2005 California Education Code Sections 94944-94948 Obligations

94944.  (a) The Student Tuition Recovery Fund is continued in
existence.  All assessments collected pursuant to Section 94945 shall
be credited to this fund, along with any interest on the moneys, for
the administration of this article.  Notwithstanding Section 13340
of the Government Code, the moneys in the fund are continuously
appropriated to the bureau without regard to fiscal years for the
purposes of this chapter.  The fund shall consist of a
degree-granting postsecondary educational institution account, a
vocational educational institution account, and an account for
institutions approved under any provision of this chapter that charge
each enrolled student a total charge, as defined in subdivision (k)
of Section 94852, of less than one thousand dollars ($1,000), for the
purpose of relieving or mitigating pecuniary losses suffered by any
California resident who is a student of an approved institution and
who meets either of the following conditions:
   (1) (A) The student was enrolled in an institution, prepaid
tuition, and suffered loss as a result of any of the following:
   (i) The closure of the institution.
   (ii) The institution's failure to pay refunds or charges on behalf
of a student to a third party for license fees or any other
purposes, or to provide equipment or materials for which a charge was
collected within 180 days before the closure of the institution.
   (iii) The institution's failure to pay or reimburse loan proceeds
under a federally guaranteed student loan program as required by law
or to pay or reimburse proceeds received by the institution prior to
closure in excess of tuition and other costs.
   (iv) The institution's breach or anticipatory breach of the
agreement for the course of instruction.
   (v) A decline in the quality or value of the course of instruction
within the 30-day period before the closure of the institution or,
if the decline began before that period, the period of decline
determined by the bureau.
   (vi) The commission of a fraud by the institution during the
solicitation or enrollment of, or during the program participation
of, the student.
   (B) For the purposes of this section, "closure" includes closure
of a branch or satellite campus, the termination of either the
correspondence or residence portion of a home study or correspondence
course, and the termination of a course of instruction for some or
all of the students enrolled in the course before the time these
students were originally scheduled to complete it, or before a
student who has been continuously enrolled in a course of instruction
has been permitted to complete all the educational services and
classes that comprise the course.
   (2) The student obtained a judgment against the institution for
any violation of this chapter, and the student certifies that the
judgment cannot be collected after diligent collection efforts.  A
court judgment obtained under this paragraph shall be paid in
accordance with paragraph (1) of subdivision (f), unless the judgment
indicates that a lesser amount is due.
   (b) Payments from the fund to any student shall be made from the
appropriate account within the fund, as determined by the type of
institution into which the student has paid his or her fees, and
shall be subject to any regulations and conditions prescribed by the
bureau.
   (c) (1) (A) The institution shall provide to the bureau, at the
time of the institution's closure, the names and addresses of persons
who were students of an institution within 60 days prior to its
closure, and shall notify these students, within 30 days of the
institution's closure, of their rights under the fund and how to
apply for payment.  If the institution fails to comply with this
subdivision, the bureau shall attempt to obtain the names and
addresses of these students and shall notify them, within 90 days of
the institution's closure, of their rights under the fund and how to
apply for payment.  This notice shall include the explanation and the
claim form described in subparagraph (B).
   (B) The bureau shall develop a form in English and Spanish fully
explaining a student's rights, which shall be used by the institution
or the bureau to comply with the requirements of subparagraph (A).
The form shall include, or be accompanied by, a claim application and
an explanation of how to complete the application.
   (2) (A) If an institution fails to comply with paragraph (1), the
bureau shall order the institution, or any person responsible for the
failure to provide notice as required by paragraph (1), to reimburse
the bureau for all reasonable costs and expenses incurred in
notifying students as required in paragraph (1).  In addition, the
bureau may impose a penalty of up to five thousand dollars ($5,000)
against the institution and any person found responsible for the
failure to provide notice.  The amount of the penalty shall be based
on the degree of culpability and the ability to pay.  Any order may
impose joint and several liability.  Before any order is made
pursuant to this paragraph, the bureau shall provide written notice
to the institution and any person from whom the bureau seeks recovery
of the bureau's claim and of the right to request a hearing within
30 days of the service of the notice.
