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AB-1619 Private postsecondary education.(2017-2018)

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Date Published: 05/30/2017 02:00 PM
AB1619:v97#DOCUMENT

Amended  IN  Assembly  May 30, 2017
Amended  IN  Assembly  April 17, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 1619


Introduced by Assembly Member Berman
(Coauthor: Assembly Member McCarty)

February 17, 2017


An act to add Section 94885.6 to the Education Code, relating to private postsecondary education.


LEGISLATIVE COUNSEL'S DIGEST


AB 1619, as amended, Berman. Private postsecondary education.
Existing law, the California Private Postsecondary Education Act of 2009, provides, among other things, for student protections and regulatory oversight of private postsecondary institutions in the state. The act is enforced by the Bureau for Private Postsecondary Education within the Department of Consumer Affairs. The act requires the bureau to adopt by regulation minimum operating standards for institutions that are subject to the act’s provisions. Under existing federal law, 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. Existing federal law establishes debt-to-earnings rates to determine whether a gainful employment program prepares students for gainful employment in a recognized occupation.
This bill would require the bureau to prohibit institutions that are subject to the act’s provisions from enrolling new students in an educational program that receives a fail rating for 2 out of 3 consecutive years, or receives a combination of zone or fail ratings for 4 consecutive years, based on the federal debt-to-earnings rates. The bill would prohibit these institutions from reestablishing enrollment of new students in a fail or zone educational program that it discontinued voluntarily, reestablishing enrollment of new students in an educational program that is out-of-compliance under the federal debt-to-earnings rates, or establishing enrollment of new students in an educational program that is substantially similar to the discontinued or out-of-compliance program, until 3 years has passed. The bill would authorize institutions with an educational program that receives a fail or zone rating under the federal debt-to-earnings rates to file an alternate earnings appeal.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 (a) The Legislature finds and declares all of the following:
(1) On July 1, 2015, the federal regulations took effect.
(2) Through the regulatory process, the United States Department of Education established debt-to-earnings rates based on the typical loan debt and earnings of students who previously completed a gainful employment (GE) program.
(3) Two debt-to-earnings rates are calculated pursuant to the federal regulations, one based on annual earnings and one based on discretionary income.
(4) The two rates described in paragraph (3) are calculated for each GE program as a measure of the ability of graduates of the GE program to reasonably repay their student loan debt.
(5) For the annual earnings rate, the numerator is the calculated annual loan payment amount, which is an estimate of the annual loan repayment amount based on the median educational debt of the members of the cohort, and the denominator is the higher of the cohort’s mean or median earnings.
(6) 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 percent of the poverty guideline.
(7) To maintain federal Title IV financial aid eligibility, GE programs are required to meet minimum standards for the debt-to-earnings rates of their graduates and are provided a pass, zone, or fail rating.
(8) The pass rating is given to GE programs whose graduates have annual loan payments less than or equal to 8 percent of total earnings, or less than or equal to 20 percent of discretionary income.
(9) The zone rating is given to GE programs whose graduates have annual loan payments greater than 8 percent but less than or equal to 12 percent of total earnings, or greater than 20 percent but less than or equal to 30 percent of discretionary income.
(10) The fail rating is given to GE programs whose graduates have annual loan payments greater than 12 percent of total earnings, and greater than 30 percent of discretionary income.
(11) The current federal regulations have been reviewed and upheld in their entirety by two different federal courts and affirmed by the United States Court of Appeals, District of Columbia Circuit.
(b) It is the intent of the Legislature to continue the student protections in the federal regulations by applying the federal debt-to-earnings rates to California law.
(c) For purposes of this section, the following terms have the following meanings:
(1) “Debt-to-earnings rates” are the rates established in the federal regulations.
(2) “Federal regulations” mean the federal gainful employment regulations established in Part 668 of Chapter VI of Subtitle B of Title 34 of the Code of Federal Regulations.
(3) “Gainful employment program” or “GE program” has the same meaning as the term is defined for purposes of the federal regulations.

SEC. 2.

 Section 94885.6 is added to the Education Code, to read:

94885.6.
 (a) The bureau shall prohibit an institution that is not exempt from this chapter 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. If an educational program receives a fail or zone rating under the federal debt-to-earnings rates, an institution may file an alternate earnings appeal.
(b) An institution shall not reestablish enrollment of new students in a fail or zone educational program that it discontinued voluntarily, reestablish enrollment of new students in an educational program that is out-of-compliance under the federal debt-to-earnings rates, or establish enrollment of new students in an educational program that is substantially similar to the discontinued or out-of-compliance program, until three years has passed.

(b)

(c) The bureau shall adopt regulations as necessary to implement this section, including regulations to obtain data if the United States Department of Education no longer releases the federal debt-to-earnings rates.

(c)

(d) For purposes of this section, the following terms have the following meanings:
(1) “Alternate earnings appeal” has the same meaning as the term is described for purposes of the federal regulations.

(1)

(2) “Debt-to-earnings rates” are the rates established in the federal regulations.

(2)

(3) “Fail rating” has the same meaning as the term is described for purposes of the federal regulations.

(3)

(4) “Federal regulations” mean the federal gainful employment regulations established in Part 668 of Chapter VI of Subtitle B of Title 34 of the Code of Federal Regulations, as those regulations read on January 1, 2017.

(4)

(5) “Zone rating” has the same meaning as the term is described for purposes of the federal regulations.