma from students to collect money owed.
4. Related activity in K-12. This bill is consistent with recent legislation enacted, AB 1974 (Gonzalez, Chapter 577, Statutes of 2018), to prohibit K-12 public and charter schools from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee:

• Community college districts could incur unknown but potentially significant costs to the extent that this bill limits their ability to collect debt, which they would then have to absorb. While the Chancellor's Office does not uniformly track student debt information systemwide, these costs would vary by district depending on the amount of debt currently owed. To the extent that the Commission on State Mandates determines the bill's requirements to be a mandate, the state would need to reimburse these costs.
• This bill could also result in unknown but potentially significant costs to CSU UC campuses and to private postsecondary institutions to the extent that the bill limits their ability to collect debt. While the segments indicate they do not uniformly track student debt information systemwide, the UC indicates that if transcripts can no longer be used as leverage to collect on delinquent balances, they could incur statewide costs of $10 to $12 million each year after the delinquent accounts are sent to collection agencies.

SUPPORT: (Verified 8/30/19)

California Department of Justice (source)

American Federation of State, County and Municipal Employees, AFL-CIO

California Community Colleges Chancellor's Office
California Department of Justice
California Faculty Association
California Low-income Consumer Coalition
California Teachers Association
California Faculty Association

Student Borrower Protection Center

OPPOSITION: (Verified 8/30/19)

None received

ASSEMBLY FLOOR: 78-0, 5/23/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Cooley, Eduardo Garcia

Prepared by: Olgalilia Ramirez / ED. /

9/1/19 14:14:15

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1313 (Luz Rivas) - Higher education: prohibited debt collection practices

Bill Summary:

This bill prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt.

Fiscal Impact:

• Community college districts could incur unknown but potentially significant costs to the extent that this bill limits their ability to collect debt which they would then have to absorb. While the Chancellor's Office does not uniformly track student debt information systemwide, these costs would vary by district depending on the amount of debt currently owed. To the extent that the Commission on State Mandates determines the bill's requirements to be a mandate, the state would need to reimburse these costs.
• This bill could also result in unknown but potentially significant costs to California State University (CSU) and University of California (UC) campuses and to private postsecondary institutions to the extent that the bill limits their ability to collect debt. While the segments indicate they do not uniformly track student debt information systemwide, the UC indicates that if transcripts can no longer be used as leverage to collect on delinquent balances, they could incur statewide costs of $10 to $12 million each year after the delinquent accounts are sent to collection agencies.

Background:

Existing law regulates the practice of debt collection and the conduct of debt collectors under the Rosenthal Fair Debt Collection Practices Act by prohibiting deceptive, dishonest, unfair, and unreasonable practices.

The practice of withholding transcripts for delinquent accounts is a fairly common and effective tool in recouping outstanding funds owed to the institution. According to the University of California (UC), the tool is the campus’ primary leverage to engage students about debt repayment when they transfer to another university or apply to graduate degree programs. Promoting debt repayment in this manner reduces the amount of delinquent accounts that UC would otherwise have to report to third-party collection agencies. The withholding policy allows UC campuses to work with students to develop repayment plans and campuses often release transcripts once the student agrees to such a plan. California State University as well as private institutions also use the withholding of transcripts as a method to recoup debt owed to schools.

Proposed Law:

This bill prohibits a public or private postsecondary school from doing any of the following:

1. Refuse to provide a transcript for a current or former students on the grounds that the student owes debt.
2. Condition the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript.
3. Charge a higher fee for obtaining a transcript, or provide less favorable treatment of a transcript request because a student owes debt.
4. Use transcript issuance as a tool for debt collection.

This bill modifies provisions that authorize the withholding of certain services from a student that have defaulted on a loan under the Federal Family Education Loan (FFEL) program through regulations adopted by the governing bodies of the public postsecondary educational institutions by removing the authority to withhold transcripts from that student. The bill also deletes provisions that authorize a college or university to withhold a transferring student’s records upon payment of fees or charges due to that college or university.