   (B) If a hearing is not requested within 30 days of service of the
notice, the bureau may order payment in the amount of the claim.  If
a hearing is requested, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code shall apply,
and the bureau shall have all of the powers therein prescribed.
Within 30 days after the effective date of the issuance of an order,
the bureau may enforce the order in the same manner as if it were a
money judgment pursuant to Title 9 (commencing with Section 680.010)
of Part 2 of the Code of Civil Procedure.  All penalties and
reimbursements paid pursuant to this section shall be deposited in
the Private Postsecondary and Vocational Education Administration
Fund established pursuant to Section 94932 or any successor fund.
   (d) (1) Students entitled to payment as provided in paragraph (1)
of subdivision (a) shall file with the bureau a verified application
indicating each of the following:
   (A) The student's name, address, telephone number, and social
security number.
   (B) If any portion of the tuition was paid from the proceeds of a
loan, the name of the lender, and any state or federal agency that
guaranteed or reinsured the loan.
   (C) The amount of the paid tuition, the amount and description of
the student's loss, and the amount of the student's claim.
   (D) The date the student started and ceased attending the
institution.
   (E) A description of the reasons the student ceased attending the
institution.
   (F) If the student ceased attending because of a breach or
anticipatory breach or because of the decline in the quality or value
of the course of instruction as described in clause (v) of
subparagraph (A) of paragraph (1) of subdivision (a), a statement
describing in detail the nature of the loss incurred.  The
application shall be filed within one year from the date of the
notice, as described in paragraph (1) of subdivision (c).  If no
notice is received by the student from the bureau soon after the
school closes, the application shall be filed within four years of
the institution's closure, or within two years of the student's or
former student's receipt of an explanation of his or her rights and a
claim form, whichever of those claim periods expires later.  The
two-year claim period shall begin on the day the student or former
student receives from the bureau both an explanation regarding how to
file a claim and a claim application, as provided in subparagraph
(B) of paragraph (1) of subdivision (c), or on the day the second of
the two documents is received, if they are received on different
dates.  If the claimant's primary language is Spanish, the notice and
explanation shall be sent in Spanish.
   (G) Nothing in this subdivision shall preclude the filing of a
single, unified application that aggregates the claims of similarly
situated students.
   (2) (A) Students entitled to payment as provided in paragraph (2)
of subdivision (a) shall file with the bureau a verified application
indicating the student's name, address, telephone number, and social
security number, the amount of the judgment obtained against the
institution, a statement that the judgment cannot be collected, and a
description of the efforts attempted to enforce the judgment.  The
application shall be accompanied by a copy of the judgment and any
other documents indicating the student's efforts made to enforce the
judgment.
   (B) The application shall be filed within two years after the date
upon which the judgment became final.
   (3) The bureau may require additional information designed to
facilitate payment to entitled students.  The bureau shall waive the
requirement that a student provide all of the information required by
this subdivision if the bureau has the information or the
information is not reasonably necessary for the resolution of a
student's claim.
   (4) Nothing in this subdivision shall be construed to preclude the
filing of a single, unified application that aggregates the claims
of similarly situated students.
   (e) Within 60 days of the bureau's receipt of a completed
application for payment, the bureau shall pay the claim from the
Student Tuition Recovery Fund or deny the claim.  The bureau, for
good cause, may extend the time period for up to an additional 90
days to investigate the accuracy of the claim.
   (f) (1) If the bureau pays the claim, the amount of the payment
shall be (A) the greater of either (i) the total guaranteed student
loan debt incurred by the student in connection with attending the
institution, or (ii) the total of the student's tuition and the cost
of equipment and materials related to the course of instruction, less
(B) the amount of any refund, reimbursement, indemnification,
restitution, compensatory damages, settlement, debt forgiveness,
discharge, cancellation, or compromise, or any other benefit received
by, or on behalf of, the student before the bureau's payment of the
claim in connection with the student loan debt or cost of tuition,
equipment, and materials.  The payment also shall include the amount
the institution collected and failed to pay to third parties on
behalf of the student for license fees or any other purpose.
