(1)Existing law, the California Private Postsecondary Education Act of 2009, provides, among other things, for student protections and regulatory oversight of private postsecondary schools in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs.

This bill would require an institution subject to the act to report to the bureau according to a schedule and format determined by the bureau, collect and retain for each graduate completing a program at that institution on or after January 1, 2020, individual identifying information, the program the graduate was enrolled in, and specified student loan debt information. The bill would require the institution to report that information to the bureau annually according to a schedule and format determined by the bureau. The bill would require the bureau to match the data reported by institutions pursuant to this provision with wage data from the Employment Development Department, as specified. The bill would require this data to be reported to the Employment Development Department to fulfill specified requirements of the federal Workforce Innovation and Opportunity Act. The bill would also require the bureau to make available on its internet website certain program-level and institution-level statistics regarding the earnings levels of students and student debt burdens. The bill would require the labor market outcome data reported under the bill to provide data relating to graduates at 2 years and at 5 years after their graduation. These provisions The provisions related to reporting, matching, and internet posting would not be operative until the Director of Consumer Affairs certifies that the bureaus information technology system has been updated and is capable of processing data as required by this bill. The bill would require the bureau to notify institutions subject to the act when this certification has occurred, and would require institutions to comply with the bills provisions within 120 days from the date they receive this notification.

(2)Existing law requires the Director of Employment Development to permit the bureau to access relevant quarterly wage data, as necessary, for the bureaus evaluation and reporting of program performance outcomes as required and permitted by various state and federal laws, including the federal Workforce Innovation and Opportunity Act of 2014. Existing law makes a person who knowingly accesses, uses, or discloses this confidential information without authorization guilty of a misdemeanor.

This bill would permit the bureau to access and use any relevant quarterly wage data necessary for the labor market outcome reporting data match requirement described above. The bill would specify that this data would be provided to the extent permitted by state and federal law and regulations. By providing this information to the bureau, the bill would expand the crime related to unauthorized access, use, or disclosure of this information, thereby imposing a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1340

Author:(Chiu, et al.)

As Amended Ver:September 6, 2019

Majority vote

SUMMARY:

Requires institutions regulated by the Bureau for Private Postsecondary Education (BPPE or Bureau) to report identifying, program enrollment, and loan debt information to BPPE. This bill authorizes BPPE to match student information with wage data provided by the Employment Development Department (EDD). This bill requires BPPE to make information available on its Web site when the Director of the Department of Consumer Affairs (DCA) certifies that an updated information technology system is capable of processing data.

The Senate Amendments:

Senate Amendments removed language that would have recodified in state law the federal "gainful employment" rule for private postsecondary institutions so the rule may be enforced by the BPPE.

COMMENTS:

As the number of students served by private postsecondary institutions has increased, so has the focus on fraudulent practices and low academic standards. There have been numerous high-profile federal investigations into the practices of for-profit institutions in recent years. Among the most notable are the United States Government Accountability Office (GAO) series of investigations raising concerns regarding the amount of federal student aid dollars directed to for-profit institutions, the misleading and deceptive recruitment practices at certain institutions, and substandard academic performance expectations in some for-profit programs.

Federal data also raises important questions about program cost and student outcomes within the sector. Students from for-profit institutions have higher default rates on federal student loans than in other sectors, accounting for nearly half of all defaults. According to data from the National Bureau of Economic Research (NBER), for-profit student defaults are 8.7% higher than four-year public institutions and nonprofits and 5.7% higher than community colleges. Student satisfaction information shows for-profit students are less likely to believe their education was worth the price paid.

While NEBR data, which attempts to adjust for student population differences, indicates for-profit students have higher probability of staying with a program through the first year and are somewhat more likely than community college students to obtain an AA degree, they are less likely to continue to higher-level college courses and to gain a BA degree. Further, NEBR indicates that for-profit students are more likely to be idle (not working and no longer enrolled in school) six years after starting college, and are more likely to have experienced substantial unemployment since leaving school.

According to the Author:

"AB 1340 will protect Californians – particularly low-income students of color and veteran students – from overpriced and ineffective career training programs by providing critical data to prospective students and the public on gainful employment (GE) outcomes at private for-profit schools in California. The GE rule was implemented to address the all-too-common problem: A student takes out tens of thousands of dollars in loans to enroll in a career training program they have been told will lead to a good-paying job, only to discover upon that they cannot find that promised job. However, they still face astronomical debt repayments or even loan default, which destroys their credit for years."

"Based on initial data, over 250 programs throughout California did not pass the GE rule. These shoddy programs graduated 56,000 students who left school with close to a billion dollars in student loan debt. Last year, President Trump – the founder of a bogus and scandal-ridden for-profit college, Trump University – and Secretary of Education Betsy DeVos moved to scrap the rule, declaring open season on our most vulnerable students. This bill protects those students from predatory schools by shining a light on the actual wages students are earning after graduation and allowing them to make informed decisions about the true quality and worth of these degrees."

Arguments in Support:

Supporters of AB 1340 argue that this bill will protect students, especially veterans, low-income students, and students of color, from ineffective career training and burdensome debt. According to supporters, protecting students from harm is vastly more effective than trying to make them whole after the harm has occurred. AB 1340 further reduces harm to students by prodding schools to improve their value proposition for students.

Arguments in Opposition:

There is no opposition on file.

FISCAL COMMENTS:

According to the Senate Appropriations Committee, this bill will result in potentially significant ongoing costs, depending on the volume of data requested by the BPPE. Staff notes this bill's direct costs and cost pressures may be reduced significantly, to the extent any costs can be leveraged as part of the BPPE's scheduled transition to a new IT platform in FY 2019-20 and FY 2020-21. Because it is unlikely the entirety of this bill's requirements can be absorbed within the current project scope, staff anticipates unknown costs (potentially mid-hundreds of thousands to low millions) to amend the existing contract and make any change orders; for project oversight and management; and ongoing staffing needs.

VOTES:

ASM HIGHER EDUCATION: 9-1-2

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

NO: Kiley

ABS, ABST OR NV: Choi, Patterson

ASM BUSINESS AND PROFESSIONS: 15-2-3

YES: Low, Bloom, Chen, Chiu, Cunningham, Eggman, Gipson, Gloria, Grayson, Holden, Irwin, McCarty, Medina, Mullin, Ting

NO: Brough, Obernolte

ABS, ABST OR NV: Dahle, Fong, Quirk-Silva

ASM APPROPRIATIONS: 13-4-1

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

NO: Bigelow, Brough, Diep, Obernolte

ABS, ABST OR NV: Fong

ASSEMBLY FLOOR: 60-12-8

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooper, Cunningham, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Waldron, Weber, Wicks, Wood, Rendon

NO: Bigelow, Brough, Dahle, Fong, Gallagher, Kiley, Lackey, Mathis, Melendez, Obernolte, Patterson, Voepel

ABS, ABST OR NV: Chen, Choi, Cooley, Diep, Flora, Eduardo Garcia, Mayes, O'Donnell

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, 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

ABS, ABST OR NV: Beall

UPDATED:

VERSION: September 6, 2019

CONSULTANT: Kevin J. Powers / HIGHER ED. / (916) 319-3960 FN: 0002262

 THIRD READING  

Bill No: AB 1340

Author: Chiu (D), Bauer-Kahan (D), Berman (D), Eggman (D), Low (D) and McCarty (D), et al.

Amended: 9/6/19 in Senate

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 7/1/19

AYES: Glazer, Archuleta, Dodd, Galgiani, Hill, Leyva, Pan, Wilk

NO VOTE RECORDED: Chang

SENATE EDUCATION COMMITTEE: 7-0, 7/10/19

AYES: Leyva, Wilk, Chang, Durazo, Glazer, McGuire, Pan

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

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

ASSEMBLY FLOOR: 60-12, 5/22/19 - See last page for vote

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009: labor market outcome data reporting

SOURCE: Author

DIGEST:

This bill requires institutions regulated by the Bureau for Private Postsecondary Education (BPPE or Bureau) to report identifying, program enrollment, and loan debt information to BPPE. This bill authorizes BPPE to match student information with wage data provided by the Employment Development Department (EDD). This bill requires BPPE to make information available on its Web site when the Director of the Department of Consumer Affairs (DCA) certifies that an updated information technology system is capable of processing data.

Senate Floor Amendments of 9/6/19 resolve chaptering conflicts.

ANALYSIS:

Existing law:

1. Prohibits an institution from promising or guaranteeing employment, or overstating the availability of jobs upon graduation, and from advertising job availability, degree of skill, or length of time required to learn a trade or skill unless the information is accurate and not misleading. (Education Code (EC) § 94897)
2. Specifies requirements regarding enrollment agreements and disclosures including that a student enroll solely by executing an enrollment agreement and that prospective students be provided with a school catalog and a School Performance Fact Sheet (Fact Sheet). The California Private Postsecondary Education Act of 2009 (Act) establishes minimum requirements and disclosures to be made in these documents. (EC §§ 94902-94912)
3. Specifies various disclosure and reporting requirements around completion, placement, licensure and salary of students/graduates and establishes various definitions for this purpose. (EC §§ 94928 and 94929.5)

This bill:

1. Requires institutions to collect and retain for each graduate completing a program at that institution on or after January 1, 2020, information about each graduate, and report information to BPPE annually when the DCA Director certifies that BPPE’s information technology (IT) system has been updated and is capable of processing data, including:
   1. Individual identifying information sufficient to match to wage data from EDD.
   2. The program the graduate was enrolled in.
   3. The graduate’s student loan debt information reported on the School Performance Fact Sheet, if applicable.
2. Specifies that identifying information shall not be disclosed to any other third party than BPPE and EDD unless required by law.
3. Authorizes BPPE to access and use any relevant quarterly wage data from EDD necessary to perform a labor market outcome reporting data match and requires BPPE to match the data reported by institutions with EDD wage data.
4. Requires BPPE to make the relevant program-level and institution-level statistics regarding the earnings levels of graduates and applicable student loan debt information available on its Web site, presented in terms of easily understood labor market measures, consistent with all pertinent state and federal privacy laws. Specifies that labor market outcome data for each program and institution must be for graduates at two years and at five years after their graduation.
5. Requires BPPE to provide the information reported by institutions to EDD for the purpose of fulfilling federal Workforce Innovation and Opportunity Act reporting requirements.
6. Requires BPPE to notify institutions when the DCA director has certified its IT system and specifies that an institution will have 120 days from receiving notification to report the required information.
7. States legislative intent to review the process by which institutions are required to collect and report employment data and reduce duplicative efforts when sufficient data is reported and publicly available.

Background

BPPE is generally responsible for protecting consumers and students against fraud, misrepresentation, or other business practices at private postsecondary institutions that may lead to loss of students’ tuition and related educational funds; establishing and enforcing minimum standards for ethical business practices and the health and safety and fiscal integrity of postsecondary education institutions; and establishing and enforcing minimum standards for instructional quality and institutional stability for all students in all types of private postsecondary educational and vocational institutions.

The United States Department of Education (USDE) establishes that states are responsible for providing primary protection of consumers and students attending postsecondary educational institutions. BPPE approval not only authorizes institutions to operate and serve students in California but also enables institutions to receive public funds through the federal Title IV financial aid programs.

The BPPE is responsible for oversight of private postsecondary educational institutions operating with a physical presence in California. The Act provides for prohibitions on false advertising and inappropriate recruiting and requires disclosure of critical information to students such as program outlines, graduation and job placement rates, and license examination information, and ensures colleges justify those figures. The Act also provides BPPE with enforcement powers necessary to protect consumers. BPPE is also tasked with actively investigating and combatting unlicensed activity, administering the Student Tuition Recovery Fund (STRF), and conducting outreach and education activities for students and private postsecondary educational institutions within the state. STRF exists to relieve or mitigate economic loss suffered by students enrolled at non-exempt private postsecondary education institutions due to the institutions' closure, the institutions' failure to pay refunds or reimburse loan proceeds, or the institutions' failure to pay students' restitution award for a violation of the Act.

Private postsecondary institutions play an important role in ensuring access to higher educational opportunities for California’s students. The landscape of schools that are now regulated under BPPE, and that have become central in California’s discussion of private postsecondary education, has evolved significantly in recent decades. The smaller, independent for-profit institutions that made up the bulk of the former-Bureau’s licensee population have shifted. Today, a large number of California students are being served by multi-campus, publicly-traded institutions with a national presence. These institutions also receive significant public funds; under federal law, up to 90 percent of revenues can come from the Title IV financial aid program and at least 10 percent of revenues must come from non-Title IV sources ("90/10 rule"); however, this can include state aid, veteran's aid, and private loans (among other sources). High-profile state and federal investigations have revealed deceptive and illegal practices by some institutions within the sector. Federal regulators responded by increasing student outcome and institutional accountability measures. Specifically, in California, BPPE’s approval can enable these institutions to access the Title IV program; USDE relies on the Bureau to provide oversight and student protection.

Disclosures. Institutions regulated by BPPE are subject to reporting and disclosure requirements. The Act requires institutions to provide prospective students with a School Performance Fact Sheet (Fact Sheet). The Fact Sheet includes various data regarding graduation rates, job placement, salary, and licensure examination passage rates.

Current requirements for institutions to include information regarding the salaries of graduates can prove difficult to collect and verify. During the prior sunset review oversight of BPPE, one school advised that only 29 percent of graduates responded to surveys regarding employment and salary. Other options for more reliable salary data are available to California’s public institutions. The community colleges, California State University, and University of California are required to provide students and the public data regarding salaries associated with degrees or certificates in specific disciplines. Wage information comes from an agreement between the segment offices and the EDD. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas. This bill provides BPPE the tools to establish a similar system.

Other Tools Aimed At Assisting Students. In 2012, USDE partnered with the Consumer Financial Protection Bureau to develop the Shopping Sheet as a means of promoting transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. According to information provided to financial aid professionals by USDE, the Shopping Sheet (previously referred to as “Know Before You Owe” and the “Model Financial Aid Offer Form”) may be used in place of, or as a supplemental cover sheet to, an institution’s existing financial aid award letter, with the goal of ensuring that families have an easy-to-read form that enables them to compare institutions in terms of grant and scholarship amounts, net costs, graduation rates, loan default rates, median borrowing, and estimated monthly loan payments after graduation. Institutions that have agreed to comply with the Principles of Excellence outlined in Executive Order 13607 are expected to use the Shopping Sheet to provide financial aid information for undergraduate and graduate service members, veterans, military spouses, and other military family members covered by this Order.

In February 2013, the USDE College Affordability and Transparency Center released an interactive College Scorecard, intended to provide information on a college’s affordability and value to enable parents and prospective students to make informed decisions about which college to attend. According to the USDE, the Scorecard highlights key indicators about the cost and value of institutions across the country to help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals. Each Scorecard includes five key pieces of data about a college: costs, graduation rate, loan default rate, average amount borrowed, and employment.

Federal law requires any college that participates in Title IV financial aid programs to post on-line “net price calculators” to help parents and students determine the potential cost of different colleges before they apply. This calculator allows students to calculate an estimated net price of attendance at an institution (defined as cost of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students. The USDE College Affordability and Transparency Center provides a link to the net-price calculator for individual colleges nationally.

In California, the Salary Surfer allows students and the public to see salaries associated with degrees or certificates in specific disciplines. Salary Surfer provides wage data for CCC students who earned an associate’s degree or a credit certificate by using the aggregated earnings of graduates from a five year period. Wage information comes from an agreement between the California Community Colleges Chancellor's Office and the EDD. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas.

Student Debt. As the number of students served by private postsecondary institutions has increased, so has the focus on fraudulent practices and low academic standards. There have been numerous high-profile federal investigations into the practices of for-profit institutions in recent years. Among the most notable are the United States Government Accountability Office (GAO) series of investigations raising concerns regarding the amount of federal student aid dollars directed to for-profit institutions, the misleading and deceptive recruitment practices at certain institutions, and substandard academic performance expectations in some for-profit programs.

Federal data also raises important questions about program cost and student outcomes within the sector. Students from for-profit institutions have higher default rates on federal student loans than in other sectors, accounting for nearly half of all defaults. According to data from the National Bureau of Economic Research (NBER), for-profit student defaults are 8.7 percent higher than four-year public institutions and nonprofits and 5.7 percent higher than community colleges. Student satisfaction information shows for-profit students are less likely to believe their education was worth the price paid. While NEBR data, which attempts to adjust for student population differences, indicates for-profit students have higher probability of staying with a program through the first year and are somewhat more likely than community college students to obtain an AA degree, they are less likely to continue to higher-level college courses and to gain a BA degree. Further, NEBR indicates that for-profit students are more likely to be idle (not working and no longer enrolled in school) six years after starting college, and are more likely to have experienced substantial unemployment since leaving school.