Related Legislation:

AB 1974 (Gonzalez, Chapter 577, Statutes of 2018) prohibits K-12 public and charter schools from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 1313 (Author:Luz Rivas)

Version: June 6, 2019

Hearing Date: July 2, 2019

Fiscal: Yes

Urgency: No

Consultant: AM

SUBJECT

Higher education: prohibited debt collection practices

DIGEST

This bill prohibits a public or private univeristy from refusing to provide a transcript for a current or former student on the grounds that the student owes a debt, conditioning the provision of a transcript on the payment of a debt, charging a higher fee for obtaining a transcript or providing less favorable treatment because a student owes a debt, or using transcript issuance as a tool for debt collection.

EXECUTIVE SUMMARY

Recent investigations by the California Department of Justice (DOJ) have revealed instances of schools and colleges threatening to withhold transcripts from students who owe or are alleged to owe a debt to the school in order to collect that debt. This practice can have detrimental consequences for students, including being unable to transfer to another school or apply for graduate school. This bill seeks to remedy this issue by prohibiting a public or private univeristy or college from refusing to provide a transcript for a current or former student on the grounds that the student owes a debt or conditioning the provision of a transcript on the payment of a debt. The bill also prohibits charging a higher fee for obtaining a transcript or providing less favorable treatment because a student owes a debt, or using transcript issuance as a tool for debt collection.

The bill is sponsored by California Attorney General Xavier Becerra and supported by U.S. Representative Zoe Lofgren of the 19^th district of California, various labor organizations, and the Student Borrower Protection Center. The bill is opposed by the Association of Independent California Colleges and Universities and the University of California (UC). The bill passed the Senate Education Committee 5-0.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Regulates the practice of debt collection and the conduct of debt collectors pursuant to the Rosenthal Fair Debt Collection Practices Act by prohibiting deceptive, dishonest, unfair, and unreasonable practices. (Civil Code §§ 1788 et. seq.)
2. Provides that, whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student. However, the community college, college, or university from which the student is transferring may notify the student that the student’s records will be transferred upon payment by the student of all fees and charges due the community college, college, or university. (Educ. Code § 76225.)
3. Requires the governing boards of the UC, Hastings College of the Law, California State University (CSU) and the California Community Colleges (CCC) to adopt regulations providing for the withholding of institutional services from students or former students that they are in default, as defined, under the Federal Family Education Loan Program. The services that may be withheld from the student include the provision of grades and transcripts, but not the withholding of registration privileges. (Educ. Code § 66022.)

This bill:

1. Establishes the Educational Debt Collection Practices Act and provides that the Legislature finds and declares both of the following:
   1. Schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. The practice can cause severe hardship by preventing students from pursuing educational and career opportunities, and it is therefore unfair and contrary to public policy. Moreover, the practice is counterproductive as it may further delay the payment of the debt by creating obstacles to student employment.
   2. It is the purpose of this title to prohibit schools from interfering with student educational and career opportunity by the withholding of transcripts.
2. Prohibits a school from doing any of the following:
   1. refusing to provide a transcript for a current or former student on the grounds that the student owes a debt;
   2. conditioning the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript;
   3. charging a higher fee for obtaining a transcript or providing less favorable treatment because a student owes a debt; or
   4. using transcript issuance as a tool for debt collection
3. Defines the following terms for these purposes:
   1. “School” means any public or private postsecondary school, or any public or private entity, responsible for providing transcripts to current or former students of a school.
   2. “Debt” means any money, obligation, claim, or sum, due or owing, or alleged to be due or owing, from a student, but does not include the fee, if any, charged to all students for the actual costs of providing the transcripts.

