Bill Text: CA AB1916 | 2015-2016 | Regular Session | Amended
Bill Title: Private postsecondary education: school closure bonds.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2016-11-30 - From committee without further action. [AB1916 Detail]
Download: California-2015-AB1916-Amended.html
BILL NUMBER: AB 1916 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 5, 2016
INTRODUCED BY Assembly Member Irwin
FEBRUARY 11, 2016
An act to add Section 94886.5 to the Education Code, relating to
private postsecondary education.
LEGISLATIVE COUNSEL'S DIGEST
AB 1916, as amended, Irwin. Private postsecondary education:
school closure bonds.
Existing law, the California Private Postsecondary Education Act
of 2009, provides for the regulation of private postsecondary
educational institutions by the Bureau for Private Postsecondary
Education in the Department of Consumer Affairs. The act exempts an
institution from its provisions, if any of a list of specific
criteria are met.
The act establishes the Student Tuition Recovery Fund and requires
the bureau to adopt regulations governing the administration and
maintenance of the fund, including requirements relating to
assessments on students and student claims against the fund, and
establishes that the moneys in this fund are continuously
appropriated to the bureau for specified purposes.
This bill would require a private postsecondary institution, as
defined, to file a surety bond before January 1, 2019, with the
department bureau in the
an amount equal to a reasonable
estimate of the maximum amount of tuition and fees imposed on
students of the institution for a period of attendance of greatest
expense during the applicable academic year. no less
than the total amount of tuition and fees charged by the institution
for the immediately preceding academic year, divided by 4.
In the event the institution ceases operation, this bill would
require the bureau, upon request for a refund by a student
or the implementation of a teach-out for students of the institution,
to bureau, if it makes a specified determination, to
make a demand on the bond to: (1) issue a refund of
tuition and fees for student claims, (2) implement a teach-out for
students of the institution, and (3) to provide
recovery to students who were enrolled at the time of the closure, or
within 120 days of the closure, and reimburse the Student
Tuition Recovery Fund for moneys paid from the fund for
student claims that would have been otherwise recoverable under the
bond. these students.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 94886.5 is added to the Education Code, to
read:
94886.5. (a) Before January 1, 2019, an institution shall file
with the bureau a surety bond in the amount determined pursuant to
subdivision (b). The bond shall be executed by the institution as
principal and by a surety company authorized to do business in this
state. The bond shall be continuous unless the surety is released
pursuant to this section.
(b) The amount of the bond shall be equal to a reasonable
estimate of the maximum amount of tuition and fees to be returned to
students of the institution for the most expensive period of
attendance during the applicable academic year. Following the initial
filing of the bond with the bureau, the amount of the bond shall be
recalculated annually by the bureau based upon a reasonable estimate
of the maximum amount of tuition and fees to be returned to students
anticipated by the school for that period of attendance. The bond
shall, to the extent practicable, cover potential administrative
costs incurred by the bureau in an amount no less than 5 percent of
the total amount of the bond. In no case shall the amount of the bond
be less than five thousand dollars ($5,000). no less
than the total amount of tuition and fees charged by the institution
for the immediately preceding academic year, divided by four.
(c) (1) In the event that an
institution ceases operation, the bureau shall make demand on the
surety of the institution upon the request for a refund by a
student or the implementation of the teach-out for the students of
the institution according to the plan provided to the bureau pursuant
to Section 94926, and the surety shall pay the claim due within 45
days. The bureau shall use the bond to pay claims, to the extent
practicable, filed by students who have not otherwise recovered their
tuition and fees through a teach-out, or from the Student Tuition
Recovery Fund established in Section 94923. The bureau shall use the
bond to reimburse the Student Tuition Recovery Fund for all moneys
paid from the fund for claims that would have been otherwise
recoverable under the bond, except as provided in paragraph (4).
to provide refunds of tuition and fees and, if
applicable, punitive damages to students who were enrolled at the
time of the closure, or within 120 days before the closure, if the
bureau determines that there was a significant decline in the quality
or value of applicable educational programs offered by the
institution during that 120-day time period. If Student Tuition
Recovery Fund reimbursements are processed for these students, the
bureau shall immediately notify the surety and use the surety to
fully reimburse the fund. If the bureau fails to make the demand on
the surety within 120 days of closure, a student or group
of students of the closed institution may make a demand directly on
the surety of that institution to recover refunds of tuition and fees
and, if applicable, punitive damages to which the student or
students proves he or she is due. The surety shall provide recovery
to students for at least four years after the closure of the
institution or until the surety is depleted of funds. A student may,
but is not required to, use his or her recovery from the surety to
pay for a teach-out or other educational services.