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

According to the Senate Appropriations Committee, this bill will result in potentially significant ongoing costs, depending on the volume of data requested by the BPPE. Staff notes this bill’s direct costs and cost pressures may be reduced significantly, to the extent any costs can be leveraged as part of the BPPE’s scheduled transition to a new IT platform in FY 2019-20 and FY 2020-21. Because it is unlikely the entirety of this bill’s requirements can be absorbed within the current project scope, staff anticipates unknown costs (potentially mid-hundreds of thousands to low millions) to amend the existing contract and make any change orders; for project oversight and management; and ongoing staffing needs.

SUPPORT: (Verified 9/6/19)

California Community Colleges Chancellor’s Office

California Conference of the American Association of University Professors

California Faculty Association

California Low Income Consumer Coalition

Children’s Advocacy Institute Center for Public Interest Law

Community Youth Center of San Francisco

Consumer Federation of California

Consumer Reports Advocacy

Housing and Economic Rights Advocates

Larkin Street Youth Services

National Student Legal Defense Network

NextGen California

Public Advocates

Public Counsel

Public Law Center

SEIU California

Student Debt Crisis

The Century Foundation

The Institute for College Access and Success

Veterans Education Success

Veterans Legal Clinic

Youth Leadership Institute

OPPOSITION: (Verified 9/6/19)

None received

ARGUMENTS IN SUPPORT: Supporters of AB 1340 argue that this bill will protect students, especially veterans, low-income students, and students of color, from ineffective career training and burdensome debt. According to supporters, protecting students from harm is vastly more effective than trying to make them whole after the harm has occurred. AB 1340 further reduces harm to students by prodding schools to improve their value proposition for students.

ASSEMBLY FLOOR: 60-12, 5/22/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooper, Cunningham, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Waldron, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Dahle, Fong, Gallagher, Kiley, Lackey, Mathis, Melendez, Obernolte, Patterson, Voepel

NO VOTE RECORDED: Chen, Choi, Cooley, Diep, Flora, Eduardo Garcia, Mayes, O'Donnell

Prepared by: Sarah Mason / B., P. & E.D. /

9/9/19 18:40:17

**** END ****

 THIRD READING  

Bill No: AB 1340

Author: Chiu (D), Bauer-Kahan (D), Berman (D), Eggman (D), Low (D) and McCarty (D), et al.

Amended: 8/30/19 in Senate

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 7/1/19

AYES: Glazer, Archuleta, Dodd, Galgiani, Hill, Leyva, Pan, Wilk

NO VOTE RECORDED: Chang

SENATE EDUCATION COMMITTEE: 7-0, 7/10/19

AYES: Leyva, Wilk, Chang, Durazo, Glazer, McGuire, Pan

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

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

ASSEMBLY FLOOR: 60-12, 5/22/19 - See last page for vote

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009: labor market outcome data reporting

SOURCE: Author

DIGEST:

This bill requires institutions regulated by the Bureau for Private Postsecondary Education (BPPE or Bureau) to report identifying, program enrollment, and loan debt information to BPPE. This bill authorizes BPPE to match student information with wage data provided by the Employment Development Department (EDD). This bill requires BPPE to make information available on its Web site when the Director of the Department of Consumer Affairs (DCA) certifies that an updated information technology system is capable of processing data.

ANALYSIS:

Existing law:

1. Prohibits an institution from promising or guaranteeing employment, or overstating the availability of jobs upon graduation, and from advertising job availability, degree of skill, or length of time required to learn a trade or skill unless the information is accurate and not misleading. (Education Code (EC) § 94897)
2. Specifies requirements regarding enrollment agreements and disclosures including that a student enroll solely by executing an enrollment agreement and that prospective students be provided with a school catalog and a School Performance Fact Sheet (Fact Sheet). The California Private Postsecondary Education Act of 2009 (Act) establishes minimum requirements and disclosures to be made in these documents. (EC §§ 94902-94912)
3. Specifies various disclosure and reporting requirements around completion, placement, licensure and salary of students/graduates and establishes various definitions for this purpose. (EC §§ 94928 and 94929.5)

This bill:

1. Requires institutions to collect and retain for each graduate completing a program at that institution on or after January 1, 2020, information about each graduate, and report information to BPPE annually when the DCA Director certifies that BPPE’s information technology (IT) system has been updated and is capable of processing data, including:
   1. Individual identifying information sufficient to match to wage data from EDD.
   2. The program the graduate was enrolled in.
   3. The graduate’s student loan debt information reported on the School Performance Fact Sheet, if applicable.
2. Specifies that identifying information shall not be disclosed to any other third party than BPPE and EDD unless required by law.
3. Authorizes BPPE to access and use any relevant quarterly wage data from EDD necessary to perform a labor market outcome reporting data match and requires BPPE to match the data reported by institutions with EDD wage data.
4. Requires BPPE to make the relevant program-level and institution-level statistics regarding the earnings levels of graduates and applicable student loan debt information available on its Web site, presented in terms of easily understood labor market measures, consistent with all pertinent state and federal privacy laws. Specifies that labor market outcome data for each program and institution must be for graduates at two years and at five years after their graduation.
5. Requires BPPE to provide the information reported by institutions to EDD for the purpose of fulfilling federal Workforce Innovation and Opportunity Act reporting requirements.
6. Requires BPPE to notify institutions when the DCA director has certified its IT system and specifies that an institution will have 120 days from receiving notification to report the required information.
7. States legislative intent to review the process by which institutions are required to collect and report employment data and reduce duplicative efforts when sufficient data is reported and publicly available.

Background

BPPE is generally responsible for protecting consumers and students against fraud, misrepresentation, or other business practices at private postsecondary institutions that may lead to loss of students’ tuition and related educational funds; establishing and enforcing minimum standards for ethical business practices and the health and safety and fiscal integrity of postsecondary education institutions; and establishing and enforcing minimum standards for instructional quality and institutional stability for all students in all types of private postsecondary educational and vocational institutions.

The United States Department of Education (USDE) establishes that states are responsible for providing primary protection of consumers and students attending postsecondary educational institutions. BPPE approval not only authorizes institutions to operate and serve students in California but also enables institutions to receive public funds through the federal Title IV financial aid programs.

The BPPE is responsible for oversight of private postsecondary educational institutions operating with a physical presence in California. The Act provides for prohibitions on false advertising and inappropriate recruiting and requires disclosure of critical information to students such as program outlines, graduation and job placement rates, and license examination information, and ensures colleges justify those figures. The Act also provides BPPE with enforcement powers necessary to protect consumers. BPPE is also tasked with actively investigating and combatting unlicensed activity, administering the Student Tuition Recovery Fund (STRF), and conducting outreach and education activities for students and private postsecondary educational institutions within the state. STRF exists to relieve or mitigate economic loss suffered by students enrolled at non-exempt private postsecondary education institutions due to the institutions' closure, the institutions' failure to pay refunds or reimburse loan proceeds, or the institutions' failure to pay students' restitution award for a violation of the Act.

Private postsecondary institutions play an important role in ensuring access to higher educational opportunities for California’s students. The landscape of schools that are now regulated under BPPE, and that have become central in California’s discussion of private postsecondary education, has evolved significantly in recent decades. The smaller, independent for-profit institutions that made up the bulk of the former-Bureau’s licensee population have shifted. Today, a large number of California students are being served by multi-campus, publicly-traded institutions with a national presence. These institutions also receive significant public funds; under federal law, up to 90 percent of revenues can come from the Title IV financial aid program and at least 10 percent of revenues must come from non-Title IV sources ("90/10 rule"); however, this can include state aid, veteran's aid, and private loans (among other sources). High-profile state and federal investigations have revealed deceptive and illegal practices by some institutions within the sector. Federal regulators responded by increasing student outcome and institutional accountability measures. Specifically, in California, BPPE’s approval can enable these institutions to access the Title IV program; USDE relies on the Bureau to provide oversight and student protection.

Disclosures. Institutions regulated by BPPE are subject to reporting and disclosure requirements. The Act requires institutions to provide prospective students with a School Performance Fact Sheet (Fact Sheet). The Fact Sheet includes various data regarding graduation rates, job placement, salary, and licensure examination passage rates.

Current requirements for institutions to include information regarding the salaries of graduates can prove difficult to collect and verify. During the prior sunset review oversight of BPPE, one school advised that only 29 percent of graduates responded to surveys regarding employment and salary. Other options for more reliable salary data are available to California’s public institutions. The community colleges, California State University, and University of California are required to provide students and the public data regarding salaries associated with degrees or certificates in specific disciplines. Wage information comes from an agreement between the segment offices and the EDD. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas. This bill provides BPPE the tools to establish a similar system.

Other Tools Aimed At Assisting Students. In 2012, USDE partnered with the Consumer Financial Protection Bureau to develop the Shopping Sheet as a means of promoting transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. According to information provided to financial aid professionals by USDE, the Shopping Sheet (previously referred to as “Know Before You Owe” and the “Model Financial Aid Offer Form”) may be used in place of, or as a supplemental cover sheet to, an institution’s existing financial aid award letter, with the goal of ensuring that families have an easy-to-read form that enables them to compare institutions in terms of grant and scholarship amounts, net costs, graduation rates, loan default rates, median borrowing, and estimated monthly loan payments after graduation. Institutions that have agreed to comply with the Principles of Excellence outlined in Executive Order 13607 are expected to use the Shopping Sheet to provide financial aid information for undergraduate and graduate service members, veterans, military spouses, and other military family members covered by this Order.

In February 2013, the USDE College Affordability and Transparency Center released an interactive College Scorecard, intended to provide information on a college’s affordability and value to enable parents and prospective students to make informed decisions about which college to attend. According to the USDE, the Scorecard highlights key indicators about the cost and value of institutions across the country to help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals. Each Scorecard includes five key pieces of data about a college: costs, graduation rate, loan default rate, average amount borrowed, and employment.

Federal law requires any college that participates in Title IV financial aid programs to post on-line “net price calculators” to help parents and students determine the potential cost of different colleges before they apply. This calculator allows students to calculate an estimated net price of attendance at an institution (defined as cost of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students. The USDE College Affordability and Transparency Center provides a link to the net-price calculator for individual colleges nationally.

In California, the Salary Surfer allows students and the public to see salaries associated with degrees or certificates in specific disciplines. Salary Surfer provides wage data for CCC students who earned an associate’s degree or a credit certificate by using the aggregated earnings of graduates from a five year period. Wage information comes from an agreement between the California Community Colleges Chancellor's Office and the EDD. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas.

Student Debt. As the number of students served by private postsecondary institutions has increased, so has the focus on fraudulent practices and low academic standards. There have been numerous high-profile federal investigations into the practices of for-profit institutions in recent years. Among the most notable are the United States Government Accountability Office (GAO) series of investigations raising concerns regarding the amount of federal student aid dollars directed to for-profit institutions, the misleading and deceptive recruitment practices at certain institutions, and substandard academic performance expectations in some for-profit programs.

Federal data also raises important questions about program cost and student outcomes within the sector. Students from for-profit institutions have higher default rates on federal student loans than in other sectors, accounting for nearly half of all defaults. According to data from the National Bureau of Economic Research (NBER), for-profit student defaults are 8.7 percent higher than four-year public institutions and nonprofits and 5.7 percent higher than community colleges. Student satisfaction information shows for-profit students are less likely to believe their education was worth the price paid. While NEBR data, which attempts to adjust for student population differences, indicates for-profit students have higher probability of staying with a program through the first year and are somewhat more likely than community college students to obtain an AA degree, they are less likely to continue to higher-level college courses and to gain a BA degree. Further, NEBR indicates that for-profit students are more likely to be idle (not working and no longer enrolled in school) six years after starting college, and are more likely to have experienced substantial unemployment since leaving school.

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

According to the Senate Appropriations Committee, this bill will result in potentially significant ongoing costs, depending on the volume of data requested by the BPPE. Staff notes this bill’s direct costs and cost pressures may be reduced significantly, to the extent any costs can be leveraged as part of the BPPE’s scheduled transition to a new IT platform in FY 2019-20 and FY 2020-21. Because it is unlikely the entirety of this bill’s requirements can be absorbed within the current project scope, staff anticipates unknown costs (potentially mid-hundreds of thousands to low millions) to amend the existing contract and make any change orders; for project oversight and management; and ongoing staffing needs.

SUPPORT: (Verified 8/30/19)

California Community Colleges Chancellor’s Office

California Conference of the American Association of University Professors

California Faculty Association

California Low Income Consumer Coalition

Children’s Advocacy Institute Center for Public Interest Law

Community Youth Center of San Francisco

Consumer Federation of California

Consumer Reports Advocacy

Housing and Economic Rights Advocates

Larkin Street youth Services

National Student Legal Defense Network

NextGen California

Public Advocates

Public Counsel

Public Law Center

SEIU California

Student Debt Crisis

The Century Foundation

The Institute for College Access and Success

Veterans Education Success

Veterans Legal Clinic

Youth Leadership Institute

OPPOSITION: (Verified 8/30/19)

None received

ARGUMENTS IN SUPPORT: Supporters of AB 1340 argue that this bill will protect students, especially veterans, low-income students, and students of color, from ineffective career training and burdensome debt. According to supporters, protecting students from harm is vastly more effective than trying to make them whole after the harm has occurred. AB 1340 further reduces harm to students by prodding schools to improve their value proposition for students.

ASSEMBLY FLOOR: 60-12, 5/22/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooper, Cunningham, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Waldron, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Dahle, Fong, Gallagher, Kiley, Lackey, Mathis, Melendez, Obernolte, Patterson, Voepel

NO VOTE RECORDED: Chen, Choi, Cooley, Diep, Flora, Eduardo Garcia, Mayes, O'Donnell

Prepared by: Sarah Mason / B., P. & E.D. /

9/3/19 11:30:52

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1340 (Chiu) - Private postsecondary education: California Private Postsecondary Education Act of 2009: labor market outcome data reporting

Bill Summary:

Assembly Bill 1340 would require the Bureau of Private Postsecondary Education (BPPE) to collect specified data on graduates of private postsecondary institutions, and to publish program- and institution-based aggregate debt-to-income information on the Bureau’s website based on information matched with wage data provided by the Employment Development Division (EDD).

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 30, 2019

Fiscal Impact:

• Employment Development Division: Unknown, potentially significant ongoing costs, depending on the volume of data requested by the BPPE. Each contract must include a $1,500 administrative charge ($500 over a three-year contract, per contract, or prorated at $125 per quarter) to process and maintain the contract. In addition, the cost of the data-sharing agreement depends on the volume of data.
• Bureau of Private Postsecondary Education: Staff notes the bill’s direct costs and cost pressures may be reduced significantly, to the extent any costs can be leveraged as part of the BPPE’s scheduled transition to a new IT platform in FY 2019-20 and FY 2020-21. Because it is unlikely the entirety of the bill’s requirements can be absorbed within the current project scope. Staff anticipates unknown costs (potentially mid-hundreds of thousands to low millions) to amend the existing contract and make any change orders; for project oversight and management; and ongoing staffing needs, up to 2.0 PYs. The database would need to be updated for the 12,000 programs, 1,100 institutions, and 300,000 graduates annually, and for IT costs would be spread over several years.

Author Amendments:

The author’s amendments would do the following:

• Makes the bill operative after the Director of Department of Consumer Affairs certifies the BPPE’s IT system has been updated and is capable of processing data;
• Requires BPPE to notify institutions when the certification has occurred, and requires an institution to report and comply within 120 days of that notice;
• Clarifies the bill’s provisions pertain to a graduate completing a program after Jan. 1, 2020, at a specified private postsecondary institution;
• Requires all social security numbers or federal tax information numbers must be kept confidential, unless disclosure is required by law;
• Requires BPPE to provide the data to EDD, and to enable to the BPPE to access and use quarterly wage data to perform the labor market outcome reporting data match, only to the extent permitted by state and federal law; and,
• Makes other minor, technical changes.

-- END --

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1340 (Chiu) - Private postsecondary education: California Private Postsecondary Education Act of 2009: labor market outcome data reporting

Bill Summary:

Assembly Bill 1340 would require the Bureau of Private Postsecondary Education (BPPE) to collect specified data on graduates of private postsecondary institutions, and to publish program- and institution-based aggregate debt-to-income information on the Bureau’s website based on information matched with wage data provided by the Employment Development Division (EDD).

Fiscal Impact:

Employment Development Division: Unknown, potentially significant ongoing costs, depending on the volume of data requested by the BPPE. In order to implement the bill, the EDD must draft a new contract with the Bureau, and each contract must include a $1,500 administrative charge ($500 over a three-year contract, per contract, or prorated at $125 per quarter) to process and maintain the contract. In addition, the cost of the data-sharing agreement depends on the volume of data. Based on EDD’s current data-sharing fee structure, and staff assumes approximately 300,000 graduates annually, the cost for the agreement could be $438.