COMMENTS

1. Stated need for the bill

The author writes:

AB 1313 ensures that a student’s future is not held hostage by colleges. This bill prohibits postsecondary schools from refusing to provide a transcript in order to collect a debt. College transcripts are critical documents that give students the mobility to pursue higher education, licensure, and employment. By withholding transcripts, schools are putting students in a predicament where they are unable to advance their careers and get to a place where they can actually pay off their debt. Instead of making it more difficult, we should be doing everything we can to reduce the burden of paying it off.

1. Withholding transcripts because of debt owed

According to the DOJ, recent investigations have revealed instances of schools and colleges threatening to withhold transcripts from students who owe or are alleged to owe a debt to the school in order to collect that debt. This practice can have detrimental effects on students, such as preventing or delaying their ability to transfer, apply for graduate school, obtain various professional licenses, and in some cases employment. As many students are already struggling with the burden of student debt and the high cost of housing, preventing them from being able to secure employment or further their education can exacerbate their already precarious financial situation.^[1] In 2018, the Legislature prohibited public schools or school districts from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.^[2] This bill seeks to protect students by prohibiting a private or public college or university from refusing to provide a transcript for a current or former student on the grounds that the student owes a debt, conditioning the provision of a transcript on the payment of a debt, charging a higher fee for obtaining a transcript or providing less favorable treatment because a student owes a debt, or using transcript issuance as a tool for debt collection. The bill still allows a college or university to charge a fee to provide a transcript. The bill also still allows the UCs, Hastings, CSUs, and CCCs to withhold diplomas or grades from a student due to a debt owed.

3. Statements in support

The bill is sponsored by Attorney General Xavier Becerra, is supported by Representative Zoe Lofgren, various labor organizations, and the Student Borrower Protection Center.

Attorney General Becerra writes:

In the course of recent California Department of Justice investigations, we have documented instances where schools and colleges have threatened to withhold transcripts from students who owe or are alleged to owe a debt as a tactic to collect debt.

Withholding a student’s transcript potentially makes it much harder for a student to secure a job, transfer or apply to another school, or obtain certain licenses. This practice can cause severe hardship for many Americans […] AB 1313 would prohibit postsecondary schools from (1) refusing to provide a transcript to a current or former student on the grounds that the student owes a debt, or (2) conditioning the provision of a transcript on the payment of a debt. Schools would still be permitted to charge a standard fee for the transcript. However, they would also be prohibited from charging a higher fee or providing less favorable treatment of a request for a transcript simply because the student owes a debt.

4. Statements in opposition

The UC, an opponent of the bill, writes:

The practice of withholding transcripts for delinquent accounts is the campus’ primary leverage to get students into a productive conversation to pay back the debt they owe when they transfer to another university or apply to graduate degree programs. Promoting debt repayment in this manner reduces the amount of delinquent accounts that UC would otherwise have to report to third-party collection agencies, thus keeping students out of the collections process.

We appreciate and share the author’s interest in protecting students and controlling debt collection abuses. UC has a keen awareness of the challenges faced by students with educational debt. Currently, campuses do have the flexibility to work with students to offer one time release of transcripts, develop repayment plans, as well as other similar agreements. However, prohibiting the use of this method of debt collection could cost UC $10 to $12 million annually and may drastically increase the number of students who are sent to collection agencies.

SUPPORT

California Attorney General Xavier Becerra (sponsor)

American Federation of State, County and Municipal Employees, AFL-CIO

California Community Colleges Chancellor's Office

California Faculty Association

California Teachers Association

Student Borrower Protection Center

UAW 2865, UC Graduate Student Workers

UAW Local 5810

U.S. Representative Zoe Lofgren, 19^th District, California

OPPOSITION

Association of Independent California Colleges and Universities

University of California

RELATED LEGISLATION

Pending Legislation: None known

Prior Legislation:

AB 1974 (Gonzalez, Ch. 577, Stats. 2018), among other things, prohibited a public school or school district from withholding grades or transcripts from current or former pupils because of a debt owed to the school.