However, if the claim is based solely on the circumstances described
in subparagraph (B) or (C) of paragraph (1) of subdivision (a), the
amount of the payment shall be the amount of the loss suffered by the
student.  In addition to the amount determined under this paragraph,
the amount of the payment shall include all interest and collection
costs on all student loan debt incurred by the student in connection
with attending the institution.
   (2) The bureau may reduce the total amount specified in paragraph
(1) by the value of the benefit, if any, of the education obtained by
the student before the closure of the institution.  If the bureau
makes any reduction pursuant to this paragraph, the bureau shall
notify the claimant in writing, at the time the claim is paid, of the
basis of its decision and provide a brief explanation of the reasons
upon which the bureau relied in computing the amount of the
reduction.
   (3) No reduction shall be made to the amount specified in
paragraph (1) if (A) the student did not receive adequate instruction
to obtain the training, skills, or experience, or employment to
which the instruction was represented to lead, (B) credit for the
instruction obtained by the student is not generally transferable to
other institutions approved by the bureau, or (C) the institution or
one of its representatives fraudulently misrepresented to students
the likely starting salary or job availability, or both, after
training.
   (4) The amount of the payment determined under this subdivision is
not dependent on the amount of the refund to which the student would
have been entitled after a voluntary withdrawal.
   (5) Upon payment of the claim, all of the student's rights against
the institution shall be deemed assigned to the bureau to the extent
of the amount of the payment.
   (g) (1) The bureau shall negotiate with a lender, holder,
guarantee agency, or the United States Department of Education for
the full compromise or writeoff of student loan obligations to
relieve students of loss and thereby reduce the amount of student
claims.
   (2) The bureau, with the student's permission, may pay a student's
claim directly to the lender, holder, guarantee agency, or the
United States Department of Education under a federally guaranteed
student loan program only if the payment of the claim fully satisfies
all of the student's loan obligations related to attendance at the
institution for which the claim was filed.
   (3) Notwithstanding subdivision (e), the bureau may delay the
payment of a claim pending the resolution of the bureau's attempt to
obtain a compromise or writeoff of the claimant's student loan
obligation.  However, the bureau shall immediately pay the claim if
any adverse action that is not stayed is taken against the claimant,
including the commencement of a civil or administrative action, tax
offset, the enforcement of a judgment, or the denial of any
government benefit.
   (4) The bureau shall make every reasonable effort to obtain a loan
discharge for an eligible student in lieu of reimbursing that
student in whole or in part from the fund pursuant to federal student
loan laws and regulations.
   (5) Whenever the bureau receives from a student a completed
application for payment from the Student Tuition Recovery Fund, the
bureau shall, as soon as is practicable, cause to be delivered to
that student a written notice specifying, in plain English, the
rights of a student under this section.
   (h) (1) If the bureau denies the claim, or reduces the amount of
the claim pursuant to paragraph (2) of subdivision (f), the bureau
shall notify the student of the denial or reduction and of the
student's right to request a hearing within 60 days or any longer
period permitted by the bureau.  If a hearing is not requested within
60 days or any additional period reasonably requested by the
student, the bureau's decision shall be final.  If a hearing is
requested, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code shall apply.
   (2) It is the intent of the Legislature that, when a student is
enrolled in an institution that closes prior to the completion of the
student's program, the student shall have the option for a teach-out
at another institution approved by the bureau.  The bureau shall
seek to promote teach-out opportunities wherever possible and shall
inform the student of his or her rights, including payment from the
fund, transfer opportunities, and available teach-out opportunities,
if any.
   (i) This section applies to all claims filed or pending under
former Chapter 7 (commencing with Section 94700) after January 1,
1990.