Bureau of Private Postsecondary Education: $993,000 in the first fiscal year, $1.1 million in the second fiscal year, $748,000 in the third fiscal year, and $560,000 in the fourth fiscal year and ongoing for 3.0 positions to complete oversight of the new labor market outcome reporting, update the database for the 12,000 programs, 11,000 institutions, and 300,000 graduates annually, and for IT costs to be spread over the first three years and ongoing.

One-time $1.1 million IT cost spread over the first three years and $200,000 ongoing for:

• $613,000 in FY 1 to develop detailed requirements for the IT solution (platform and configuration, interface with EDD, calculations and reports), purchase the applicable platform/software, and provide project oversight
• $424,000 in FY 2 to develop/configure the software and provide project oversight
• $63,000 in FY 3 to complete project oversight

Additionally, the following limited term and ongoing costs are identified:

• $125,000 for a two-year Limited Term Information Technology Specialist I in FY 2 and FY 3
• $200,000 ongoing, beginning in FY 2, for annual platform subscription costs.

The program is currently scheduled to transition to a new IT platform during FY 2019-20 and FY 20-21. Staff notes the bill’s requirements could extend the current project schedule, as well as unknown costs related to restructuring any IT connectivity. In addition, the fiscal estimate assumes adherence to the Project Approval Lifecycle, including a six months of planning, one year of development, and one year of maintenance.

Background:

The BPPE is generally responsible for protecting students against fraud, misrepresentation, or other business practices at private postsecondary institutions; and for establishing and enforcing business and instructional quality standards. Under the California Private Postsecondary Act of 2009 (AB 48, Portantino, Chapter 310, Statutes of 2009), the Bureau must oversee private postsecondary institutions and can take formal actions, including closure, against an institution/school. The Bureau must also administer the Student Tuition Recovery Fund (STRF), which provides refunds to students affected by the possible closure of an institution/school, by the institutions' failure to refund or reimburse loan proceeds, or by the institutions' failure to pay students' restitution award. The BPPE also enables institutions to receive public funds through the federal Title IV financial aid programs.

Current law requires an institution to submit an annual report to the bureau that includes, among other things, the School Performance Fact Sheet. The Fact Sheet includes completion rates, job placement rates within the career fields, license examination passage rates, salaries or wages, and the most recent three-year cohort default rate. The report and fact sheets are available on the institution and Bureau’s website (Education Code §94910, 9434, 94913 and 94878). In California, the Salary Surfer allows the public to see salaries associated with specific degrees or certificates in disciplines. Wage information comes from an agreement between the California Community Colleges Chancellor's Office and the EDD.

Proposed Law:

AB 1340 includes the following provisions, among others, when the DCA Director certifies that BPPE’s information technology system is updated and capable of processing data, requires institutions to report information about each graduate, including:

• Individual identifying information sufficient to match to wage data from EDD.
• The program the graduate was enrolled in.
• The graduate’s student loan debt information reported on the School Performance Fact Sheet, if applicable.

The bill also includes the following provisions, among others:

• Authorizes BPPE to access any relevant and necessary quarterly wage data from EDD, and requires BPPE to match data reported by institutions with EDD to perform a labor market outcome reporting data match.
• Requires BPPE to make the relevant program-level and institution-level statistics regarding the earnings levels of graduates and applicable student loan debt information available on its website, consistent with all pertinent state and federal privacy laws, and specifies that labor market outcome data for each program and institution must be for graduates at two years and at five years after their graduation.

Related Legislation:

• AB 1341 (Berman, 2019) would require bureau oversight for a nonprofit that operated as a for-profit institution unless the Attorney General makes certain determinations. AB 1341 is pending in the Senate Appropriations Committee.
• AB 1342 (Bauer-Kahan, 2019) would require a nonprofit corporation that operates or controls a private postsecondary educational institution to obtain the Attorney General’s consent before entering into certain agreements or transactions. AB 1342 is pending on the Senate Appropriations Committee suspense file.
• AB 1343 (Eggman, 2019) would have, beginning January 1, 2023, prohibited new enrollments at a private postsecondary educational institution, unless the institution meets one of two specified scenarios about the institution’s tuition revenue composition. AB 1343 is in the Senate Business, Professions, and Economic Development Committee.
• AB 1344 (Bauer-Kahan, 2019) would, effective July 1, 2022, require an out-of-state private postsecondary educational institution to provide the Bureau with specified information regarding whether or not a specified entity, has been subject to certain adverse state or federal actions in the previous 5 years before seeking authorization to operate in California. AB 1344 is pending in the Senate Appropriations Committee.
• AB 1345 (McCarty, 2019) would revise existing restrictions on private postsecondary school enrollment recruitment compensation. The bill would exempt nonprofit, regionally accredited institutions that grant undergraduate or graduate degrees, or both, from the Act. AB 1345 is in the Senate Appropriations Committee.
• AB 1346 (Medina, 2019) expands the definition of “economic loss,” as it pertains to the Student Tuition Recovery Fund (STRF). AB 1346 is in the Senate Appropriations Committee.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: Hearing Date: July 10, 2019

Subject:

SUMMARY

This bill requires institutions regulated by the Bureau for Private Postsecondary Education (bureau) to report identifying, program enrollment, and loan debt information to bureau. Authorizes bureau to match student information with wage data provided by the Employment Development Department (EDD). Requires bureau to make information available on its website when the Director of the Department of Consumer Affairs (DCA) certifies that an updated information technology system is capable of processing data.

BACKGROUND

Existing law:

1. Establishes the California Private Postsecondary Act of 2009 and requires the bureau to, among other things, review, investigate and approve private postsecondary institutions, programs and courses of instruction and authorizes bureau to take formal actions against an institution/school to ensure compliance with the Act, including seeking closure of an institution/school if determined necessary. The Act also provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and that bureau shall administer the Student Tuition Recovery Fund to provide refunds to students affected by the possible closure of an institution/school. Existing law repeals the act on January 1, 2021. (Education Code (EC) § 94800 et seq.)
2. Under the Act, requires a private postsecondary institution to provide a prospective student, prior to enrollment, with a School Performance Fact Sheet for each educational program containing information related to completion rates, job placement rates within the career fields for which the program was designed, license examination passage rates, salaries or wages, and the most recent three-year cohort default rate. In order to remain in compliance, the California Private Postsecondary Education Act of 2009 (Act) requires an institution to submit an annual report to the bureau that includes, among other things, the School Performance Fact Sheet. The report and fact sheets are made available on the institution’s as well as the bureau’s Internet Web site. (EC § 94910, 9434, 94913 and 94878)
3. Requires the Director of Employment Development to permit access to certain wage data by various state entities including:
   1. The bureau to access relevant quarterly wage data, as necessary, for the bureau’s evaluation and reporting of program performance outcomes as required and permitted by various state and federal laws, including the federal Workforce Innovation and Opportunity Act of 2014. Existing law makes a person who knowingly accesses, uses, or discloses this confidential information without authorization guilty of a misdemeanor. (Unemployment Insurance Code (UIC § 1095 (aj))
   2. The Student Aid Commission to provide wage information in order to verify the employment status of an individual applying for a Cal Grant C award. (UIC § 7095 (ag))
   3. The State Department of Education, the University of California, the California State University, and the Chancellor of the California Community Colleges, to obtain quarterly wage data on students who have attended their respective systems to assess the impact of education on the employment and earnings of those students, to conduct the annual analysis of district-level and individual district or postsecondary education system performance in achieving priority educational outcomes, and to submit the required reports to the Legislature and the Governor. Existing law requires that information be provided to the extent permitted by federal statutes and regulations. (UIC § 1095 (ab))

ANALYSIS

This bill:

1. Requires an institution, for each of its graduates, to report to the bureau all of the following data:
   1. Individual identifying information for each graduate of the institution

sufficient to match to wage data from the EDD.

• 1. The program the graduate was enrolled in.
  2. The graduate’s student loan debt information reported on the School

Performance Fact Sheet, if applicable.

1. Requires that the bureau match the data reported by institutions with wage data from the EDD.
2. States that its provisions would not be operative until the DCA certifies that the bureau’s information technology system has been updated and is capable of process data as required by the bill.
3. Requires that the bureau make available on its internet website the relevant program-level and institution-level statistics, presented in terms of easily understood labor market measures and consistent with all pertinent state and federal privacy laws, regarding the earning levels of graduates and student debt information reported on the School Performance Fact Sheet, if applicable.
4. Requires that the labor market outcome data reported for each program and institution, at a minimum, provide data relating to graduates at two-years and at five-years after their graduation.
5. Permits the bureau to access and use any relevant quarterly wage data necessary for the gainful employment labor market outcome reporting data match requirement and specifies that this data would be provided to the extent permitted by federal law and regulations.
6. States that it is the intent of the Legislature to review the process by which institutions are required to collect and report employment data and reduce duplicative efforts.
7. Makes various technical changes.

STAFF COMMENTS

1. Need for the bill. According to the author, “thousands of Californians have enrolled in career training programs they believed would lead to a job that justified the student loans they were taking on, only to discover too late that they had dug themselves in a deep hole with no return on investment. In 2014, after a five-year rulemaking process, the US Department of Education proposed the “Gainful Employment,” rule to enforce the federal Higher Education Act’s requirement that all career training programs receiving Title IV federal student aid “prepare students for gainful employment in a recognized occupation.” The rule was intended to address concerns about educational programs that provide career training to students, but instead are leaving them with high levels of student loan debt in relation to their earnings after graduation, or are leading them to default. Many of these programs are offered by proprietary, for-profit colleges-and these programs are the main route through which proprietary schools can access federal financial aid dollars.

…The US Department of Education under Secretary Devos has proposed to rescind the gainful employment rule completely. This would be costly not only for students, but also for taxpayers, Evidence shows the gainful employment rule has had the intended effect of improving the value of programs available to students- many colleges have improved program outcomes and affordability and those programs that could not be improved were closed. According to the New America Foundation, by August 2018, almost two-thirds of failing programs from the first cohort of gainful employment data were no longer enrolling students. In addition, the Congressional Budget Office projected that repealing the gainful employment rule would increase federal spending by $1.3 billion over 10 years.

…While California’s community college and state university systems and strong financial aid programs have made quality, affordable college options available to millions, there are many still struggling in the state. The low-income, minority, and veteran students overwhelmingly targeted by this sector are precisely the ones who stand to lose the most from this extreme agenda- and make up a significant portion of California’s students overall. California has a responsibility to step in and ensure our students are well protected and are being served responsibly by institutions operating in our state.”

1. Employment and student debt information currently reported by schools. Current law requires an institution regulated by the bureau to provide a prospective student with a School Performance Fact Sheet containing, among other things, the number of graduates employed in the field, job placement rates, salary and wage information of employed graduates and federal student debt information including the percent of students who defaulted on federal student loans. Each calculation is based on a formula outlined in statute. The School Performance Fact Sheet provides students with a reasonable perspective on the performance of the institution or program for graduating students, graduating it’s students with manageable debt load and offering training that leads to quality employment. It assists prospective students in making informed decisions when selecting a program at a private postsecondary institution.

In addition to disclosing the above information to students, this bill requires schools report to the bureau the same student debt information disclosed on the School Performance Fact Sheet as well as personal identifying information of its graduates sufficient to match the information with EDD wage data. With this information, it further calls on the bureau to make available on its website statistics regarding the earning levels of graduates and student debt information at two and five-years after graduation. Although, earning levels and job placement rates are already reported in the School Performance Fact Sheet and posted online, presumably this bill adds an additional layer for which employment data may be verified and ensure a certain caliber of accuracy. Staff understands information disclosed on the fact sheet in part is collected through self-reported data.

Additionally, acquiring labor market outcome data in the manner being proposed is consistent with the process used for the state’s public higher education systems. The public’s use the data match agreement to assess the impact of education on student employment and earnings, as well as to analyze performance of their respective programs.

1. Student loan debt average 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 nonprofit 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 is classified as low-debt state.

In the private for-profit sector, however, the numbers show a different narrative. Specifically, TICAS reports that over half of all California student loan defaulters in 2017 had borrowed to attend a for-profit college. The report further notes that compared to public and nonprofit colleges in California, for-profit colleges have lower graduation rates, higher rates of default among borrowers. Nationally, of the top 35 schools in the country where students hold the most student loan debt, over half were for-profit schools in 2014. The state and federal government have attempted to implement policies that guard against high debt burdens for college graduates.

1. Federal gainful employment regulations. To qualify for federal student aid, federal law requires that most for-profit programs and certificate programs at private nonprofit and public institutions (including community colleges) prepare students for "gainful employment in a recognized occupation." These regulations distinguish programs that provide affordable training that lead to well-paying jobs from programs that leave students with poor earnings prospects and high amounts of debt. The regulations require institutions to provide key information on program costs, whether students graduate, how much they earn, and how much debt they may accumulate. These required standard disclosures are intended to help students compare colleges when searching for and selecting a program. Staff notes, for purposes of qualifying for financial aid California established a standard (i.e. a cohort default rate threshold) independent of the federal gainful employment rule.

Education Secretary Betsy DeVos issued the final repeal of an Obama-era regulation known as the gainful employment rule on June 28, 2019. In rescinding the rule, the department is eliminating the loss of federal aid for schools that promise to furnish students with specific career skills but fail to prepare them for the job market. The repeal will take effect in July 2020. In January 2019, the department published a review of gainful employment data intended for enforcement purposes and considered reliable. According to a review of the data by TICAS, more than 350,000 graduates carried nearly $7.5 billion in debt and attended career education programs that failed to meet minimum standards. Almost 98 percent of these programs were for-profit programs.

To a smaller extent, this bill seeks to monitor outcomes and close a gap in information relating to student employment after graduation.

1. Private for-profit sector. According to the Legislative Analyst’s Office (LAO), California’s higher education system (public and private) serves 3.7 million students (2016-17 academic year). Private for-profit colleges represent 9 percent of that enrollment among approximately 180 campuses. In comparison, California community colleges have the largest share of students at 59 percent with 114 campuses and the private nonprofit sector serving 10 percent of students spread amongst 700 campuses. The majority of degrees produced by private for-profit colleges are certificates and associate degrees, 61 percent of students are over the age of 25 and 57 percent are from historically underrepresented communities. Notably, the sector serves a significant portion of Californians.
2. Double referral. This bill was previously heard by the Senate Business, Professions and Economic Development Committee which has jurisdiction over bills relating to business and professional practices and periodically conducts sunset review of various boards and licensing agencies, including the Bureau.
3. Related legislation.

AB 1341 (Berman, 2019) prohibits the bureau from verifying an exemption from bureau oversight for a nonprofit that operated as a for-profit institution unless the Attorney General makes certain determinations. AB 1341 is also on the committee’s agenda today.

AB 1344 (Bauer-Kahan, 2019) expands existing requirements that out-of-state private postsecondary educational institutions register with, and report information to, the bureau to include additional information regarding adverse actions and to authorize the bureau upon review to revoke an out-of-state school’s ability to enroll students in California, as specified. AB 1344 is also on the committee’s agenda today.

AB 1340 (Chiu, 2019) requires certain private postsecondary schools to report to the bureau information about their graduates and match that information with wage data from the EDD. It also requires the bureau to make available on its website information regarding the earnings levels of graduates and student debt information. AB 1340 is also on the committee’s agenda today.

AB 1345 (McCarty, 2019) revises existing restrictions on private postsecondary school enrollment recruitment compensation to prohibit institutions from paying a person by means of a commission, bonus, quota, or other similar method contingent upon student recruitment, enrollment, admissions, attendance, financial aid, or sales of educational materials. AB 1345 is also on the committee’s agenda today.

AB 1346 (Medina, 2019) expands the definition of “economic loss,” as it pertains to the Student Tuition Recovery Fund (STRF), to include all amounts paid by a student to the institution, any amounts paid in connection with attending the institution, and all principal, interest, and charges of any kind for any loan incurred by the student to pay these amounts. AB 1346 is also on the committee’s agenda today.

AB 1342 (Bauer-Kahan, 2019) requires a nonprofit corporation that operates or controls a private postsecondary educational institution to obtain the Attorney General’s (AG) consent before entering into certain agreements or transactions, including an agreement or transaction to sell or convey its assets to, or to transfer control, responsibility, or governance of a material amount of its assets to, a for-profit corporation or mutual benefit corporation. AB 1342 was approved by this committee and is pending in Senate Appropriations Committee.