PRIOR VOTES:

Senate Education Committee (Ayes 5, Noes 0)

Assembly Floor (Ayes 78, Noes 0)

Assembly Appropriations Committee (Ayes 18, Noes 0)

Assembly Higher Education Committee (Ayes 12, Noes 0)

**************

1. See The Institute for College Access & Success, Student Debt and the Class of 2017 (Sep., 2018): finding that “about two in three (65 percent) college seniors who graduated from public and private nonprofit colleges in 2017 had student loan debt, a slight decrease from 2016,” available at https://ticas.org/posd/home (as of Jun. 21, 2019). ↑

2. AB 1974 (Gonzalez, Ch. 577, Stats. 2018); Edc. Code § 49014. ↑

SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: AB 1313 Hearing Date: June 19, 2019

Subject: Higher education: prohibited debt collection practices

NOTE: This bill has been referred to the Committees on Education and Judiciary. A "do pass" motion should include referral to the Committee on Judiciary.

SUMMARY

This bill establishes the Educational Debt Collection Practices Act and prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt.

BACKGROUND

Existing law:

1) Regulates the practice of debt collection and the conduct of debt collectors under

the Rosenthal Fair Debt Collection Practices Act by prohibiting deceptive, dishonest, unfair, and unreasonable practices. (Title 1.6C of Part 4 of Division 3 of the Civil Code, commencing with § 1788.)

2) Provides that, whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student. However, the community college, college, or university from which the student is transferring may notify the student that the student’s records will be transferred upon payment by the student of all fees and charges due the community college, college, or university. (EC §76225.)

3) Requires the governing boards of University of California (UC), Hastings,

California State University (CSU) and the CCC to adopt regulations providing for the withholding of institutional services from students or former students that they are in default, as defined, under the FFEL Program. The services that may be withheld from the student include the provision of grades and transcripts, but not the withholding of registration privileges. (EC § 66022.)

ANALYSIS

This bill establishes the Educational Debt Collection Practices Act and prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt. Specifically, it:

1. Prohibits a public or private postsecondary school from doing any of the following:
   1. Refuse to provide a transcript for a current or former students on the

grounds that the student owes debt.

• 1. Condition the provision of a transcript on the payment of a debt, other than

a fee charged to provide the transcript.

• 1. Charge a higher fee for obtaining a transcript, or provide less favorable

treatment of a transcript request because a student owes debt.

• 1. Use transcript issuance as a tool for debt collection.

1. Modifies provisions that authorize the withholding of certain services from a student that have defaulted on a loan under the Federal Family Education Loan (FFEL) program through regulations adopted by the governing bodies of the public postsecondary educational institutions by removing the authority to withhold transcripts from that student. (The FFEL program was replaced by the Federal Direct Student Loan Program in 2010)
2. Deletes provisions that authorize a college or university to withhold a transferring student’s records upon payment of fees or charges due to that college or university.
3. Defines “school,” to mean any public or private postsecondary school, or any public or private entity, responsible for providing transcripts to current or former students of a school.
4. Defines “debt,” to mean any money, obligation, claim, or sum, due or owing, or alleged to be due or owing, from a student, but does not include the fee, if any, charged to all students for the actual costs of providing the transcripts.
5. Makes conforming and technical changes.

STAFF COMMENTS

1. Need for the bill. According to the author, “current policies that allow schools to withhold transcripts in order to collect debt threaten to interfere with the employment, licensure, or further education of students in California. Existing law authorizes public and private higher education institutions to adopt these policies, and legislation is needed to make clear that schools should not engage in this particular method of debt collection in the future.

AB 1313 will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.”