   (j) Once the bureau has determined that a student claim is
eligible for payment under this section and intends to use the
Student Tuition Recovery Fund, in whole or in part, to satisfy the
eligible claim, the bureau shall document its negotiations with the
relevant lender, holder or guarantee agency, the United States
Department of Education, or the applicable state agency.  The bureau
shall prepare a written summary of the parties and results of the
negotiations, including the amounts offered and accepted, the
discounts requested and granted, and any other information that is
available to any party that files a request for this information with
the bureau.
94945.  (a) The bureau shall assess each institution, including a
non-WASC regionally accredited institution, as defined in Section
94740.5, except for an institution that receives all of its students'
total charges, as defined in subdivision (k) of Section 94852, from
third-party payers for the purpose of compliance with the provisions
of this chapter that are related to the Student Tuition Recovery
Fund.  A third-party payer, for the purposes of this section, means
an employer, government program, or other payer that pays a student's
total charges directly to the institution when no separate agreement
for the repayment of that payment exists between the third-party
payer and the student.  A student who receives third-party payer
benefits for his or her institutional charges is not eligible for
benefits from the Student Tuition Recovery Fund.
   (1) (A) The amount assessed each institution shall be calculated
only for those students who are California residents and who are
eligible to be reimbursed from the fund.  It shall be based on the
actual amount charged each of these students for total tuition cost,
regardless of the portion that is prepaid, and shall be assessed as
tuition is paid or loans are funded on behalf of the student, based
upon academic term.  The amount of the assessment on an institution
shall be determined in accordance with paragraphs (2) and (3).
   (B) Each institution shall collect the amount assessed by the
bureau in the form of a Student Tuition Recovery Fund fee from its
new students, and remit these fees to the bureau during the quarter
immediately following the quarter in which the fees were collected
from the students, or from loans funded on behalf of the students,
except that an institution may waive collection of the Student
Tuition Recovery Fund fee and assume the fee as a debt of the
institution.  The student's subsequent disenrollment at the
institution shall not relieve the institution of the obligation to
pay the fee to the bureau, nor be the basis for refund of the fee to
the student.  An institution may not charge a fee of any kind for the
collection of the Student Tuition Recovery Fund fee.  An institution
may refuse to enroll a student who has not paid, or made provisions
to pay, the appropriate Student Tuition Recovery Fund fee.
   (C) For the purposes of this section, a "new student" means a
student who signs  his or her enrollment agreement on or after
January 1, 2002.  Those students who sign their enrollment agreement
prior to January 1, 2002, are not "new students" for purposes of this
section, and shall be assessed the Student Tuition Recovery Fund fee
in effect prior to January 1, 2002, except that an institution may
waive collection of the Student Tuition Recovery Fund fee in effect
prior to January 1, 2002.  Institutions electing to waive collection
of the Student Tuition Recovery Fund fee shall disclose this fact to
the student in the enrollment agreement, along with the amount of the
fee paid on the student's behalf to the bureau.
   (2) The amount collected from a new student by an institution
shall be calculated on the basis of the course tuition paid over the
current calendar year, based upon the assessment rate in effect when
the student enrolled at the institution, without regard to the length
of time the student's program of instruction lasts.  For purposes of
annualized payment, a new student enrolled in a course of
instruction that is longer than one calendar year in duration shall
pay fees for the Student Tuition Recovery Fund based on the amount of
tuition collected during the current calendar year.
   (3) The assessment made pursuant to this section shall be made in
accordance with both of the following:
   (A) Each new student shall pay a Student Tuition Recovery Fund
assessment for the period of January 1, 2002, to December 31, 2002,
inclusive, at the rate of three dollars ($3) per thousand dollars of
tuition paid, rounded to the nearest thousand dollars.
   (B) Commencing January 1, 2003, Student Tuition Recovery Fund fees
shall be collected from new students at the rate of two dollars and
fifty cents ($2.50) per thousand dollars of tuition charged, rounded
to the nearest thousand dollars.  For new students signing enrollment
agreements between January 1, 2002, and December 31, 2002,
inclusive, the assessment rate of three dollars ($3) per thousand
dollars of tuition paid, rounded to the nearest thousand dollars, as
provided in subparagraph (A) of this paragraph, shall remain the
assessment rate for the duration of the student's enrollment
agreement.