SUPPORT

California Community Colleges Chancellor’s Office

California Conference of the American Association of University Professors

California Faculty Association

California Low Income Consumer Coalition

Children’s Advocacy Institute Center for Public Interest Law

Community Youth Center of San Francisco

Consumer Federation of California

Consumer Reports Advocacy

Housing and Economic Rights Advocates

Larkin Street youth Services

National Student Legal Defense Network

NextGen California

Public Advocates

Public Counsel

Public Law Center

SEIU California

Student Debt Crisis

The Century Foundation

The Institute for College Access and Success

Veterans Education Success

Veterans Legal Clinic

Youth Leadership Institute

OPPOSITION

American Career College

California Association of Private Postsecondary Schools

California Northstate University

Professional Beauty Federation of California

San Joaquin Valley College

UEI College

West Coast University

Zovio

-- END --

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Steven Glazer, Chair

2019 - 2020 Regular

Bill No: AB 1340 Hearing Date: July 1, 2019

Subject: Private postsecondary education: California Private Postsecondary Education Act of 2009: labor market outcome data reporting

SUMMARY:

Requires institutions regulated by the Bureau for Private Postsecondary Education (BPPE or Bureau) to report identifying, program enrollment, and loan debt information to BPPE. Authorizes BPPE to match student information with wage data provided by the Employment Development Department (EDD). Requires BPPE to make information available on its website when the Director of the Department of Consumer Affairs (DCA) certifies that an updated information technology system is capable of processing data.

NOTE:

This bill is referred, second, to the Senate Committee on Education.

Existing law:

1. Establishes the California Private Postsecondary Education Act of 2009 (Act) until January 1, 2021, and requires the BPPE within the DCA to, among other things, review, investigate and approve private postsecondary institutions, programs and courses of instruction pursuant to the Act and authorizes BPPE to take formal actions against an institution/school to ensure compliance with the Act to include closure of an institution/school, if determined necessary. The Act provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and the BPPE is required to administer the Student Tuition Recovery Fund (STRF) to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EC) § 94800 et seq.)
2. Establishes an Office of Student Assistance and Relief (Office) for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. Tasks the Office with: conducting outreach and providing information and assistance to students who have been affected by the unlawful activities or closure of an institution; serving as a primary point of contact to address the needs of private postsecondary education students and working in consultation with state and federal agencies, including, but not limited to, the California Student Aid Commission (CSAC), the Office of the Chancellor of the California Community Colleges, the Department of Veterans Affairs, the federal Consumer Financial Protection Bureau, and the United States Department of Education. Authorizes the Office to provide outreach to students and prospective students to provide them with, among other information, information on making informed decisions in selecting postsecondary educational institutions, student rights regarding school performance disclosures, enrollment agreements, and cancellation and refund policies, how to contact the office and the bureau for assistance, student loan rights and assistance, and free nonprofit community based resources. (EC §§ 94949.7 - 94949.73)
3. Prohibits an institution from promising or guaranteeing employment, or overstating the availability of jobs upon graduation, and from advertising job availability, degree of skill, or length of time required to learn a trade or skill unless the information is accurate and not misleading. (EC § 94897)
4. Specifies requirements regarding enrollment agreements and disclosures including that a student enroll solely by executing an enrollment agreement and that prospective students be provided with a school catalog and a School Performance Fact Sheet (Fact Sheet). The Act establishes minimum requirements and disclosures to be made in these documents. (EC §§ 94902-94912)
5. Specifies various disclosure and reporting requirements around completion, placement, licensure and salary of students/graduates and establishes various definitions for this purpose. Requires an institution to annually report to the Bureau, as part of the annual report, and publish in its Fact Sheet, the completion rate for each program. Requires reporting of an institution’s job placement rate, license examination passage rates for the immediately preceding two years for programs leading to employment for which passage of a state licensing examination is required, salary and wage information, if applicable, the most recent official three-year cohort default rate reported by the United States Department of Education (USDE) for the institution and the percentage of enrolled students receiving federal student loans. States that the Bureau is not limited from being authorized to collect information from an institution to ensure that the information is useful to students, useful to policymakers, based upon the most credible and verifiable data available and that does not impose undue compliance burdens on an institution.
   (EC §§ 94928 and 94929.5)
6. Establishes the Cal Grant Program under the administration of CSAC, and establishes eligibility requirements for awards under the program for participating students attending qualifying institutions. As a condition for participation in the program, existing law requires each Cal Grant participating institution to annually report specified information to CSAC, which CSAC is required to provide on its Internet Website in a searchable database. Current law also requires the CSAC to provide other information and links useful to students and parents who are in the process of selecting a college or university. (EC § 69433.2)
7. Requires public, private or independent postsecondary educational institutions (other than the California Community Colleges who are requested to comply) to state in all printed and online financial aid materials issued or distributed by the institution that federal student loans are required by law to provide a range of flexible repayment options, including, but not limited to, income-based repayment and income-contingent repayment plans, and loan forgiveness benefits, as specified. Requires these institutions to clearly distinguish private loans from federal loans in individual financial aid awards by providing specified information. Requires these institutions to make available to the public upon request and in a prominent location on its website information concerning graduates and student loan debt. Requires all private, independent, and public institutions, prior to certifying a borrower’s eligibility for a private student loan to inform the student of all unused state and federal financial assistance. Requires an institution that does not participate in federal student loan programs to inform the students of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid websites. (EC § 69800)
8. Federal law requires, that in order to be eligible for funding under the federal Higher Education Act Title IV student assistance programs, an educational program must lead to a degree at a nonprofit or public institution or it must prepare students for gainful employment in a recognized occupation. (20 U.S.C. 1001 et seq.)
9. Federal law establishes debt-to-earnings rates to determine whether a gainful employment program prepares students for gainful employment in a recognized occupation. (34 CFR Part 668 et seq.)

This bill:

1. When the DCA Director certifies that BPPE’s information technology system is updated and capable of processing data, requires institutions to report information about each graduate, including:
2. Individual identifying information sufficient to match to wage data from EDD.
3. The program the graduate was enrolled in.
4. The graduate’s student loan debt information reported on the School Performance Fact Sheet, if applicable.
5. Authorizes BPPE to access and use any relevant quarterly wage data from EDD necessary to perform a labor market outcome reporting data match and requires BPPE to match the data reported by institutions with EDD wage data.
6. Requires BPPE to make the relevant program-level and institution-level statistics regarding the earnings levels of graduates and applicable student loan debt information available on its website, presented in terms of easily understood labor market measures, consistent with all pertinent state and federal privacy laws. Specifies that labor market outcome data for each program and institution must be for graduates at two years and at five years after their graduation.
7. States Legislative intent to review the process by which institutions are required to collect and report employment data and reduce duplicative efforts when sufficient data is reported and publicly available.

FISCAL EFFECT:

Unknown. This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

1. Purpose. The Author is the Sponsor of this bill. According to the Author, “Thousands of Californians have enrolled in career training programs they believed would lead to a job that justified the student loans they were taking on, only to discover too late that they had dug themselves in a deep hole with no return on investment. Troubling data has repeatedly demonstrated the need for oversight and accountability of the for-profit college sector. For example, according to The Institute for College Access & Success and others, over half of all California student loan defaulters in 2017 had borrowed to attend a for-profit college; compared to public and nonprofit colleges in California, for-profit colleges have lower graduation rates, higher rates of student loan borrowing, higher debt levels among those who graduate, and higher rates of default among borrowers; nationally, students entering for-profit colleges in 2003-04 were four times more likely to default on a federal student loan within 12 years than students who started at public colleges; nationally, almost half of students who first attended for-profit colleges in 2003-04 defaulted within 12 years; of the top 35 schools in the US where students hold the most student loan debt, over half were for-profit schools in 2014. Close to three quarters (73 percent) of students at for-profit colleges take on debt to enroll and; nationally, for-profit college graduates were more likely to default on their loans than were public and nonprofit college dropouts.”

According to the Author, “Unfortunately, the progress the United States Department of Education was making toward accountability and student protections for this sector shifted dramatically with the 2016 presidential election. It is difficult to overstate the extent to which President Donald Trump’s higher education policies are designed to hurt everyday Americans…Federal deregulation would open the floodgates to low-quality, high-cost programs at schools that rely on billions of dollars in taxpayer funding. Trump and DeVos are proposing to remove critical guardrails at a time of unprecedented student debt levels and rapidly increasing tuition.”

The Author states that “While California’s community college and state university systems and strong financial aid programs have made quality, affordable college options available to millions, there are many still struggling in the state. The low-income, minority, and veteran students overwhelmingly targeted by this sector are precisely the ones who stand to lose the most from this extreme agenda – and make up a significant portion of California’s students overall. California has a responsibility to step in and ensure our students are well protected and are being served responsibly by institutions operating in our state.”

1. Background.

BPPE. BPPE is generally responsible for protecting consumers and students against fraud, misrepresentation, or other business practices at private postsecondary institutions that may lead to loss of students’ tuition and related educational funds; establishing and enforcing minimum standards for ethical business practices and the health and safety and fiscal integrity of postsecondary education institutions; and establishing and enforcing minimum standards for instructional quality and institutional stability for all students in all types of private postsecondary educational and vocational institutions.

The United States Department of Education (USDE) establishes that states are responsible for providing primary protection for consumers and students attending postsecondary educational institutions. BPPE approval not only authorizes institutions to operate and serve students in California but also enables institutions to receive public funds through the federal Title IV financial aid programs.

The BPPE is responsible for oversight of private postsecondary educational institutions operating with a physical presence in California. Established by AB 48 (Portantino, Chapter 310, Statutes of 2009) after numerous legislative attempts to remedy the laws and structure governing regulation of private postsecondary institutions, the bill took effect January 1, 2010, and made many substantive changes that created a foundation for oversight and gave the BPPE enforcement tools to ensure schools comply with the law.

AB 48 established BPPE’s authority to regulate private postsecondary institutions and enforce the provisions of the new Act and to respond to the major problems with the former laws governing the industry in California. The Act provides for prohibitions on false advertising and inappropriate recruiting and requires disclosure of critical information to students such as program outlines, graduation and job placement rates, and license examination information, and ensures colleges justify those figures. The Act also provides BPPE with enforcement powers necessary to protect consumers. The Act directs BPPE to:

• Create a structure that provides an appropriate level of oversight, including approval of private postsecondary educational institutions and programs;
• Establish minimum operating standards for California private postsecondary educational institutions to ensure quality education for students;
• Provide students a meaningful opportunity to have their complaints resolved;
• Ensure that private postsecondary educational institutions offer accurate information to prospective students on school and student performance; and,
• Ensure that all stakeholders have a voice and are heard in the operations and rulemaking process of BPPE.

BPPE is also tasked with actively investigating and combatting unlicensed activity, administering the Student Tuition Recovery Fund (STRF), and conducting outreach and education activities for students and private postsecondary educational institutions within the state. The STRF is an important tool to assist harmed students. STRF exists to relieve or mitigate economic loss suffered by students enrolled at non-exempt private postsecondary education institutions due to the institutions' closure, the institutions' failure to pay refunds or reimburse loan proceeds, or the institutions' failure to pay students' restitution award for a violation of the Act.

Private postsecondary institutions play an important role in ensuring access to higher educational opportunities for California’s students. The landscape of schools that are now regulated under BPPE, and that have become central in California’s discussion of private postsecondary education, has evolved significantly in recent decades. The smaller, independent for-profit institutions that made up the bulk of the former-Bureau’s licensee population have shifted. Today, a large number of California students are being served by multi-campus, publicly-traded institutions with a national presence. These institutions also receive significant public funds; under federal law, up to 90 percent of revenues can come from the Title IV financial aid program. High-profile state and federal investigations have revealed deceptive and illegal practices by some institutions within the sector. Federal regulators responded by increasing student outcome and institutional accountability measures. Specifically, in California, BPPE’s approval can enable these institutions to access the Title IV program; USDE relies on the Bureau to provide oversight and student protection.

Students, the public, and quality private postsecondary educational institutions are best served by a well-functioning regulatory entity that effectively enforces the Act. BPPE has faced significant difficulties in implementing the law. It is important that California’s approval and oversight of an institution assures minimum quality and student protections.

Disclosures. Institutions regulated by BPPE are subject to reporting and disclosure requirements. The Act requires institutions to provide prospective students with a School Performance Fact Sheet (Fact Sheet). The Fact Sheet includes various data regarding graduation rates, job placement, salary, and licensure examination passage rates.

In response to a series of high-profile claims of false and misleading job placement and salary statistics provided by some for-profit institutions, AB 2296 (Block, Chapter 585, Statutes of 2012) amended the Act to require additional information on the Fact Sheet regarding loan default rates and to increase the accuracy of job placement claims. BPPE was directed, by July 1, 2014, to adopt regulations to define “graduates employed in the field” for purposes of ensuring accurate job placement rates are provided on the Fact Sheet.

Current requirements for institutions to include information regarding the salaries of graduates can prove difficult to collect and verify. During the prior sunset review oversight of BPPE, one school advised that only 29 percent of graduates responded to surveys regarding employment and salary. Other options for more reliable salary data are available to California’s public institutions. The community colleges, California State University, and University of California are required to provide students and the public data regarding salaries associated with degrees or certificates in specific disciplines. Wage information comes from an agreement between the segment offices and the EDD. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas. This bill provides BPPE the tools to establish a similar system.

Other Tools Aimed At Assisting Students. In 2012, USDE partnered with the Consumer Financial Protection Bureau to develop the Shopping Sheet as a means of promoting transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. According to information provided to financial aid professionals by USDE, the Shopping Sheet (previously referred to as “Know Before You Owe” and the “Model Financial Aid Offer Form”) may be used in place of, or as a supplemental cover sheet to, an institution’s existing financial aid award letter, with the goal of ensuring that families have an easy-to-read form that enables them to compare institutions in terms of grant and scholarship amounts, net costs, graduation rates, loan default rates, median borrowing, and estimated monthly loan payments after graduation. Institutions that have agreed to comply with the Principles of Excellence outlined in

Executive Order 13607 are expected to use the Shopping Sheet to provide financial aid information for undergraduate and graduate service members, veterans, military spouses, and other military family members covered by this Order. While the Shopping Sheet is not mandatory for other students, institutions were asked to voluntarily adopt the Shopping Sheet beginning with the 2013-14 academic year. UC and CSU campuses use the Shopping Sheet for newly admitted prospective students.

In February 2013, the USDE College Affordability and Transparency Center released an interactive College Scorecard, intended to provide information on a college’s affordability and value to enable parents and prospective students to make informed decisions about which college to attend. According to the USDE, the Scorecard highlights key indicators about the cost and value of institutions across the country to help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals. Each Scorecard includes five key pieces of data about a college: costs, graduation rate, loan default rate, average amount borrowed, and employment.

Federal law requires any college that participates in Title IV financial aid programs to post on-line “net price calculators” to help parents and students determine the potential cost of different colleges before they apply. This calculator allows students to calculate an estimated net price of attendance at an institution (defined as cost of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students. The USDE College Affordability and Transparency Center provides a link to the net-price calculator for individual colleges nationally.

In California, the Salary Surfer allows students and the public to see salaries associated with degrees or certificates in specific disciplines. Salary Surfer provides wage data for CCC students who earned an associate’s degree or a credit certificate by using the aggregated earnings of graduates from a five year period. Wage information comes from an agreement between the CCC Chancellor's Office and the California Employment Development Department. The system is a useful tool for students to estimate their potential earnings after receiving a certificate or degree in certain areas.

Student Debt. As the number of students served by private postsecondary institutions has increased, so has the focus on fraudulent practices and low academic standards. There have been numerous high-profile federal investigations into the practices of for-profit institutions in recent years. Among the most notable are the United States Government Accountability Office (GAO) series of investigations raising concerns regarding the amount of federal student aid dollars directed to for-profit institutions, the misleading and deceptive recruitment practices at certain institutions, and substandard academic performance expectations in some for-profit programs.

Federal data also raises important questions about program cost and student outcomes within the sector. Students from for-profit institutions have higher default rates on federal student loans than in other sectors, accounting for nearly half of all defaults. According to data from the National Bureau of Economic Research (NBER), for-profit student defaults are 8.7 percent higher than four-year public institutions and nonprofits and 5.7 percent higher than community colleges. Student satisfaction information shows for-profit students are less likely to believe their education was worth the price paid. While NEBR data, which attempts to adjust for student population differences, indicates for-profit students have higher probability of staying with a program through the first year and are somewhat more likely than community college students to obtain an AA degree, they are less likely to continue to higher-level college courses and to gain a BA degree. Further, NEBR indicates that for-profit students are more likely to be idle (not working and no longer enrolled in school) six years after starting college, and are more likely to have experienced substantial unemployment since leaving school.

According to a recent report, Student Debt and the Class of 2017, issued by The Institute for College Access and Success (TICAS), nationally, average student debt at graduation in 2016 ranged from $20,000 in Utah to $36,350 in New Hampshire, and new graduates’ likelihood of having debt ranged from 43 percent in Utah to 77 percent in West Virginia. The report stated that average debt varies even more across colleges, from a low of $4,600 to a high of $59,100, and the share of students graduating with loans ranges from six to 98 percent. Additionally, the TICAS report found that the burden of student debt is not just about overall debt levels, but also about the types of loans students take out. TICAS asserts that federal student loans come with crucial consumer protections and repayment options not guaranteed by private, nonfederal loans, noting that the average debt in California is $22,744 at public and private non-profit colleges. According to the report, about 53 percent of students graduate with debt, ranking California 48th and 37th lowest nationally.