1. Average student loan debt for California graduates. According to The Institute for College Access and Success (TICAS) and its Project on Student Debt, 65 percent of seniors who graduated from public and nonprofit colleges in 2017 had student loan debt, with an average nationally of $28,650 per borrower. TICAS reports that the share of graduates with debt rose steadily from 1996 to 2012. Between 2012 and 2016 the growth stopped. The report notes, that this overall trend for bachelor’s degree recipients masks significant variation in debt burden for different types of students. TICAS also reports that average debt in California is $21,852 at public and private non-profit colleges and that about 50 percent of students graduate with debt, ranking California 46th and 40^th nationally, respectively. California falls below the national average in student loan debt and classified as a low-debt state. The outstanding debt referenced in the bill is not specific to student loan debt and could apply to debt incurred through other means such as owing fees.
2. Withholding of transcripts is common practice. The practice of withholding transcripts for delinquent accounts is a fairly common and effective tool in recouping outstanding funds owed to the institution. According to the University of California (UC), the tool is the campus’ primary leverage to engage students about debt repayment when they transfer to another university or apply to graduate degree programs. Promoting debt repayment in this manner reduces the amount of delinquent accounts that UC would otherwise have to report to third-party collection agencies. The withholding policy allows UC campuses to work with students to develop repayment plans and campuses often release transcripts once the student agrees to such a plan. California State University as well as private institutions also use the withholding of transcripts as a method to recoup debt owed to schools. The segments have expressed concerns that this bill would compel them to either attempt more costly means of debt collection or write-off outstanding debt. Could this bill result in institutions choosing to report students with more frequency to a collection agency or credit reporting agency?
3. Does not prohibit withholding of grades, and diplomas for debt owed. The bill prohibits the withholding of transcripts from a student who owes debt including from those in default on a loan under the Federal Family Education Loan Program. A student who defaulted on that federal loan may still withhold grades or diploma from that student under provisions specified in current law. In part, the bill is silent, as is current law with exception of federal loan program mentioned, regarding other tools that may be used to recoup other types of outstanding debt. Presumably, an institution could withhold other services such as grades or a diploma from students to collect money owed.
4. Related activity in K-12. This bill is consistent with recent legislation enacted, AB 1974 (Gonzalez, Chapter 577, Statutes of 2018), to prohibit K-12 public and charter schools from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.
5. Fiscal effect. According to the Assembly Appropriations Committee the bill would have the following fiscal impact:
   1. Unknown, potentially significant ongoing Proposition 98 General Fund cost pressures to California Community College Districts (CCDs) to the degree this bill limits their ability to collect debt. Currently, the California Community (CCC) Chancellor's office does not uniformly track student debt information systemwide.

The state would need to reimburse these costs to CCC, if the Commission on State Mandates determines the bill’s requirements to be a reimbursable state mandate.

• 1. Unknown, potentially significant ongoing General Fund cost pressures to California State University (CSU) campuses and to University of California (UC) campuses, to the degree this bill limits their ability to collect debt. Both systems indicate they do not uniformly track student debt information systemwide. According to CSU, using rough estimates, the bill could result in revenue losses in the hundreds of thousands of dollars. According to UC, costs could be as high as the millions of dollars.

SUPPORT

American Federation of State, County and Municipal Employees, AFL-CIO

California Community Colleges Chancellor's Office

California Department of Justice (Sponsors)

California Faculty Association

California Teachers Association

Student Borrower Protection Center

OPPOSITION

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1313

Author:(Luz Rivas)

As Amended Ver:April 11, 2019

Majority vote

SUMMARY:

Enacts the Educational Debt Collection Practices Act to prohibit any postsecondary educational institution from withholding a student’s request for a transcript because that student owes money to the institution.

Major Provisions

Prohibits any public or private postsecondary educational institution, or any entity responsible for providing a school’s transcripts to students, from doing any of the following:

• 1. Refusing to provide a transcript to a current or former student on the grounds that the student owes a debt to the school;
  2. Conditioning the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript;
  3. Charging a higher fee for obtaining a transcript, or provide less favorable treatment to a transcript request, because a student owes a debt; or,
  4. Using transcript issuance as a tool for debt collection.