(2) The bureau shall develop and implement a process, and
necessary forms, for students enrolled in an institution ceasing
operation to file claims to the bureau to recover their tuition and
fees not recovered through a teach-out.
(3) Any student enrolled in an institution ceasing operation who
does not file a claim to recover tuition and fees pursuant to
paragraph (2) may recover through a teach-out provided to students of
the institution ceasing operation through a contract with a
community college or any other arrangement approved by the bureau.
The teach-out provided to the student shall replace the enrollment
agreement or contract between the institution ceasing operation and
the student, except that fee and tuition payments shall be made by
the student as required by the enrollment agreement or contract.
(4) If the amount of the bond is less than the total tuition and
fees paid by all students declining the teach-out at the time the
institution ceased operation, the amount of the bond shall be
prorated among those students.
(5) The Student Tuition Recovery Fund shall be used to cover
economic loss incurred by a student while enrolled at an institution
ceasing operation, including any prepaid tuition and fees not
recovered by the student under the bond.
(6) The bond shall be used to provide recovery for students
enrolled in an institution at the time it ceases operation, within
121 days of the institution ceasing operation, and, if applicable,
within a period of a declining quality of education, as determined by
the bureau, longer than 120 days before the institution ceases
operation.
(d) Once an institution ceases operation, no new students shall be
enrolled.
(e) An institution's approval to operate shall be suspended by
operation of law when the institution is no longer covered by a
surety bond as required by this section. The bureau shall
give written notice to the institution at the last-known address, at
least 45 days prior to a release of a surety, to the effect that
approval shall be suspended by operation of law until another surety
bond is filed in the same manner and like amount as the bond being
released.
(f) A surety on any bond filed under the provisions of this
section may be released after the surety or the institution
serves written notice to the bureau at least 60 days prior to
the release. The release shall not discharge or otherwise affect any
claim filed by any student for loss of tuition or any fees that
occurred while the bond was in effect or that occurred under any note
or contract executed during any period of time when the bond was in
effect, except when another bond is filed in a like amount and
provides indemnification for any loss.
(g) For purposes of this section, and notwithstanding Section
94858, "institution" means, to the extent authorized by federal law,
a private postsecondary educational institution that offers
postsecondary education to the public in this state for an
institutional charge, but does not include an independent institution
of higher education, as defined in Section 66010, that has operated
in California as an independent academic institution for
no less than 15 academic years.
(h) An institution, as defined in subdivision (g), shall on at
least a quarterly basis provide copies of records sufficient to
produce academic transcripts, and certify completion of the degrees
or other programs offered by the institution, to a third party. The
third party shall be independent of the institution, financially
stable, and capable of producing transcripts and certifications, upon
request, within two weeks of the closure of the institution, and in
perpetuity thereafter. The third party shall charge a fee of no more
than ten dollars ($10) per transcript or certification it produces in
the event of the institution's closure, and it shall not withhold a
transcript or certification based on a student's nonpayment of a debt
or obligation to the institution or any other party.
(i) The bond may be used to award punitive damages to a student of
an institution that ceases operation and is found, by a court of
law, to have violated state or federal law, or laws, that caused or
contributed to the student's economic loss.
(h)
(j) Tuition and fees for purposes of this section are
both of the following:
(1) (A) Paid tuition and fees not recovered
by the receipt of academic credits.
(2) Paid tuition and fees recovered by the receipt of academic
credits that are nontransferable to accredited institutions.
(B) Tuition and fees pursuant to subparagraph (A) shall include
amounts paid under the Cal Grant Program (commencing with Section
69430) of Part 42 of Division 5, the California National Guard
Education Assistance Award Program, as established in Article 20.7
(commencing with Section 69999.10) of Chapter 2 of Part 42 of
Division 5, and the Post 9/11 GI Bill program, as established in
Chapter 33 (commencing with Section 3301) of Title 38 of the United
States Code, as it read on January 1, 2016.
(2) Interest on educational loans incurred to pay tuition and fees
not recovered by the receipt of academic credits.