1. Related Legislation This Year. AB 1341 (Berman) prohibits BPPE from approving an exemption for, or handling complaints for a nonprofit institution that the AG determines does not meet the definition of a nonprofit corporation. (Status: This measure is currently pending in this Committee.)

AB 1342 (Low) would require the state Attorney General to review and approve any sale of a nonprofit educational institution to a for-profit entity. (Status: This measure is currently pending in the Senate Committee on Appropriations.)

AB 1343 (Eggman) would prohibit a private postsecondary educational institution, beginning January 1, 2023, from enrolling residents of California who are not already enrolled as of that date, unless the institution meets one of two requirements:  either no more than 85 percent of the institution's tuition revenue is derived from federal monies or the institution does not spend less than 50 percent of revenue on student instruction. (Status: This measure is currently pending in this Committee.)

AB 1344 (Bauer-Kahan) beginning July 1, 2021, would replace current requirements for the information out-of-state institutions are required to provide the Bureau if they enroll California students in online programs, with the same and expanded information requirements, specifically adding adverse actions to the list of information that has to be provided. It would also authorize the BPPE to place these out-of-state private postsecondary institutions on a probationary status and revoke authorization to enroll California students. (Status: This measure is currently pending in this Committee.)

AB 1345 (McCarty) prohibits an institution from providing financial incentives to any person, including a student, involved in student recruitment, enrollment, continued enrollment, admission, or attendance, or involved in awarding of financial aid based on the enrollment of a student, or in the sales of any education materials, based on succeeding in those activities. (Status: This measure is currently pending in this Committee.)

AB 1346 (Medina) would expand the definition of economic loss to include all amounts paid by a student to the institution, any amounts paid in connection with attending the institution, and all principal, interest, and charges of any kind for any loan incurred by the student to pay these amounts and would expand STRF eligibility to expands eligibility to students residing in California and attending a campus of a Corinthian Colleges, Inc. (CCI), institution on or after January 1, 2010. (Status: This measure is currently pending in this Committee.)

1. Prior Related Legislation. AB 1858 (Calderon, Chapter 671, Statutes of 2018) requires, by January 1, 2020, each UC, CSU, CCC campus, each independent institution of higher education, and each private postsecondary educational institution subject to the Act that participates in federal financial aid or veterans financial aid programs to provide students with the Financial Aid Shopping Sheet developed by the USDE to inform admitted students or individuals who have been offered admission about financial aid award packages.

AB 1619 (Berman) of 2016 would have required BPPE to prohibit an institution subject to the Act from enrolling new students in an educational program that receives a fail rating or a combination of zone and fail ratings, based on the federal debt-to-earnings rates specified under federal gainful employment regulations. (Status: The bill was amended to deal with a different subject.)

AB 721 (Medina, Chapter 632, Statutes of 2015) established requirements on institutions related to disclosure of student loan data and disclosure of information to students seeking private loans.

AB 330 (Chau) of 2013 would have required CSAC and BPPE to post additional links on their websites to provide information such as net cost, financial aid, and student loan debt for students and families to evaluate their college choices. (Status: This bill died on the Senate Inactive File.)

AB 534 (Wieckowski) of 2013 would have required public and private postsecondary educational institutions to provide entrance and exit counseling, as specified, for students enrolled at their institutions regarding student loans offered by the institution or a private lender, and prohibits a lender from accepting an application for a private student loan without first receiving certification that the counseling was conducted by the appropriate postsecondary institution, which may charge a fee to the lender for this service. (Status: This bill was held in the Assembly Committee on Appropriations.)

1. Arguments in Support. Supporters of AB 1340 argue that this measure will protect students, especially veterans, low-income students, and students of color, from ineffective career training and burdensome debt.

The Institute for College Access and Success, the National Student Legal Defense Network, the Housing and Economic Rights Advocates, the Children’s Advocacy Institute, the Center for Public Interest Law, the Public Law Center, the Consumer Federation of California, Public Advocates, Consumer Reports Advocacy, California Low-Income Consumer Coalition, Veterans Legal Clinic, Public Counsel, SEIU California, the Century Foundation, NextGen California, and Veterans Education Success, support AB 1340 and write that “protecting students from harm is vastly more effective than trying to make them whole after the harm has occurred. AB 1340 would further reduce harm to students by prodding schools to improve their value proposition for students.”

Consumer Action writes that “AB 1340 will help families better evaluate the claims put forth by for-profit schools, and help regulators check the growth of predatory outfits,” and that “Weeding out unscrupulous programs also will protect taxpayers from being left holding the bag when scam schools collapse.”

California Community Colleges argue that “students harmed by the fraudulent practices, low quality, and/or abrupt closure of for-profit colleges regularly come to the California Community Colleges to continue their education. Often they arrive to discover their units are not transferable and their debt loads unmanageable. This bill would create a mechanism for the state to monitor the outcomes of for-profit colleges and allow earlier intervention to protect students.”

In support of AB 1340, the ­Campaign for College Opportunity cites their own report, State of Higher Education for Black Californians which found that Black Californians are overrepresented at private, for-profit colleges, which is “especially disturbing given that graduation rates at many for-profit institutions is notoriously low. California’s for-profit colleges only graduate seven percent of Black students with a bachelor’s degree in six years, compared to 43 percent at the CSU and 75 percent at the UC.”

SUPPORT AND OPPOSITION:

Support:

California Community Colleges Chancellor's Office

California Conference of the American Association of University Professors
California Faculty Association
Campaign for College Opportunity
California Low-Income Consumer Coalition

Center for Public Interest Law

Children’s Advocacy Institute

Community Youth Center of San Francisco

Consumer Action

Consumer Federation of California

Consumer Reports Advocacy

Larkin Street Youth Services

Legal Aid Foundation of Los Angeles
Housing and Economic Rights Advocates

National Student Legal Defense Network

National University System

NextGen California

OneVet OneVoice

Public Advocates

Public Counsel

Public Law Center

SEIU California

The Institute for College Access and Success

The Century Foundation

Veterans Education Success

Veterans Legal Clinic

Youth Leadership Institute

Opposition:

None received for the current version of this measure.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1340

Author:(Chiu, et al.)

As Amended Ver:May 16, 2019

Majority vote

SUMMARY:

Recodifies in state law the federal gainful employment rule for private postsecondary institutions so the rule may be enforced by the California Bureau of Private Postsecondary Education (BPPE). Specifically, the bill requires BPPE to collect information in order to calculate debt-to-earnings ratios of graduates who attended private postsecondary institutions in California. To do this, the bill requires BPPE to enter into a data-sharing agreement with the Employment Development Division (EDD). In situations where programs consistently fall short of providing gainful employment, the bill prohibits the program from enrolling California residents.

Major Provisions

Please see the Higher Education Committee and Business and Professions Committee analyses for a detailed discussion of the provisions of this bill.

COMMENTS:

To note – several amendments to this bill were taken in the Assembly Committee on Appropriations. These changes include delayed implementation of a reporting requirement to BPPE, would require institutions to use data made available by EDD, to the extent possible, to determine their debt-to-earnings ratios, and would require compliance measures that, if not followed, could include action up to or including the suspension or revocation of the institutions approval to operate.

According to the Author:

According to the author, "AB 1340 will implement a state-level version of the federal Gainful Employment (GE) rule in California for schools governed by the Act, with a few changes to account for the state setting. California cannot control access to federal financial aid – the enforcement mechanism in the federal GE rule – but can regulate a program's authority to enroll new students. This bill would prohibit or limit new resident enrollment in career training programs that fall into the 'fail' or 'zone' category based on the ratio of a typical program graduate's debt-to-income, as established in the federal GE rule."

"Because the Trump Administration has halted the data collection and matching required to implement the federal GE rule, this bill proposes a different approach to collecting wage and student debt information. AB 1340 will utilize state Unemployment Insurance data on wages and student debt information provided by institutions to the Bureau of Private Postsecondary Education to calculate the debt-to-earnings rates for programs. By taking a more proactive approach and tracking what schools are providing good value and quality programs to students, this will potentially alleviate some of the back-end enforcement challenges the Bureau is facing. Protecting students from harm in the first place is more effective than making them whole once the harm has already occurred."

Arguments in Support:

A coalition of student, veteran, civil rights, and higher education advocates jointly wrote to the committee in support of this bill. They noted that, "...it is sadly too common that students take out thousands of dollars in student loans to enroll in career training programs they believe will lead to a job, only to discover - too late - that they have unmanageable debt with no return on investment. In an effort to address this problem, the U.S. Department of Education engaged experts and stakeholders over the course of several years to develop the GE regulation, finalized in 2014. The GE rule was an effort to measure career education programs' performance in 'prepar[ing] students for gainful employment in a recognized occupation,' and to prevent programs that leave students with debt and no means to pay it back from continuing to receive federal financial aid."

"Unfortunately, the Trump Administration and Education Secretary Betsy DeVos have proposed to rescind the GE rule completely, leaving these programs free to continue enrolling students without being held accountable for their poor performance….AB 1340 would further reduce harm to students by prodding schools to improve their value proposition for students."

Arguments in Opposition:

The California Association of Private Postsecondary Schools writes that, "AB 1340 as amended cannot possibly work. The Social Security Administration rejected providing wage data for GE, which was a main reason the regulations were withdrawn. While a surface review might cause one to think that the State EDD Unemployment Insurance data could be used as a substitute, a more in-depth look reveals that Unemployment Insurance (UI) data cannot substitute for the wage and hour data produced by the US Social Security Administration. And it does not contain data for any student who is not a California taxpayer, of which there are many enrolled at our schools. Besides the obvious legal issues involved in using UI data for a Higher Education program review, there other factors that make this bill a non-starter:"

FISCAL COMMENTS:

The Assembly Committee on Appropriations noted Special Fund costs of about

$11 million in the first year of program implementation and about $9 million in future years for BPPE to administer the program. These include costs to a) hire over 65 positions (about $8 million ongoing); b) pay for new facilities to house the new positions (about $3 million in year one and about $900,000 ongoing); and, c) pay the Office of Administrative Hearings and the Attorney General to provide an option of a hearing for institutions who are cited (about $400,000 ongoing) and costs to update and maintain IT infrastructure and data for the program about $200,000 ongoing).

VOTES:

ASM HIGHER EDUCATION: 9-1-2

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

NO: Kiley

ABS, ABST OR NV: Choi, Patterson

ASM BUSINESS AND PROFESSIONS: 15-2-3

YES: Low, Bloom, Chen, Chiu, Cunningham, Eggman, Gipson, Gloria, Grayson, Holden, Irwin, McCarty, Medina, Mullin, Ting

NO: Brough, Obernolte

ABS, ABST OR NV: Dahle, Fong, Quirk-Silva

ASM APPROPRIATIONS: 13-4-1

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

NO: Bigelow, Brough, Diep, Obernolte

ABS, ABST OR NV: Fong

UPDATED:

VERSION: May 16, 2019

CONSULTANT: Kevin J. Powers / HIGHER ED. / (916) 319-3960 FN: 0000925

Date of Hearing: May 15, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1340

Author:(Chiu) – As Amended Ver:April 30, 2019

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

SUMMARY:

This bill recodifies in state law the federal gainful employment rule for private postsecondary institutions so the rule may be enforced by the California Bureau of Private Postsecondary Education (BPPE). Specifically, the bill requires BPPE to collect information in order to calculate debt-to-earnings ratios of graduates who attended private postsecondary institutions in California. To do this, the bill requires BPPE to enter into a data-sharing agreement with the Employment Development Division (EDD). In situations where programs consistently fall short of providing gainful employment, the bill prohibits the program from enrolling California residents.

FISCAL EFFECT:

Special Fund costs of about $12 million in the first year of program implementation and about $9 million in future years for BPPE to administer the program. These include costs to (a) hire over 65 positions (about $8 million ongoing), (b) pay for new facilities to house the new positions (about $3 million in year one and about $900,000 ongoing), (c) pay the Office of Administrative Hearings and the Attorney General to provide an option of a hearing for institutions who are cited (about $400,000 ongoing) and costs to update and maintain IT infrastructure and data for the program (about $1 million in year one and about $200,000 ongoing).

COMMENTS:

1. Purpose. According to the author:

AB 1340 will implement a state-level version of the federal Gainful Employment (GE) rule in California for schools governed by the Act, with a few changes to account for the state setting. California cannot control access to federal financial aid – the enforcement mechanism in the federal GE rule – but can regulate a program’s authority to enroll new students. This bill would prohibit or limit new resident enrollment in career training In a 5-year period, approximately 1.4 million students have completed programs and over 10,000 active approved programs are under the Bureau’s oversight.  These programs would all be required to provide data to the Bureau.  All the Bureau’s processes will need to be updated to adhere to the requirements in this bill. 

Because the Trump Administration has halted the data collection and matching required to implement the federal GE rule, this bill proposes a different approach to collecting wage and student debt information. AB 1340 will utilize state Unemployment Insurance data on wages and student debt information provided by institutions to the Bureau of Private Postsecondary Education to calculate the debt-to-earnings rates for programs. By taking a more proactive approach and tracking what schools are providing good value and quality programs to students, this will potentially alleviate some of the back-end enforcement challenges the Bureau is facing. Protecting students from harm in the first place is more effective than making them whole once the harm has already occurred.

1. Background. The BPPE was created in 2009 under the Department of Consumer Affairs to oversee most of the state’s private postsecondary schools, including nationally accredited schools, unaccredited schools, and various specialized schools. The BPPE is charged with ensuring minimum educational quality standards, providing students with an effective complaint resolution process and preventing public deception associated with fraudulent or substandard degrees.

The federal government also has a role in regulating private postsecondary institutions. To improve transparency and accountability of private postsecondary institutions, the US Department of Education (USDE) established a “gainful employment” rule. The gainful employment rule requires a program’s graduates to meet certain debt-to-earnings ratios after completing the program as a condition of that program maintaining federal financial aid eligibility. To determine whether a program provides its students with gainful employment, the USDE is to assign private postsecondary programs a gainful employment rating of passing, approaching failing or failing gainful employment ratios, with some grace periods.

The USDE released its first gainful employment rating for career training programs in January 2017. However, the USDE moved to rescind the gainful employment rule in August 2018 and allowed a data-sharing agreement, which provides the USDE information to calculate debt-to-earnings ratios, to lapse.

This bill would essentially recodify in state law the federal gainful employment rule so that the provisions may be enforced in California. This responsibility would fall to the BPPE, as the state’s regulator of private postsecondary educational institutions. The BPPE would carry out this function through new reporting requirements for private postsecondary institutions and a data sharing partnership with the EDD.

According to the BPPE, over 10,000 active programs currently are under its oversight and would be subject to this bill’s requirements. In addition, the EDD indicates it likely would share 350,000 records with the BPPE. (The BPPE would reimburse the EDD for data sharing.)

1. Private Postsecondary Bill Package. This bill is a part of an Assembly bill package designed to provide more accountability and state oversight of private postsecondary institutions.

AB 1341 (Berman) clarifies that an institution of higher education is exempt only from the requirements imposed on out-of-state institutions if it meets the definition of a nonprofit corporation or public institution. The bill is pending in this committee.

AB 1342 (Low) requires the attorney general’s review and approval for any sale of a nonprofit educational institution to a for-profit entity. The bill is pending in this committee.

AB 1343 (Eggman) prohibits a private postsecondary educational institution from enrolling residents of California, unless the institution meets either the requirement that no more than 85% of the institution’s tuition revenue is derived from student financial aid and loans, or not less than 50% of the institution’s tuition revenue is dedicated to student instruction. The bill is pending in this committee.

AB 1344 (Bauer-Kahan) increases the BPPE’s oversight over out-of-state private postsecondary educational institutions operating online. The bill is pending in this committee.

AB 1345 (McCarty) prohibits a private postsecondary school from providing financial incentives or compensation to its employees, directly or indirectly, for student recruitment, enrollment, admissions, attendance, financial aid or sales of educational materials. The bill passed out of this committee on May 1, 2019.

AB 1346 (Medina) expands the definition of economic loss, as it pertains to the Student Tuition Recovery Fund. The bill is pending in this committee.

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

Date of Hearing:

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Evan Low, Chair

ABPCA Bill Id:AB 1340

Author:(Chiu) – As Amended Ver:April 1, 2019

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009.

SUMMARY: Places under state law a requirement that private postsecondary educational institutions must comply with existing federal regulations requiring schools offering programs intended to prepare a student for gainful employment in a recognized profession to meet certain debt-to-earnings rates measures in order to continue normal enrollment of students in California.

