April 6, 2023 · by COHEAO · Spark Notes

Dear CA COHEAO institutional member,

 

As Executive Director of COHEAO, I am writing to inform you of and share concerns with a bill introduced by Assembly Member Blanca Pacheco in the State legislature, AB 1160 – the Protecting Students from Creditor Colleges Act.  This measure was introduced on March 16th and is slated to have a hearing in the Assembly’s Committee on Higher Education on April 18th.  Institutions of higher education must engage in this debate.

 

The Protecting Students from Creditor Colleges Act would expand the current transcript withholding prohibition on students who owe a debt to include diplomas and certificates.  It also requires institutions to allow students who owe a debt to the institution to register for classes to continue their education.  The measure prohibits institutions from contracting with a third-party debt collection agency or selling debt to a collection agency with regard to existing and future debt.  Further, the bill defines an ‘institution of higher education’ as “any public or private postsecondary educational institution operating in the state, including its branch campuses and satellite locations or distance education.”  It also includes the current definitions of ‘public higher education,’ ‘independent institutions of higher education,’ and any private postsecondary educational institution.

 

The bill prohibits the current practice of the state Controller directing any funds owed to an individual by the state to an institution of higher education to pay some or all of a debt that individual owes to that institution.  Thus, institutions will no longer be able to recoup their debt through the state.  This bill would require the institution to recoup the debt by themselves.

 

Should you find this bill problematic, and I hope you do, you need to discuss these concerns with your government affairs office and then engage state lawmakers based on the recommendations and with the help of your government affairs office; however, I would start with your local state representatives.  While engaging in this debate, here are some suggested talking points:

  • The measure’s sponsor argues that borrowers with institutional debt have little to no consumer protections; however, this is not true. Third-party debt collectors must comply with several federal laws, including the Fair Debt Collections Act and federal unfair, deceptive, or abusive acts or practices (UDAAP) provisions.  These are highly regulated entities at the federal and state levels and, in CA, must be licensed by the state.
  • This bill eliminates any recourse for an institution to recoup debt owed for providing a service. This restriction may result in even further negative consequences for the borrower. 
    • Institutions’ final recourse would be to report the debt to credit bureaus or sue the borrower. (Use your discretion on arguing these points as it may result in further prohibitions specifically on this activity.)
  • Schools use registration holds as a tool to HELP students. It makes no sense to allow a student struggling with paying a debt to take on more debt that will likely also be difficult to manage. 
    • A hold allows the school to work with the student and instill financial management skills that help make their continued education less financially stressful.
  • The bill would burden institutions with the responsibility to collect these debts themselves. Institutions are NOT equipped and do not have the resources to pursue borrowers who owe a debt to the institution.  It will take an institution years to develop an efficient process if they can develop one at all.
  • Institutions currently use entities with the resources to engage with students who owe a debt to assess individual needs and circumstances. Those entities then work with the student to establish a manageable plan.
  • The bill may violate existing contractual arrangements with agencies collecting on current debt, resulting in lawsuits against institutions.
  • This bill’s passage will ultimately lead to the deterioration of high-quality postsecondary education in the state of CA.
  • The bill is a backdoor to free college by removing any incentive for students to pay their bills to institutions.
  • Removing any ability for the institution to recoup or capture those funds, either through third-party entities or preventing enrollment holds, requires institutions to continue providing education without compensation.
  • Schools will eventually fall into financial ruin and close. At the same time,  the quality of the educational offering will diminish during that fall.

 

Thank you for your attention to this bill.  COHEAO stands ready to assist and support you in any way.  Should you have questions or further follow-up, please do not hesitate to contact me, Bob Moran, Executive Director of COHEAO, at rmoran@bosepublicaffairs.com.

 

Sincerely,

 

 

Robert Moran

Executive Director, COHEAO

 

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