   (4) The bureau may levy additional reasonable special assessments
on an institution under this section only if these assessments are
required to ensure that sufficient funds are available to satisfy the
anticipated costs of paying student claims pursuant to Section
94944.
   (5) (A) The bureau may not levy a special assessment unless the
balance in any account in the Student Tuition Recovery Fund falls
below two hundred fifty thousand dollars ($250,000), as certified by
the Secretary of the State and Consumer Services Agency.
   (B) A special assessment is a surcharge, collected by each
institution from newly enrolled students, of up to 100 percent of
that institution's regular assessment for four consecutive quarters.
The affected student shall pay the surcharge simultaneously with his
or her regular quarterly payment to the Student Tuition Recovery
Fund.
   (C) The bureau shall provide at least 90 days' notice of an
impending special assessment to each affected institution.  This
notice shall also be posted on the bureau's Internet Web site.
   (D) The bureau may apply any special assessment payments that it
receives from an institution as a credit toward that institution's
current or future obligations to the Student Tuition Recovery Fund.
   (6) The assessments shall be paid into the Student Tuition
Recovery Fund and credited to the appropriate account in the fund,
and the deposits shall be allocated, except as otherwise provided for
in this chapter, solely for the payment of valid claims to students.
  Unless additional reasonable assessments are required, no
assessments for the degree-granting postsecondary educational
institution account shall be levied during any fiscal year if, as of
June 30 of the prior fiscal year, the balance in that account of the
fund exceeds one million five hundred thousand dollars ($1,500,000).
Unless additional reasonable assessments are required, no
assessments for the vocational educational institution account shall
be levied during any fiscal year if, as of June 30 of the prior
fiscal year, the balance in that account exceeds four million five
hundred thousand dollars ($4,500,000).  However, regardless of the
balance in the fund, assessments shall be made on any newly approved
institution.  Notwithstanding Section 13340 of the Government Code,
the moneys so deposited in the fund are continuously appropriated to
the bureau for the purpose of paying claims to students pursuant to
Section 94944.
   (b) The bureau may deduct from the fund the reasonable costs of
administration of the tuition recovery program authorized by Section
94944 and this section.  The maximum amount of administrative costs
that may be deducted from the fund, in a fiscal year, shall not
exceed one hundred thousand dollars ($100,000) from the
degree-granting postsecondary educational institution account and
three hundred thousand dollars ($300,000) from the vocational
educational institution account, plus the interest earned on money in
the fund that is credited to the fund.  Prior to the bureau's
expenditure of any amount in excess of one hundred thousand dollars
($100,000) from the fund for administration of the tuition recovery
program, the bureau shall develop a plan itemizing that expenditure.
The plan shall be subject to the approval of the Department of
Finance.  Institutions, including any non-WASC regionally accredited
institution, as defined in Section 94740.5, except for schools of
cosmetology licensed pursuant to Article 8 (commencing with Section
7362) of Chapter 10 of Division 3 of the Business and Professions
Code and institutions that offer vocational or job training programs,
that meet the student tuition indemnification requirements of a
California state agency, that secure a policy of surety or insurance
from an admitted insurer protecting their students against loss of
paid tuition, or that demonstrate to the bureau that an acceptable
alternative method of protecting their students against loss of
prepaid tuition has been established, shall be exempted from this
section.
   (c) Reasonable costs in addition to those permitted under
subdivision (b) may be deducted from the fund for any of the
following purposes:
   (1) To make and maintain copies of student records from
institutions that close.
   (2) To reimburse the bureau or a third party serving as the
custodian of records.
   (d) In the event of a closure by any approved institution under
this chapter, any assessments that have been made against those
institutions, but have not been paid into the fund, shall be
recovered.  Any payments from the fund made to students on behalf of
any institution shall be recovered from that institution.
