August XX, 2024
The Honorable Anna Caballero
Chair, Senate Appropriations Committee
1021 O Street, Suite 7620
Sacramento, CA 95814
Higher Education Letter Sign-on Letter – Oppose AB 1160
Dear Chair Caballero:
The undersigned institutions of higher education and their contracted partners urge opposition to AB 1160 – the Protecting Students from Creditor Colleges Act and request that the Appropriations Committee take no action to advance this bill during this year’s legislative session. As currently written, this measure will have a detrimental impact on the finances of California’s colleges and universities, the quality of education they offer, and the ability of students to receive an education at other non-California schools that determine that enrollment of CA students poses a financial risk.
AB1160 is problematic on several fronts, but the most significant issue for your committee is the loss of funding institutions would suffer. 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 that individual’s debt to that institution. Thus, public institutions will no longer be able to recoup their debt through state tax offset. Instead, this bill would require the institution to recoup the debt alone. It also gives the Controller total discretion over off-setting funding owed to a public institution. With this optional fiscal support, we know that our institutions will again lose out on critical fiscal resources, putting an even more significant burden on currently enrolled students to pay for debts incurred by others. It’s estimated that the California State University System collects over $7 million every two years through the tax-offset process alone. The CA Community Colleges will suffer an equally significant fiscal hit.
Further, the bill would expand the current transcript withholding prohibition on students who owe a debt to include a prohibition on withholding the physical diploma a student receives. While the transcript and diploma withholding prohibitions seemingly have little impact on institutions, there is growing concern among institutions as students incur more considerable debt without the benefit of any financial counseling. Where transcript and diploma withholding are legal and used, institutions can address the current/former student’s financial situation by providing much-needed financial literacy and resolving their situation immediately. It’s another hook to bring students to the table to engage with their institutions. AB1160 allows only an institution to engage with students on their debt initially; due to limited resources, institutions often rely on their contractors to conduct this exchange of information. The amended Assembly bill restricts an institution from contracting with a collection agency until 180 days, or nearly six months, have passed. Research demonstrates that engaging with students early about debt results in more successful resolutions of that debt. Thus, the amended language, while seemingly helpful, is still harmful.
The measure’s sponsor argues that borrowers with institutional debt have little to no consumer protections; however, this is incorrect. 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 (UDAP) provisions. These are highly regulated entities at the federal and state levels. In California, they must be licensed by the state and meet all of the state’s licensing requirements, most of which are designed to protect consumers.
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. They rely on trusted partners and other state entities to help collect owed funds. Institutions ensure and count on these trusted contractors to follow all consumer laws (as noted above), as the risk of the institution being exposed to legal liability is unacceptable. In addition to institutional discussions, the staff of contractors are trained to help students with financial literacy and counseling.
We know that hindering institutions within CA and elsewhere from the ability to recover funds owed by students for rendered services will dramatically impact students and the state. The loss of institutional revenue will lead to the loss of employment, reduction in educational offerings, and, ultimately, the ability to offer quality education and much-needed student support services. The complex reporting requirements in the bill are also burdensome and challenging, particularly for smaller institutions, and will further strain already limited resources and increase costs at many of our institutions. Community Colleges, in particular, will see a significant increase in costs because of the difficulty of tracking students in a more open and fluid enrollment system. CA residents seeking to enroll at institutions outside of CA may find it more and more challenging to gain enrollment at their desired institution as more and more institutions refuse to assume the risk of losing revenue in an economy with tight margins.
At a time of shrinking state budgets and likely additional public funding cuts for higher education – this bill only adds to the already increasing burden on colleges and universities. For these reasons, we, the undersigned, urge you to oppose advancing AB 1160, the Protecting Students from Creditor Colleges Act, during the remainder of this session. Thank you for your attention to these concerns.
Sincerely,
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