COMMENTS:

There is currently no federal law regarding transcript withholding. In the 1990s, the federal Department of Education issued guidance encouraging the withholding of academic transcripts in the context of obtaining repayment of federal student loans, though the department recognized such action is under an institution’s authority.

While this bill addresses unpaid debt that students owe to the schools, as opposed to loan repayments owed the federal government, schools can apply the same means to collect such debt. State law is silent on this matter, with the exception of authority provided to colleges and universities to withhold releasing records, including transcripts, of transferring students who owe debts to the school.

While not taking a position on the bill at this time, the University of California (UC) and the California State University (CSU) have expressed a concern with regard to students transferring to another school – a situation where the school provides an official transcript for the exiting student to the student’s new school. Without the ability to withhold the transcript, as a method of debt collection, the student could move between colleges without paying their fees/debts at their time of exit, and the colleges would have to either attempt more costly means of debt collection or write-off that debt.

According to the Author:

The Department of Justice has documented instances where schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. Given the growing cost of higher education and high costs of living, students struggle to pay off debts. The problem with withholding transcripts is that it can be a barrier to a student getting a job or license, or furthering their education at another institution, thereby potentially leading the student into a greater cycle of debt.

This bill will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.

Arguments in Support:

This bill is sponsored by the Attorney General, who maintains that the withholding of transcripts is an undesirable way to collect debt from students, wherever it is authorized or utilized, because it potentially handcuffs students in pursuing educational and career opportunities.

Arguments in Opposition:

There is no opposition on file.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. Unknown, potentially significant ongoing Proposition 98 General Fund cost pressures to California Community College Districts to the degree this bill limits their ability to collect debt.
2. Unknown, potentially significant ongoing General Fund cost pressures to CSU campuses and to UC campuses, to the degree this bill limits their ability to collect debt.

VOTES:

ASM HIGHER EDUCATION: 12-0-0

YES: Medina, Choi, Gloria, Bloom, Gabriel, Irwin, Kiley, Gonzalez, Low, Patterson, Santiago, Weber

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: April 11, 2019

CONSULTANT: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0000779

Date of Hearing: May 1, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1313

Author:(Luz Rivas) – As Amended Ver:April 11, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill prohibits a postsecondary institution from withholding registration privileges or transcripts from current or former students who have outstanding college debt.

FISCAL EFFECT:

1. Unknown, potentially significant ongoing Proposition 98 General Fund cost pressures to California Community College Districts (CCDs) to the degree this bill limits their ability to collect debt. Currently, the CCC chancellor's office does not uniformly track student debt information systemwide.

The state would need to reimburse these costs to CCC, if the Commission on State Mandates determines the bill’s requirements to be a reimbursable state mandate.

1. Unknown, potentially significant ongoing General Fund cost pressures to California State University (CSU) campuses and to University of California (UC) campuses, to the degree this bill limits their ability to collect debt. Both systems indicate they do not uniformly track student debt information systemwide. According to CSU, using rough estimates, the bill could result in revenue losses in the hundreds of thousands of dollars. According to UC, costs could be as high as the millions of dollars.

COMMENTS:

1. Purpose. AB 1313 is sponsored by the California Attorney General, who maintains that the withholding of transcripts is an undesirable way to collect debt from students. According to the author of this bill:

The Department of Justice has documented instances where schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. Given the growing cost of higher education and high costs of living, students struggle to pay off debts. The problem with withholding transcripts is that it can be a barrier to a student getting a job or license, or furthering their education at another institution, thereby potentially leading the student into a greater cycle of debt. AB 1313 will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.

1. Background. The majority of student debt is held with the federal government in the form of student loan debt. In addition, students may hold debt with private banks for credit card debt or private student loans. Students may also hold debt payable to the universities or colleges they attend or have attended. Typically, that debt is for unpaid fees, such as library fees or parking fees, however, it could be for larger debts, such as tuition costs.