   (e) In addition to civil remedies, the bureau may order an
institution to pay previously unpaid assessments or to reimburse the
bureau for any payments made from the fund in connection with the
institution.  Before any order is made pursuant to this section, the
bureau shall provide written notice to the institution and notice of
the institution's right to request a hearing within 30 days of the
service of the notice.  If a hearing is not requested within 30 days
of the service of the notice, the bureau may order payment.  If a
hearing is requested, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code shall apply,
and the bureau shall have all powers prescribed in that chapter.
Within 30 days after the effective date of the issuance of the order,
the bureau may enforce the order in the same manner as if it were a
money judgment pursuant to Title 9 (commencing with Section 680.010)
of Part 2 of the Code of Civil Procedure.
   (f) In addition to any other action that the bureau may take under
this chapter, the bureau may suspend or revoke an institution's
approval to operate because of the institution's failure to pay
assessments when due or failure to pay reimbursement for any payments
made from the fund within 30 days of the bureau's demand for
payment.
   (g) The moneys deposited in the fund shall be exempt from
execution and shall not be the subject of litigation or liability on
the part of creditors of those institutions or students.
94946.  (a) Any institution that willfully violates Section 94945
shall be subject to all of the following:
   (1) The institution shall lose all rights to enforce the terms of
any contract or agreement arising from the transaction in which the
violation occurred.
   (2) The institution shall refund to the student any fees that it
has collected from that student.
   (b) An institution's willful violation of Section 94945 may be
grounds for the revocation of that institution's approval to operate
in this state.
94947.  Students enrolling in institutions that come under Sections
94944 and 94945, shall disclose in writing, if applicable, the source
of any and all guaranteed or insured loans granted for the purposes
of paying tuition to that institution.  In the event of a closure of
any institution, the council shall provide any lending institution
that is the source of any guaranteed or insured student loan with the
names of students maintaining loans with that lending institution.
94948.  (a) The governing board or other governing authority of any
private postsecondary or vocational educational institution shall
adopt rules providing for the withholding of institutional services
from students or former students who have been notified, in writing,
at the student's or former student's last known address, that he or
she is in default on a loan or loans under either of the following
loan programs:
   (1) The Stafford Student Loan program.
   (2) The Supplemental Loans for Students program.
   (3) Any program directly or indirectly financed by the California
Educational Facilities Authority.
   "Default," as used in this section, with respect to a loan under
the Stafford Student Loan program or Supplemental Loans for Students
program means the failure of a borrower to make an installment
payment when due, or to meet other terms of the promissory note under
circumstances where the guarantee agency finds it reasonable to
conclude that the borrower no longer intends to honor the obligation
to repay, provided that this failure persists for 180 days for a loan
repayable in monthly installments, or 240 days for a loan repayable
in less frequent installments.  "Default," as used in this section,
with respect to a program directly or indirectly financed by the
California Educational Facilities Authority, means the failure of a
borrower to make an installment payment when due, or to meet other
terms of the loan, within that period and under the circumstances
determined by the California Educational Facilities Authority with
respect to that program.
   (b) The rules adopted pursuant to subdivision (a) shall provide
that the services withheld may be provided during a period when the
facts are in dispute and when the student or former student
demonstrates to either the governing board or other appropriate
governing authority of the institution, or the Student Aid Commission
and the appropriate entity or its designee, that reasonable progress
has been made to repay the loan or that there exists a reasonable
justification for the delay as determined by the institution.  The
rules shall specify the services to be withheld from the student and
may include, but are not limited to, the following:
   (1) The provision of grades.
   (2) The provision of transcripts.
   (3) The provision of diplomas.
   The rules shall not include the withholding of registration
privileges.
   (c) When it has been determined that an individual is in default
on a loan or loans under either of the loan programs specified in
subdivision (a), the Student Aid Commission shall give notice of the
default to all institutions through which that individual acquired
the loan or loans.
   (d) Guarantors, or those who act as their agents or act under
their control, who provide information to institutions pursuant to
this section, shall defend, indemnify, and hold harmless the
governing board or other governing authority of the institutions from
action resulting from compliance with this section when the action
arises as a result of incorrect, misleading, or untimely information
provided to the institution by the guarantors, their agents, or those
acting under the control of the guarantors.