EXISTING LAW:

1. Enacts the California Private Postsecondary Education Act to provide for the regulation and oversight of private postsecondary schools. (Education Code (EDC) §§ 94800 et al.)
2. Establishes the Bureau for Private Postsecondary Education (BPPE) in the Department of Consumer Affairs to regulate private postsecondary educational institutions under the California Private Postsecondary Education Act. (EDC § 94820)
3. Exempts the following institutions from the California Private Postsecondary Education Act:
   1. An institution offering programs solely for the purpose of personal entertainment, pleasure, or enjoyment.
   2. An institution offering educational programs sponsored by a bona fide trade, business, professional, or fraternal organization, solely for that organization’s membership.
   3. A postsecondary educational institution established, operated, and governed by the federal government or by the government in California.
   4. An institution offering either test preparation for postsecondary education admissions examinations, or continuing education or license examination preparation.
   5. An institution owned, controlled, and operated and maintained by a religious organization lawfully operating as a nonprofit religious corporation, limited to education relevant to the beliefs and practices of the church, religious denomination, or religious organization.
   6. An institution that does not award degrees and that solely provides educational programs for total charges of $2,500 or less when no part of the total charges is paid from state or federal student financial aid programs.
   7. A law school that is accredited by the Council of the Section of Legal Education and Admissions to the Bar of the American Bar Association or that is subject to the approval, regulation, and oversight of the Committee of Bar Examiners.
   8. A nonprofit school organized specifically to provide workforce development or rehabilitation services that is accredited by the Department of Rehabilitation.
   9. An institution that is accredited by the Accrediting Commission for Senior Colleges and Universities, Western Association of Schools and Colleges, or the Accrediting Commission for Community and Junior Colleges, Western Association of Schools and Colleges.
   10. Flight instruction providers or programs that provide flight instruction pursuant to Federal Aviation Administration regulations.
   11. An institution owned by a nonprofit community-based organization that does not award degrees and does not offer educational programs designed to lead to licensure, and that would not have been subject to oversight if it did not receive funding under the federal Workforce Innovation and Opportunity Act.

(EDC §94874)

1. States that as of January 1, 2016, an institution that is approved to participate in veterans’ financial aid programs that is not an independent institution of higher education shall not be exempt from the California Private Postsecondary Education Act. (EDC § 94874.2)
2. Requires institutions exempt from the California Private Postsecondary Education Act to still comply with laws relating to school closure and laws relating to fraud, abuse, and false advertising. (EDC § 94874.9)
3. Makes various findings and declarations regarding private postsecondary schools, including a finding that numerous reports and studies have concluded that California’s regulation of private postsecondary schools has consistently failed to ensure student protections or provide effective oversight of private postsecondary schools. (EDC § 94801)
4. Defines “postsecondary education” as a formal institutional educational program whose curriculum is designed primarily for students who have completed or terminated their secondary education or are beyond the compulsory age of secondary education, including programs whose purpose is academic, vocational, or continuing professional education. (EDC § 94857)
5. Defines “private postsecondary educational institution” as a private entity with a physical presence in the state that offers postsecondary education to the public for an institutional charge. (EDC § 94858)
6. Defines “out-of-state private postsecondary educational institution” as a private entity without a physical presence in this state that offers distance education to California students for an institutional charge, regardless of whether the institution has affiliated institutions or institutional locations in California.
7. Includes in the definition of “public higher education” the California Community Colleges, the California State University, and the University of California; defines “independent institutions of higher education” as nonpublic higher education institutions that grant undergraduate degrees or graduate degrees and are accredited by an agency recognized by the United States Department of Education. (EDC § 66010)
8. Requires the BPPE to adopt regulations establishing minimum operating standards for a private postsecondary educational institution that ensures all of the following:
   1. The content of each educational program can achieve its stated objective.
   2. The institution maintains specific written standards for student admissions for each educational program and those standards are related to the particular program.
   3. The facilities, instructional equipment, and materials are sufficient to enable students to achieve the educational program’s goals.
   4. The institution maintains a withdrawal policy and provides refunds.
   5. The directors, administrators, and faculty are properly qualified.
   6. The institution is financially sound and capable of fulfilling its commitments to students.
   7. That, upon satisfactory completion of an educational program, the institution gives students a document signifying the degree or diploma awarded.
   8. Adequate records and standard transcripts are maintained and are available to students.
   9. The institution is maintained and operated in compliance with all applicable laws.

(EDC § 94885)

1. Authorizes the BPPE to grant approval to operate only after an applicant has presented sufficient evidence to the bureau, and the bureau has independently verified the information provided by the applicant through site visits or other methods deemed appropriate by the bureau, that the applicant has the capacity to satisfy the minimum operating standards; requires the BPPE to deny an application for an approval to operate if the application does not satisfy those standards. (EDC § 94887)
2. Provides that a standard approval to operate shall be valid for five years. (EDC § 94888)
3. Requires the BPPE to grant an institution that is accredited an approval to operate by means of its accreditation. (EDC § 94890)
4. Requires an institution to seek approval from the BPPE if it intends to make a substantive change to its approval to operate, such as changes in its education objectives, the addition of a new degree program, a change in ownership, or a change in name. (EDC § 94893)
5. States that an institution is prohibited from doing any of the following:
   1. Use of the Great Seal of the State of California on a diploma.
   2. Promise or guarantee employment, or overstate the availability of jobs upon graduation.
   3. Advertise concerning job availability, degree of skill, or length of time required to learn a trade or skill unless the information is accurate and not misleading.
   4. Advertise, or indicate in promotional material, without including the fact that the educational programs are delivered by means of distance education.
   5. Advertise, or indicate in promotional material, that the institution is accredited if it is not.
   6. Solicit students for enrollment by causing an advertisement to be published in “help wanted” columns in a magazine, newspaper, or publication, or use “blind” advertising that fails to identify the institution.
   7. Offer to compensate a student to act as an agent of the institution with regard to the solicitation, referral, or recruitment of any person for enrollment in the institution.
   8. Pay any consideration to a person to induce that person to sign an enrollment agreement.
   9. Use a name in any manner improperly implying that the school is affiliated with a government agency, is a public institution, or grants degrees if it does not.
   10. In any manner make an untrue or misleading statement related to a test score, grade or record of grades, attendance record, record indicating student completion, placement, employment, salaries, or financial information.
   11. Willfully falsify, destroy, or conceal any document of record.
   12. Use the terms such as “approval” without stating clearly and conspicuously that approval to operate means compliance with state standards.
   13. Direct any individual to perform an unlawful act, to refrain from reporting unlawful conduct to the BPPE, or to engage in any unfair act to persuade a student not to complain.
   14. Compensate an employee involved in recruitment, enrollment, admissions, student attendance, or sales of educational materials to students on the basis of a commission, commission draw, bonus, quota, or other similar method related to the recruitment, enrollment, admissions, student attendance, or sales of educational materials to students.
   15. Require a prospective student to provide personal contact information in order to obtain, from the institution’s website, educational program information that is required to be contained in the school catalog.
   16. Offer an associate, baccalaureate, master’s, or doctoral degree without disclosing to prospective students prior to enrollment whether the institution or the degree program is unaccredited and any known limitation of the degree.

(EDC § 94897)

1. Requires an institution that offers an educational program in a profession, occupation, trade, or career field that requires state licensure to have an educational program approval from the appropriate state licensing agency to conduct that educational program in order that a student who completes the educational program is eligible to sit for any required licensure examination. (EDC § 94899)
2. Requires an institution’s recruiters to be its employees. (EDC § 94901)
3. Requires an enrollment agreement to be written in language that is easily understood. (EDC § 94905)
4. Requires an institution to provide a prospective student with a school catalog containing various program information and policies. (EDC § 94909)
5. Requires an institution to provide a prospective student with a School Performance Fact Sheet containing information including but not limited to completion rates, placement rates for each program, license examination passage rates, starting salary or wage information, and information about how to contact the BPPE. (EDC § 94910)
6. Requires an institution to post its school catalog, School Performance Fact Sheet, and student brochures on its website. (EDC § 94913)
7. Establishes the Student Tuition Recovery Fund (STRF) to relieve or mitigate economic loss suffered by a student while enrolled in an institution at the time that institution, location, or program was closed or discontinued. (EDC § 94923)
8. Requires an institution to annually report to the BPPE, as part of an annual report, and publish in its School Performance Fact Sheet, all of the following:
   1. The job placement rate for each program that is either designed, or advertised, to lead to a particular career, or advertised or promoted with any claim regarding job placement.
   2. The license examination passage rates for the immediately preceding two years for programs leading to employment requiring passage of a state licensing examination.
   3. Salary and wage information, consisting of the total number of graduates employed in the field and the annual wages or salaries of those graduates stated in increments of $5,000.
   4. If applicable, the most recent official three-year cohort default rate reported by the United States Department of Education for the institution and the percentage of enrolled students receiving federal student loans.

(EDC § 94929.5)

1. Requires the Director of Consumer Affairs to provide written updates to the Legislature describing the BPPE’s progress in protecting consumers and enforcing the provisions of the California Private Postsecondary Education Act. (EDC § 94948)
2. Establishes the Office of Student Assistance and Relief for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions. (EDC § 94949.7)
3. Subjects the BPPE to legislative oversight through the sunset review process, which provides for the California Private Postsecondary Education Act and the authority of the BPPE to be automatically repealed as of January 1, 2021 unless a later enacted statute deletes or extends that date. (EDC § 94950)

THIS BILL:

1. Requires an institution offering a program intended to prepare a student for gainful employment in a recognized profession to pass the existing federal debt-to-earnings rates measure to continue enrolling students normally.
2. Caps the number of new California students an institution may enroll in a program to no greater than the number of new students enrolled the prior year if that program does not pass the debt-to-earnings rates measure using a calculation provided for under federal regulations.
3. Prohibits an institution from enrolling any new California students in a program that fails the debt-to-earnings rates measure.
4. Authorizes the BPPE to exempt a program from the debt-to-earnings rates measure provisions if the program is one in which less than 50 percent of the students have had a loan arranged for them by the institution.
5. Requires the BPPE to adopt regulations to define gainful employment based, as much as is practicable, on the intent of the federal regulations.
6. Adds the following additional reporting requirements for institutions to submit annually to the BPPE as a condition of authorization, in order to confirm compliance with the debt-to-earnings rates measure provisions:
   1. Identifying information for each student sufficient to match to wage data from the Employment Development Department (EDD).
   2. Education debt broken down by individually identified student, and by student cohort, including the annual repayment amount.
7. Requires the BPPE to adopt regulations further specifying the data that must be reported so that the BPPE may then match the data with quarterly wage data from the EDD.
8. Authorizes the BPPE to waive the new reporting requirements if it determines that sufficient federal data is available to determine compliance.
9. Clarifies the EDD director’s authority to provide information possessed by the EDD to the BPPE for purposes of obtaining relevant quarterly wage data necessary to perform the gainful employment data match, which the BPPE must subsequently keep confidential.

FISCAL EFFECT: Unknown; this bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author:

AB 1340 will implement a state-level version of the federal Gainful Employment (GE) rule in California for schools governed by the Act, with a few changes to account for the state setting. California cannot control access to federal financial aid – the enforcement mechanism in the federal GE rule – but can regulate a program’s authority to enroll new students. This bill would prohibit or limit new resident enrollment in career training programs that fall into the “fail” or “zone” category based on the ratio of a typical program graduate’s debt-to-income, as established in the federal GE rule.

Because the Trump Administration has halted the data collection and matching required to implement the federal GE rule, this bill proposes a different approach to collecting wage and student debt information. AB 1340 will utilize state Unemployment Insurance data on wages and student debt information provided by institutions to the Bureau of Private Postsecondary Education to calculate the debt-to-earnings rates for programs. By taking a more proactive approach and tracking what schools are providing good value and quality programs to students, this will potentially alleviate some of the back-end enforcement challenges the Bureau is facing. Protecting students from harm in the first place is more effective than making them whole once the harm has already occurred.

Background.

History of Regulation of Private Postsecondary Educational Institutions. The modern iteration of the BPPE was established on January 1, 2010 through AB 48 (Portantino, Chapter 310, Statutes of 2009). Prior to the current BPPE, the state made multiple other attempts to regulate for-profit colleges and other private postsecondary schools; many of these efforts are regarded as having been largely unsuccessful. In the BPPE’s 2014 sunset review, statute was enacted stating that “the Legislature advises future policymakers to continually and carefully evaluate” the BPPE and its regulatory authority.

Private postsecondary schools were previously regulated by a division within the California Department of Education; however, by the end of the 1980s, the state had purportedly become regarded as the “diploma mill capital of the world.” This led to the enactment of the Private Postsecondary and Vocational Education Reform Act of 1989 (Reform Act), which was intended to “promote the effective integration of private postsecondary education into all aspects of California's educational system and to foster and improve the educational programs and services of these institutions while protecting the citizens of the state from fraudulent or substandard operations.” That year, the Legislature also enacted Maxine Waters School Reform and Student Protection Act, which first set a threshold for minimum job placement and graduation rates.

These two reforms, which were ultimately merged, created a new regulatory entity established as the Council on Private Postsecondary and Vocational Education (CPPVE). The CPPVE was given authority to approve and disapprove private postsecondary schools, and it used this power aggressively and at times controversially. In 1996, Columbia Pacific University engaged in litigation against the CPPVE for denying its application for approval. The CPPVE ultimately prevailed in this litigation, but the CPPVE was left with a public perception that it was overly belligerent in its regulation of educational institutions.

A review by the California Postsecondary Education Commission recommended that both the CPPVE and the Reform Act be permanently extended beyond their June 30, 1997 sunset date. However, the bill to extend that sunset date by five years (AB 2960, Firestone and Campbell) was vetoed by Governor Pete Wilson. The Governor’s veto message stated that he believed “many of the bad operators have left the state or gone out of business” and that the remaining schools “have described a pattern of reprisals and vindictiveness in dealing with the Council staff.” Governor Wilson wrote that he “would like to have more assurances that we are not making it impossible or unreasonably difficult for many small businesses to operate before I extend the life of the Council.”

Urgency legislation was introduced in 1997 (AB 71, Wright) to extend the Reform Act and respond to the Governor’s veto message by making numerous changes to how its provisions were carried out. In support of the bill, the California Postsecondary Education Commission stated that the Reform Act had “become a model for federal standards and other states, its regulation of private postsecondary education is a major improvement over the conditions that existed prior to its creation.” The bill was opposed by numerous schools that had been regulated by the CPPVE and who believed the Reform Act simply resulted in “costly overregulation over private institutions” that “discourages new schools from investing in California.”

AB 71 was signed into law extending the provisions of the Reform Act; however, the bill allowed the CPPVE to be repealed on its sunset date. In its place, the bill established a new Bureau for Private Postsecondary and Vocational Education (BPPVE) created within the Department of Consumer Affairs. The extension of the Reform Act transferred all of the CPPVE’s responsibilities for its implementation to the new BPPVE.

The creation of a new bureau, however, did not rectify concerns that the state was not appropriately overseeing private postsecondary schools. A 2000 audit of the Department of Consumer Affairs found that the BPPVE’s licensing process was “not prompt or consistent” and that its complaint resolution procedures were inadequate. Following a review by the recently established Joint Legislative Sunset Review Committee in 2002, the BPPVE was tasked with streamlining the Reform Act, making its regulatory processes more efficient, and improving its data collection and reporting systems.

In 2004, SB 1544 (Figueroa) was enacted to provide the BPPVE with an Enforcement Monitor to examine the bureau’s operations. The Enforcement Monitor’s resulting report stated that there had been a “twenty-year record of repeatedly identified, fundamental problems in every one of the Bureau’s key operations.” That year, Governor Arnold Schwarzenegger vetoed AB 711 (Correa), which would have added additional exempted schools to the Reform Act; in his veto message, the Governor stated that it “fell short of its objective to streamline functions of the Bureau.” In 2006, SB 1473 (Figueroa) was introduced to replace the Reform Act with new provisions within the Business and Professions Code and to recast the BPPVE; however, this bill was subsequently held on suspense.

That same year, legislation to extend the sunset on the Reform Act and the BPPVE was once again vetoed by the Governor. In his veto message, Governor Arnold Schwarzenegger commented that he “supported meaningful protections for students of California’s private postsecondary and vocational institutions” but that because SB 1473 failed to pass the Legislature, extending the sunset date on the BPPVE “does nothing to enhance protections for students, allows problems that have been well documented to continue to exist, and merely allows mediocrity for California’s students.” A second bill to extend the state’s regulation of private postsecondary schools through a modernization of the Reform Act, SB 823 (Perata), was also vetoed, and the Governor directed the Department of Consumer Affairs to take on the bureau’s oversight responsibilities while a better replacement for the Reform Act was negotiated.