Employers and academic institutions often require an individual’s official university or college transcripts as a condition of employment or transfer. While federal law requires schools to make unofficial transcripts available to students and their parents, no federal law addresses a university or college’s ability to withhold official student transcripts. As a means of collecting outstanding debt, colleges and universities sometimes will withhold an individual’s official transcript.

The segments have expressed concerns that this bill would compel them to either attempt more costly means of debt collection or write-off outstanding debt. They indicate that sending debt to collection typically results in recouping about 50% of the outstanding debt.

1. Prior Legislation. AB 1974 (Gonzalez), Chapter 577, Statutes of 2018, in part prohibited K-12 schools from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: April 9, 2019

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 1313 (

Author:Luz Rivas) – As Introduced Ver:February 22, 2019

SUBJECT: Higher education: prohibited debt collection practices

SUMMARY: Enacts the Educational Debt Collection Practices Act to prohibit any postsecondary educational institution from withholding a student’s request for a transcript because that student owes money to the institution. Specifically, this bill:

1. Prohibits any public or private postsecondary educational institution, or any entity responsible for providing a school’s transcripts to students, from doing any of the following:
   1. Refusing to provide a transcript to a current or former student on the grounds that the student owes a debt to the school;
   2. Conditioning the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript;
   3. Charging a higher fee for obtaining a transcript, or provide less favorable treatment to a transcript request, because a student owes a debt; or
   4. Using transcript issuance as a tool for debt collection.
2. Deletes provisions allowing regulations adopted by the University of California (UC), Hastings College of the Law, the California State University (CSU), and the California Community Colleges (CCC) to withhold providing transcripts to students who are in default of a loan under the Federal Family Education Loan (FFEL) program. (The FFEL program was replaced by the Federal Direct Student Loan Program in 2010.)

EXISTING LAW:

1. Regulates the practice of debt collection and the conduct of debt collectors under the Rosenthal Fair Debt Collection Practices Act by prohibiting deceptive, dishonest, unfair, and unreasonable practices. (Title 1.6C of Part 4 of Division 3 of the Civil Code, commencing with Section 1788.)
2. Stipulates that, whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student. However, the community college, college, or university from which the student is transferring may notify the student that the student’s records will be transferred upon payment by the student of all fees and charges due the community college, college, or university. (EC Sect. 76225.)
3. Requires the governing boards of UC, Hastings, CSU and the CCC to adopt regulations providing for the withholding of institutional services from students or former students that they are in default, as defined, under the FFEL Program. The services that may be withheld from the student include the provision of grades and transcripts, but not the withholding of registration privileges. (Education Code (EC) Section 66022.)

FISCAL EFFECT: Unknown.

COMMENTS:

Purpose. According to the author, “The Department of Justice has documented instances where schools and colleges have threatened to withhold transcripts from students as a debt collection tactic. Given the growing cost of higher education and high costs of living, students struggle to pay off debts. The problem with withholding transcripts is that it can be a barrier to a student getting a job or license, or furthering their education at another institution, thereby potentially leading the student into a greater cycle of debt.

“AB 1313 will prohibit any higher education institution from withholding transcripts for the purposes of debt collection. This is a practice that goes against California’s values and protects educational and occupational opportunities for our college students.”

AB 1313 is sponsored by the Attorney General, who maintains that the withholding of transcripts is an undesirable way to collect debt from students, wherever it is authorized or utilized, because it potentially handcuffs students in pursuing educational and career opportunities.

Transcript Withholding. There is currently no federal law regarding transcript withholding. The federal Family Education Rights and Privacy Act (FERPA) does require schools to make unofficial transcripts, and other student records, available for inspection to a student or their parents. Official transcripts, which are often required for getting a job or transferring institutions, are essentially unregulated at the federal level.

In the 1990s, the federal Department of Education issued guidance encouraging the withholding of academic transcripts in the context of obtaining repayment of federal student loans, though the department recognized such action is under an institution’s authority. The department’s website currently states that one of the consequences of being in default on a federal loan is that, “Your school may withhold your academic transcript until your defaulted student loan is satisfied. The academic transcript is the property of the school, and it is the school's decision—not the U.S. Department of Education’s or your loan holder’s—whether to release the transcript to you.”

While this bill addresses unpaid debt that students owe to the schools, as opposed to loan repayments owed the federal government, schools can apply the same means to collect such debt. State law is silent on this matter, with the exception of authority provided to colleges and universities to withhold releasing records, including transcripts, of transferring students who owe debts to the school. Curiously, this statute (see #2 above), though it applies to all college and universities within the state, is contained in the portion of the Education Code specifically governing the community colleges. (The Chancellor’s Office of the California Community Colleges has indicated to the committee staff that it does not have concerns with this bill.) The University of California (UC) and the California State University (CSU), have their own policies in this regard.

UC’s Policies Applying to Campus Activities, Organizations, and Students includes the following:

Requests to Forward Academic Records. University of California campuses may forward appropriate student records, including academic records, disciplinary records, and other student records, to other educational institutions in which a student seeks or intends to enroll, or is currently enrolled, so long as the disclosure is for purposes related to the student’s enrollment or transfer. The campus will provide annual notification of this disclosure policy, or else a reasonable attempt will be made to provide notification to individual students about whom information is disclosed. When students request that their academic records be forwarded to other institutions, students may be required to pay all fees and charges due the University before the records are forwarded.

A CSU regulation allows the Chancellor to “authorize a president of a campus, or designee, to withhold permission to register, to use facilities for which a fee is authorized to be charged, to receive services, materials, food or merchandise, or any combination of the above from any person owing a debt…”

Segment Concerns. While not taking a position on the bill at this time, the segments have expressed a concern with regard to students transferring to another school – a situation where the school provides an official transcript for the exiting student to the student’s new school. Without the ability to withhold the transcript, as a method of debt collection, the student could move between colleges without paying their fees/debts at their time of exit, and the colleges would have to either attempt more costly means of debt collection or write-off that debt.

Rosenthal Fair Debt Collection Practices Act. The Rosenthal Fair Debt Collection Practices Act regulates the practice of debt collection and the conduct of debt collectors in the State of California. It provides consumer protections by regulating the form and content of communications of debt collectors with debtors when they attempt to recover debts. In order to prevent predatory or coercive debt collection activities, the law prohibits the use of practices that are deceptive, dishonest, unfair, and unreasonable. For example, the Act prohibits debt collectors from making false claims to consumers about their debt, such as implying that non-payment will result in arrest or that failure to pay one’s debts could lead to the accusation that one has committed a crime.

Recommended Amendment. The conforming amendment below would remove any college’s authority to withhold the records, including the transcript, of a transferring student owing a debt to the school. Amend EC Sect. 76225 as follows:

Whenever a student transfers from one community college or public or private institution of postsecondary education to another within the state, appropriate records or a copy thereof shall be transferred by the former community college, or college or university upon a request from the student. However, the community college, college, or university from which the student is transferring may notify the student that the student’s records will be transferred upon payment by the student of all fees and charges due the community college, college, or university. Any community college, college, or university making a transfer of these records shall notify the student of his or her right to receive a copy of the record and his or her right to challenge the content of the record.

The board of governors may adopt rules and regulations concerning transfer of these records to, from, or between colleges under its jurisdiction.

The author has indicated to the committee that she concurs with this amendment, however, for timing purposes, the amendment will be processed in the Appropriations Committee.

Prior Legislation. AB 1974 (Gonzalez), Chapter 577, Statutes of 2018, in part prohibited K-12 schools from withholding grades or transcripts from pupils or former pupils because of a debt owed to the school.

REGISTERED SUPPORT / OPPOSITION:

Support

California Department of Justice
Student Borrower Protection Center

Opposition

None on file.

Analysis Prepared by: Chuck Nicol / HIGHER ED. / (916) 319-3960