Following the Governor’s vetoes, the Reform Act became inoperative on July 1, 2007 and the bureau was subjected to repealed. AB 1525 (Cook) was chaptered in 2007 to provide for a transition plan for business still pending before the BPPVE, and to give the Director of Consumer Affairs clear authority to take on the bureau’s responsibilities. That bill also created the Student Tuition Recovery Fund. Later bills extended some of AB 1525’s provisions.

In the years following the sunsetting of the BPPVE and the Reform Act, private postsecondary schools were subject to little or no oversight by the state. Finally, AB 48 (Portantino) was chaptered in 2009 to revive the state’s regulation of private postsecondary institutions. That bill reinstated the authority of the BPPVE, rebranded and recast as the BPPE, and established the California Private Postsecondary Education Act of 2009. The bill sought to institute a more efficient and effective oversight entity to carry out implementation of a stronger consumer protection act. The BPPE was ultimately restored full funding in late 2010.

The BPPE continues to be subject to significant scrutiny by the Legislature and advocates. SB 1247 (Lieu) was chaptered in 2014 to provide the BPPE with only a two year sunset extension before further review while making a number of reforms to the California Private Postsecondary Education Act. In the BPPE’s 2016 sunset review, staff outlined a number of ongoing issues relating to the operation of the bureau, ultimately providing no immediate recommendation as to whether the BPPE’s sunset should be extended and stating that “the Bureau has faced significant difficulties in implementing the law. It is important that California’s approval and oversight of an institution assures minimum quality and student protections.”

In 2016, the BPPE’s sunset date was again extended until January 1, 2021, with numerous reforms made in response to recent high-profile litigation and school closures. SB 1192 (Hill) established an Office of Student Assistance and Relief “for the purpose of advancing and promoting the rights of prospective students, current students, or past students of private postsecondary educational institutions.” The bill also expanded the BPPE’s authority to oversee out-of-state private postsecondary schools serving students in California, requiring registration and basic approval standards. Finally, the bill required approved institutions under investigation by entities other than the BPPE to report that investigation and its nature within 30 days.

The BPPE will next undergo sunset review in 2020. It is anticipated that the success of the new Office of Student Assistance and Relief and the effects of recent changes in management will be discussed, and the BPPE will be expected to demonstrate how it has improved its operates sufficiently to be a strong regulator on behalf of California students. Until then, the framework that has been put into place through careful oversight by the Legislature is cause for optimism that the BPPE is well-equipped to exercise its current responsibilities and expand into new opportunities for safeguarding the interests of Californians.

Criticism of For-Profit Colleges. Many educational programs run by for-profit entities offer coursework preparing students for careers not well served by nonprofit or public institutions. However the inherent profit motive behind these institutions’ stewardship of the societal values of higher education has long resulted in concern. This general apprehension about the capacity for certain private postsecondary schools to profit through the exploitation of vulnerable students has been the root purpose for regulation by the BPPE and its predecessors. The public prosecution and closure of various high-profile “bad actor” schools over the years has contributed substantially to the cause for furthering regulatory vigilance.

In 2016, California Attorney General Kamala D. Harris announced that a $1.1 billion judgment had at last been obtained against the long-vilified Corinthian Colleges, Inc. – which by that time had long closed down its campuses and filed for bankruptcy. The Attorney General’s complaint publicized how Corinthian, through its Everest, Heald, and Wyotech campuses, had for years made fraudulent statements to prospective students about job placement rates, available programs, and affiliation with the United States military.

The Attorney General’s complaint revealed that Corinthian had described its target demographic as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.” The average the average tuition for an associate’s degree at a Corinthian school was $40,000. Following the closure of Corinthian’s campuses, thousands of students were left with crippling debt without having received a quality education.

Corinthian is not regarded as being a rare exception in the world of for-profit education. In 2015, Marinello Schools of Beauty abruptly closed down campuses throughout California after the United States Department of Education cut off the institution’s access to federal student aid for “knowingly requesting federal aid for students based on invalid high-school diplomas, underawarding Title IV aid to students, charging students for excessive overtime.” In late 2018, another abrupt closure was announced by the Education Corporation of America (ECA) and its Brightwood College campuses following federal student aid restrictions and a notice from its accreditor that recognition for its campuses would be suspended.

Rollback of Federal Protections. During President Barack Obama’s second term, the White House announced that it was taking bold steps to increase federal oversight of for-profit colleges and protect students from predatory institutions. One such rule was the Department of Education’s “Gainful Employment” rule, which required colleges to track their students’ performance in the workforce after graduation. Under the Gainful Employment rule, career training programs that fail to adequately place graduates in jobs would be cut off from federal funding. This rule was intended to prevent for-profit colleges from overpromising job opportunities to students in exchange for saddling them with debt that they are subsequently unable to pay back.

By the end of President Obama’s second term, the Department of Education was robustly exercising its oversight and enforcement authority over the for-profit college sector. The Gainful Employment rule was challenged in court and was ultimately upheld in 2015, and the Department of Education ramped up its investigations into potentially problematic educational programs. However, in 2017, the Trump Administration took over the White House, and almost immediately began to reverse the progress that the Obama Administration was considered to have made.

According to recent reporting by the New York Times, an active investigation by the Department of Education into a large chain of private postsecondary schools was essentially halted after President Trump’s Secretary of Education, Betsy DeVos, named a former dean of that school as supervisor of the investigation team. Other individuals with prior affiliations with for-profit schools have also been appointed to senior positions within the Department. Reports indicate that the for-profit college investigation team has been curtailed from approximately a dozen attorneys and investigators to just three.

In addition to scaling back of investigations, Secretary DeVos announced the Department of Education’s intention to roll back several Obama-era regulations impacting higher education. In October 2017, Attorney General Xavier Becerra signed onto a multistate against the Department of Education for illegally delaying the implementation of the Gainful Employment Rule, in violation of the Administrative Procedure Act. In August 2018, a Notice of Proposed Rulemaking was announced to formally rescind the Gainful Employment rule.

An October 2018 CalMatters article titled California’s for-profit college watchdog fails to police as feds back down stated that “as the Trump administration pulls back from regulating the sector, consumer advocates argue, the states’ role becomes even more critical.” The article identifies the BPPE as the entity best suited to take on the oversight responsibilities that Secretary DeVos has taken steps to abdicate. The article does recognize that BPPE’s historical shortcomings—including its complaint backlogs—represent a challenge to effectuating new requirements. However, recent displays of progress with the BPPE showcase a bureau whose leadership is up to the task of regulating institutions through a student-centered approach, and inheriting responsibility for the Obama Administration’s protections in California may be an ideal fit.

The Gainful Employment Rule. Specifically speaking, the Gainful Employment rule provides for a framework for reviewing whether an educational program is worth the money it costs to attend. Simplifying this calculation and using it to require schools to meet a certain threshold of return on investment is a valuable way of protecting students who are considering pursuing higher education to bolster their future prospects for economic opportunity, but who are at risk of instead simply taking on debt in exchange for a program that does not ultimately improve their capacity to earn a higher income.

Under 34 C.F.R. § 668.403, the Gainful Employment program framework requires a program that provides training that prepares students for gainful employment in a recognized occupation to meet certain debt-to-earnings rates each year. Debt-to-earnings is calculated two ways. First, a “discretionary income rate” is determined by calculating the percentage of a Gainful Employment program’s annual loan payment compared to the discretionary income of the students who completed the program. Second, an “annual earnings rate” is determined by calculating the percentage of a Gainful Employment program’s annual loan payment compared to the annual earnings of those students.

For a Gainful Employment program to “pass” the debt-to-earnings rates measure, its discretionary income rate must either be less than or equal to 20 percent, or its annual earnings rate must be less than or equal to eight percent. A Gainful Employment program “fails” if either its discretionary income rate is greater than 30 percent, or its annual earnings rate is greater than 12 percent (or the denominator is zero). Anything falling between the “pass” and “fail” markers for the debt-to-earnings rates measure (e.g. a discretionary income rate between 20 percent and 30 percent) is considered to be “in the zone” under the federal regulations.

Current federal regulations state that a Gainful Employment program is ineligible for purposes of federal regulation if the program either fails the debt-to-earnings rates measure two out of any three consecutive award years, or has a combination of “zone” and failing rates for four consecutive award years. However, if the Secretary of Education does not calculate or issue debt-to-earnings rates for a program in an award year, there is no change to that program’s status. The structure of the Gainful Employment rule essentially incentivizes programs to maintain certain debt-to-earnings rates in order to remain approved, without overly penalizing schools who slip below a passing calculation over the course of a small period of time.

This bill would essentially recodify the current federal regulations enacting the Gainful Employment rule so that the provisions may be enforced by California as a matter of state law. As the state’s regulator of private postsecondary educational institutions, this responsibility would fall to the BPPE. The BPPE would be equipped to carry out this function through new reporting requirements for schools, as well as through regulatory partnership with the EDD.

Current Related Legislation. AB 1341 (Berman) would clarify that an institution of higher education is only exempt from the requirements imposed on out-of-state institutions if it meets the definition of a nonprofit corporation or public institution. This bill is pending in the Assembly Business and Professions Committee.

AB 1342 (Low) would require the Attorney General’s review and approval for any sale of a nonprofit educational institution to a for-profit entity. This bill is pending in the Assembly Judiciary Committee.

AB 1343 (Eggman) would prohibit a private postsecondary educational institution from enrolling residents of California, unless the institution meets either the requirement that no more than 85 percent of the institution’s tuition revenue is derived from student financial aid and loans, or not less than 50% of the institution’s tuition revenue is dedicated to student instruction. This bill is pending in the Assembly Business and Professions Committee.

AB 1344 (Bauer-Kahan) would increase the BPPE’s oversight over out-of-state private postsecondary educational institutions operating online. This bill is pending in the Assembly Business and Professions Committee.

AB 1345 (McCarty) would prohibit an institution from providing certain financial incentives to any person, including a student, involved in student recruitment, enrollment, continued enrollment, admission, or attendance, or involved in awarding of financial aid based on the enrollment of a student. This bill is pending in the Assembly Business and Professions Committee.

AB 1346 (Medina) would expand the definition of economic loss, as it pertains to the Student Tuition Recovery Fund. This bill is pending in the Assembly Appropriations Committee.

Prior Related Legislation. SB 1192 (Hill, Chapter 593, Statutes of 2016) extended the operation of the BPPE and established the Office of Student Assistance and Relief.

AB 1619 (Berman) of 2017 would have required the BPPE to prohibit institutions from enrolling new students in an educational program that receives a fail rating for two out of three consecutive years, or receives a combination of zone or fail ratings for four consecutive years, based on the federal debt-to-earnings rates. The provisions in this bill were ultimately replaced with provisions dealing with a different topic.

AB 1611 (McCarty) of 2017 would have required certain debt-dependent programs to submit information to the BPPE upon the repeal or suspension of specified federal regulations. This bill was held under submission on the Assembly Appropriations Committee’s suspense file.

ARGUMENTS IN SUPPORT:

The Century Foundation (TCF) supports this bill. According to the TCF, “part of a package of bills that are critical to consumer protection in California postsecondary education, AB 1340 would ensure that California is protecting students and taxpayers even while Secretary of Education Betsy DeVos is opening the floodgates of federal student loan funds to predatory colleges.” The TCF states that “AB 1340 helps to mitigate the hazards of for-profit colleges while establishing the guardrails that allow the schools to thrive when they are delivering on the promise of education and training for careers.”

The Institute for College Access and Success (TICAS) also supports this bill. TICAS argues that “it is sadly too common that students take out thousands of dollars in student loans to enroll in career training programs they believe will lead to a job, only to discover - too late - that they have unmanageable debt with no return on investment. In an effort to address this problem, the U.S. Department of Education engaged experts and stakeholders over the course of several years to develop the “gainful employment” regulation, finalized in 2014.” TICAS states that “AB 1340 will implement a state-level version of the GE rule in California for schools overseen by the BPPE, with appropriate changes to account for the state setting. By taking a proactive approach and tracking what schools are providing quality programs at a good value to students, AB 1340 seeks to reduce the number of enforcement actions the BPPE will have to undertake.”

ARGUMENTS IN OPPOSITION:

The California Association of Private Postsecondary Schools (CAPPS) opposes the bill. CAPPS states that “the most recent version of AB 1340 adopts a pass/fail system, yet the 2017 GE used a zone system for determining failure over several years that gave Institutions, whose programs were in jeopardy, an opportunity to fix or modify the program. As currently drafted, the measure includes a one-year look-back that offers no opportunity to fix the educational program in question. This one and done fail system proposed is more draconian and punitive than anything contained in the 2107 GE and strays far from any previous Federal Regulations.”

The Professional Beauty Federation of California (PBFC) also opposes the bill. The PBFC asks, “with the average student body demographics of 90% young females (where marriage, pregnancy and other variables can temporarily impact earning capacity shortly after graduation), is it fair to hold beauty schools to the same income earning capacity of other postsecondary institutions?” The PBFC states that “BPPE licensed, State Board of Barbering & Cosmetology approved institutions should not be held to a higher standard than every public university, which also utilize federal loans, and should be welcomed by policymakers eager to provide all students viable career choices.”

AMENDMENTS:

1. To amend the bill to more closely conform with the federal Gainful Employment standard requiring a rating of “fail” for two consecutive years, or have a combination of “zone” and “fail” rating over four consecutive years, as suggested in a prior committee’s analysis:

Amend subdivision (c) of Section 1 of the bill as follows:

(c) (1) An institution offering a program intended to prepare a student for gainful employment in a recognized profession shall satisfy both of the following requirements:

(A) If the program’s does not pass the federal debt-to-earnings rates, as measured pursuant to established in Section 668.403 through 668.406 of Title 34 of the Code of Federal Regulations, as that section read on January 1, 2017, are “in the zone” for the purpose of the federal debt-to-earnings rates measure in a given year, the institution shall limit the number of new California residents enrolled in the program the following year to the number of new California residents enrolled in the program the previous year.

(B) If the program’s fails the federal debt-to-earnings rates, as measured pursuant to established in Section 668.403 through 668.406 of Title 34 of the Code of Federal Regulations, as that section read on January 1, 2017, fails for two out of three consecutive years, or receives a combination of zone or fail ratings for four consecutive years, the institution shall not enroll any new California residents in the program unless and until the institution establishes the eligibility of that program, pursuant to Section 668.403 of Title 34 of the Code of Federal Regulations, as that section read on January 1, 2017.

(2) (A) The bureau may exempt a program from the requirements of paragraph (1) if the program is one in which less than 50 percent of the students have had a loan arranged for them by the institution.

(B) For purposes of this paragraph, “loan” means any agreement by the student to make future payments that extend beyond the term of enrollment.

(3) The bureau shall adopt regulations to define gainful employment based, as much as is practicable, on the intent of Section 668.403 through 668.406 of Title 34 of the Code of Federal Regulations, as that section read on January 1, 2017.

1. To accommodate educational programs preparing students for a profession requiring additional training after graduation (such as internships and residencies) by allowing the reporting of student cohort data until after the completion of that training:

Insert a new subparagraph (C) in paragraph (2) of subdivision (a) in Section 2 to read:

(C) For purposes of this paragraph, programs that train for professions with state-mandated requirements for internship, residency, or any other accrual of in-service training or hours prior to licensure or certification shall be required to provide alternative student cohort data that measures the student cohort starting the year after the point of licensure or certification.

1. To clarify the time the BPPE has to adopt regulations implementing this bill and ensure that there is adequate time for public input:

Insert “no later than July 1, 2021” into provisions in the bill requiring the BPPE to promulgate new regulations.

REGISTERED SUPPORT:

California Low-Income Consumer Coalition
Campaign for College Opportunity
Center for Public Interest Law
The Century Foundation
Children’s Advocacy Institute
Consumer Action

Consumer Federation of California
Consumer Reports
Housing and Economic Rights Advocates

The Institute for College Access and Success
OneVet OneVoice
Public Advocates
Public Counsel
Public Law Center
Service Employees International Union
Veterans Education Success
Veterans Legal Clinic
Youth Leadership Institute

REGISTERED OPPOSITION:

American Association of Cosmetology Schools
California Association of Private Postsecondary Schools

DeVry University
Ember Education
Professional Beauty Federation of California
Walden University

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301

Date of Hearing: April 9, 2019

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 1340 (

Author:Chiu) – As Amended Ver:April 1, 2019

[Note: This bill is doubled referred to the Assembly Committee on Business and Professions and will be heard by that Committee as it relates to issues under its jurisdiction.]

SUBJECT: Private postsecondary education: California Private Postsecondary Education Act of 2009

SUMMARY: Prohibits an institution offering a program intended to prepare a student for gainful employment in a recognized profession from enrolling additional California residents above the number enrolled in the program the previous year if the program does not meet the standard for passing the federal debt-to-earnings rates measure, and from enrolling any California residents if the program fails the federal debt-to-earnings rates measure. Specifically, this bill:

1. Requires an institution offering a program intended to prepare a student for gainful employment in a recognized profession to satisfy both of the following requirements:
2. If the program does not pass the federal debt-to-earnings rates measure established in the Code of Federal Regulations, (programs whose graduates have annual loan payments greater than 8% but less than or equal to 12% of total earnings or greater than 20% but less than or equal to 30% of discretionary income), the institution shall limit the number of new California residents enrolled in the program to the number of new California residents enrolled in the program the previous year; and,
3. If the program fails the federal debt-to-earnings rates measure established in the Code of Federal Regulations, (programs whose graduates have annual loan payments greater than 12% of total earnings and greater than 30% of discretionary income), the institution shall not enroll any new California residents in the program.
4. Authorizes the Bureau for Private Postsecondary Education (BPPE) to exempt a program from the requirements listed above if the program is one in which less than 50 percent of the students have had a loan arranged for them by the institution.
5. Defines “loan” to mean any agreement by the student to make future payments that extend beyond the term of enrollment.
6. Requires the BPPE to adopt regulations to define gainful employment based, as much as is practicable, on the intent of Section 668.403 of Title 34 of the Code of Federal Regulations, as that section read on January 1, 2017.
7. Requires institutions, as a condition for authorization to operate, and in order to demonstrate compliance with the requirements listed in “1” above, to annually report to the BPPE all of the following:
8. Identifying information for each student sufficient to match to wage data from the Employment Development Department (EDD); and,
9. Education debt broken down by individually identified student, and by student cohort, including the annual repayment amount.
10. Defines “student cohort” to mean the group of students who complete an educational program in a particular year.
11. Requires the BPPE to adopt regulations necessary to implement the data reporting detailed above, including further specifying the data that shall be reported by an institution to the bureau for purposes of the bureau matching reported data with wage data from the Employment Development Department.
12. Requires BPPE to match the data reported by institutions, as specified, and any regulations adopted, as specified, with quarterly wage data from the Employment Development Department pursuant to Section 1095 of the Unemployment Insurance Code.
13. Authorizes the BPPE to may waive the data reporting and data matching if it is determined that sufficient federal data is available to establish if a campus has met the gainful employment standard detailed in “#1” above.
14. Enables the BPPE to access and use any relevant EDD quarterly wage data necessary to perform the gainful employment data match pursuant to Section 94892.6 of the Education Code, including individually identifiable information. Requires BPPE to keep the wage data confidential.

EXISTING LAW:

1. Establishes the California Private Postsecondary Education Act of 2009 (Act) until January 1, 2021, and requires BPPE, within the Department of Consumer Affairs (DCA) to, in part, review, investigate and approve private postsecondary institutions (or institutions), programs and courses of instruction pursuant to the Act and authorizes BPPE to take formal actions against an institution/school to ensure compliance with the Act and even seek closure of an institution/school if determined necessary. The Act requires unaccredited degree granting institutions to be accredited by an accrediting agency recognized by the US Department of Education (USDE) by 2020. The Act also provides for specified disclosures and enrollment agreements for students, requirements for cancellations, withdrawals and refunds, and that the BPPE shall administer the STRF to provide refunds to students affected by the possible closure of an institution/school. (Education Code (EDC) Section 94800 et. seq.)
2. Requires an institution, except as specified, offering a degree to have either an accreditation by an accrediting agency covering the offering of at least one degree program by the institution, or an accreditation plan, approved by the BPPE, to become fully accredited within five years of the BPPE’s issuance of a provisional approval to operate the institution. (EDC Section 94885)
3. Requires the Director of Employment Development to permit the bureau to access relevant quarterly wage data, as necessary, for the BPPE’s evaluation and reporting of program performance outcomes as required and permitted by various state and federal laws, including the federal Workforce Innovation and Opportunity Act of 2014. Existing law makes a person who knowingly accesses, uses, or discloses this confidential information without authorization guilty of a misdemeanor. (Unemployment Insurance Code Section 1095)
4. In order to be eligible for funding under the federal Higher Education Act Title IV student assistance programs, an educational program must lead to a degree at a nonprofit or public institution or it must prepare students for gainful employment in a recognized occupation. (20 U.S.C. Section 1001 et seq.)
5. Establishes debt-to-earnings rates to determine whether a gainful employment program prepares students for gainful employment in a recognized occupation. (34 Code of Federal Regulation Part 668 et seq.)

FISCAL EFFECT: Unknown

COMMENTS: Purpose of the bill. According to the author, “AB 1340 will implement a state-level version of the federal Gainful Employment (GE) rule in California for schools governed by the Act, with a few changes to account for the state setting. California cannot control access to federal financial aid – the enforcement mechanism in the federal GE rule – but can regulate a program’s authority to enroll new students. This bill would prohibit or limit new resident enrollment in career training programs that fall into the “fail” or “zone” category based on the ratio of a typical program graduate’s debt-to-income, as established in the federal GE rule.”

“Because the Trump Administration has halted the data collection and matching required to implement the federal GE rule, this bill proposes a different approach to collecting wage and student debt information. AB 1340 will utilize state Unemployment Insurance data on wages and student debt information provided by institutions to the Bureau of Private Postsecondary Education to calculate the debt-to-earnings rates for programs. By taking a more proactive approach and tracking what schools are providing good value and quality programs to students, this will potentially alleviate some of the back-end enforcement challenges the Bureau is facing. Protecting students from harm in the first place is more effective than making them whole once the harm has already occurred.”

Background. On July 1, 2015, the federal gainful employment regulation took effect to protect students and increase accountability of low-performing career training programs at our higher education institutions. The federal USDE’s gainful employment regulation enforces the federal Higher Education Act’s requirement that all career training programs receiving Title IV federal student aid “prepare students for gainful employment in a recognized occupation.”

The gainful employment rule applies to all sectors of higher education: public, non-profit, and for-profit. Specifically, programs under the federal gainful employment regulation include: all Title IV eligible degree and non-degree programs at for-profit institutions and Title IV eligible non-degree programs (e.g., certificate and diploma programs) at public and non-profit institutions.

Gainful employment rules were enacted, in part, out of dramatically increased debt taken on by students. Over the last ten years, student loan debt has tripled from $450 billion to nearly $1.5 trillion. In a letter to Congress sent by 20 state attorneys general in February of 2017, it was noted that “…a major driver of this increase has been for-profit colleges. Of the top 25 schools where students hold the most student loan debt, over half were for-profit schools in 2014. This is up from only one for-profit institution in the top 25 in 2000.”

In addition to driving the increase in student loan borrowing, for-profit institutions also have significantly more loan defaults than other types of institutions. Since 2013, for-profit institutions accounted for 35% of all federal student loan defaults, but enrolled just 27% of all borrowers.

Many for-profit schools are almost entirely dependent on federal grants and loans.

The aforementioned letter noted that, “…in December 2016, the U.S. Department of Education found that nearly 200 for-profit schools derive more than 90% of their income from federal sources…The list of State Attorney General investigations and enforcement actions against for-profit colleges is long, including actions against: American Career Institute; Ashford University/Bridgepoint Education, Inc.; Corinthian Colleges, Inc.; Career Education Corporation; Education Management Corporation; Daymar College; DeVry University; ITT Tech; National College of Kentucky; and Westwood Colleges, among others.”

Gainful employment components. The GE regulation has two components: accountability and transparency. The accountability component distinguishes between programs that provide affordable training that leads to well-paying jobs and those that are not based on the debt-to-earnings rates of their graduates.

Through the regulatory process, the federal Department of Education established a debt-to-earnings ratio based on the typical loan debt and the earnings of students who previously completed the program. Two debt-to-earnings ratios are calculated, one based on annual earnings and one based on discretionary income. The two rates are calculated for each program as a measure of the ability of graduates of the program to reasonably repay their student debt.

For the Annual Earnings Rate, the numerator is the calculated annual loan payment amount (an estimate of the annual loan repayment amount based on the median educational debt of the members of the cohort). The denominator is the higher of the cohort’s mean or median earnings.

The Discretionary Income Rate uses the same annual loan payment amount in the numerator as the Annual Earnings Rate but the denominator is the higher of the mean or median earnings minus 150% of the poverty guideline.

To maintain Title IV federal financial aid eligibility, programs are required to meet minimum standards for the debt-to-earnings rates of their graduates and are provided the following three ratings:

1. “Pass” – Programs whose graduates have annual loan payments less than or equal to 8% of total earnings or less than or equal to 20% of discretionary income.
2. “Zone” – Programs whose graduates have annual loan payments greater than 8% but less than or equal to 12% of total earnings or greater than 20% but less than or equal to 30% of discretionary income (neither pass nor fail),
3. “Fail” – Programs whose graduates have annual loan payments greater than 12% of total earnings and greater than 30% of discretionary income.

A program becomes ineligible for Title IV federal financial aid funding if the program receives a fail rating for two out of three consecutive years or has a combination of zone or fail ratings for four consecutive years. This allows a probationary period where institutions are given the opportunity to improve their failing or in-the-zone programs. The gainful employment regulation has no impact on student eligibility for federal grants and loans, but affects only which programs are eligible.

The transparency component requires institutions to provide key consumer information to prospective students such as what the typical graduate earns, how much debt they have, and what share of students graduate and find employment in the specified field. Potential ineligibility for programs that receive zone or fail ratings also triggers disclosure to current and prospective students.

Gainful employment status. On January 9th of 2017, the USDE released its first debt-to-earnings rates for career training programs and identified over 800 programs with a fail rating that are in potential danger of losing federal financial aid funding. 98 percent of those programs that received a fail rating are offered by for-profit institutions. More than 350,000 students graduated from these worst-performing programs with nearly $7.5 billion in student loan debt. In California specifically, 84 programs failed the GE test – all but two of which were offered by for-profit colleges – and another 183 scored in the “zone” range. Over a two-year period, these substandard California programs graduated about 56,000 students who left school with $934 million – close to $1 billion – in student loan debt.

The USDE moved to rescind the GE in August of 2018, but missed a crucial November 2018 deadline. In court filings USDE cited as a reason for the delay the large number of public comments -- more than 38,000 – that it was required to consider before issuing a final rule. The delay means that the earliest USDE will be able to rescind GE will be July of 2020.

Even with the GE regulation still operative, USDE announced that the U.S. Social Security Administration, which provided the data until this year, has let an information-sharing agreement with the department lapse. Without that critical data-sharing element in place, USDE is unable to evaluate if institutions are in compliance with GE.

Arguments in support. A coalition of student, veteran, civil rights, and higher education advocates jointly wrote to the committee in support of AB 1340. They noted that, “...it is sadly too common that students take out thousands of dollars in student loans to enroll in career training programs they believe will lead to a job, only to discover - too late - that they have unmanageable debt with no return on investment. In an effort to address this problem, the U.S. Department of Education engaged experts and stakeholders over the course of several years to develop the GE regulation, finalized in 2014. The GE rule was an effort to measure career education programs’ performance in “prepar[ing] students for gainful employment in a recognized occupation,” and to prevent programs that leave students with debt and no means to pay it back from continuing to receive federal financial aid.”

“Unfortunately, the Trump Administration and Education Secretary Betsy DeVos have proposed to rescind the GE rule completely, leaving these programs free to continue enrolling students without being held accountable for their poor performance. The U.S. Department of Education estimates that eliminating the gainful employment rule will cost taxpayers $5.3 billion in financial aid because of increased spending on programs that fail to meet established standards…By taking a proactive approach and tracking what schools are providing quality programs at a good value to students, AB 1340 seeks to reduce the number of enforcement actions the BPPE will have to undertake….AB 1340 would further reduce harm to students by prodding schools to improve their value proposition for students.”

Arguments in opposition. The California Association of Private Postsecondary Schools writes that, “AB 1340 as amended cannot possibly work. The Social Security Administration rejected providing wage data for GE, which was a main reason the regulations were withdrawn. While a surface review might cause one to think that the State EDD Unemployment Insurance data could be used as a substitute, a more in-depth look reveals that Unemployment Insurance (UI) data cannot substitute for the wage and hour data produced by the US Social Security Administration. And it does not contain data for any student who is not a California taxpayer, of which there are many enrolled at our schools. Besides the obvious legal issues involved in using UI data for a Higher Education program review, there other factors that make this bill a non-starter:”

1. “There are no student identifiers available from EDD that can provide a 12-month look-back at individual wage data that can tie a student’s wages to a specific educational program. Wages can come from many sources and no conclusions can be reached.”
2. “Wages are not reported by years and are not available for use in the succeeding year, thus the bill fails on reporting.”
3. “Attempting to modify a system of UI into a student-based wage reporting system certainly violates student FERPA rights of non-disclosure under Federal law.
4. “As UI is a Federal program operated by the State, federal permissions would have to be obtained which are highly unlikely.”
5. “EDD is legally prevented from using social security numbers as identifiers. Each student would have to be assigned a special number which would be very expensive, require massive programing at the EDD and BPPE and take years to implement.”
6. “The information sought under this new and very complex bill is already reported by Institutions and available for review by Accreditors, USDOE and the State.”

“There is no reason or method that would allow the BPPE and the EDD to implement a GRE as proposed in this bill without spending millions of additional dollars and years of staffing and modifying management information systems to give a report that is already available.”

Policy considerations. Staff notes that the penalties of this legislation are more substantially more stringent than those detailed in federal GE regulations.

The committee recommends that the bill be amended to more closely conform with the federal GE standard requiring a rating of “fail” for two consecutive years (where annual loan payments are greater than 12% of total earnings and greater than 30% of discretionary income), or have a combination of “zone” and “fail” rating over four consecutive years. These amendments will create a probationary period, giving under-performing programs an opportunity to improve.

There is no explicit reference in this bill to an appeals process when an institution has concerns about the veracity of wage data. Moving forward, the author should work with stakeholder groups to craft a data appeals process.

Data availability. Staff notes opposition concern regarding the use of EDD wage data, and that provisions of this bill authorize the BPPE to waive the data reporting and data matching if it is determined that sufficient federal data is available to establish if a campus has met the gainful employment standard.

Staff also notes that the President signed an Executive Order on March 21^st, 2019 pertaining to postsecondary education data. The Executive Order requires the Secretary of Education to:

1. Make available, by January 1, 2020, a website and mobile application to inform federal student loan borrowers of certain information.
2. Expand and update annually the College Scorecard (or successor document) with program-level data for each certificate, degree, graduate, and professional program, for former students who received federal aid:
3. Estimated median earnings;
4. Median Stafford, Graduate PLUS, and Parent PLUS loan debt; and,
5. Student loan default and repayment rates.
6. Expand and update annually the College Scorecard with institution-level data, providing the aggregate for all programs for former students who received federal aid:
7. Student loan default and repayment rates;
8. Graduate PLUS default and repayment rates; and,
9. Parent PLUS default and repayment rates.

Employment information currently required by the state. Current law requires an institution regulated by the BPPE to provide a prospective student with a School Performance Fact Sheet containing information on completion rates, job placement rates, license examination passage rates and salary or wage information, among other things, each rate is based on a formula outlined in statute:

1. Job placement rate is calculated by dividing the number of graduates employed in the field by the number of graduates available for employment for each program.
2. Completion rate is calculated by dividing the number of on-time graduates by the number of students available for graduation.
3. License examination passage rates for the immediately preceding two years is calculated by dividing the number of graduates who pass the exam by the number of graduates who take the licensing exam the first time after completing the education program.
4. Salary and Wage information, consisting of the total number of graduates employed in the field and the annual wages or salaries of those graduates.

Prior legislation. AB 1619 (Berman, 2017), required the BPPE to prohibit institutions that are subject to the provisions of the Act from enrolling new students in an educational program that receives a fail rating for two out of three consecutive years, or receives a combination of zone or fail ratings for four consecutive years, based on the federal debt-to-earnings rates. On June 11, 2018, the bill was amended out of the jurisdiction of the Assembly Higher Education Committee to deal with sexual assault.

AB 1611 (McCarty, 2017), required certain debt-dependent programs to submit information to the BPPE upon the repeal or suspension of specified federal regulations. This bill was held by the Assembly Appropriations Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Conference of the American Association of University Professors
California Low-Income Consumer Coalition
Campaign for College Opportunity
Center for Public Interest Law
Children's Advocacy Institute
Consumer Federation of California
Consumer Reports Advocacy
Housing & Economic Right Advocates
Public Advocates, Inc.
Public Counsel
Public Law Center
SEIU California
The Century Foundation
The Institute for College Access and Success
Veterans Education Success
Veterans Legal Clinic

Opposition

California Association of Private Postsecondary Schools
Enlisted Association of the National Guard of the United States
Professional Beauty Federation of California
University of Phoenix
Walden University

Analysis Prepared by: Kevin J. Powers / HIGHER ED. / (916) 319-3960