Opposition to California Assembly Bill 1313

I stand with my many colleagues when i say that AB 1313 as written will have unintended consequences that will harm education, not help it. I stand by the following and ask for your consideration.

Historically, schools do everything in their power to facilitate success with their students including dealing with debts and delinquency through the form of private institutional loan funding, emergency loans, and tuition payment plans and long-term delinquent account resolution.

Schools offer pre-payment plans to help family’s budget and make regular payment plans to enable students to catch up on current semester debt.

Schools work to provide flexibility to students because we believe it is better for the student than sending unpaid debts to collections which, would lead to more credit and financial problems for the student.

We attempt to work out payment arrangements, open dialogues with them, all in the hopes of assisting them.

Transcripts or diplomas are only withheld as a last resort once our efforts have been exhausted. Schools work with any student and any financial situation and this hold only typically occurs if a student has completely ignored all of our outreach attempts. Even in this case most schools currently release a copy of a transcript to a potential employer to help the alumnus get a job and to better facilitate the payment of their obligation.

The ability to withhold transcripts, as a last resort, is the exact mechanism that makes the unique relationship between a school and a student possible where a school can invest in students without other securities.

I feel it is equally important to highlight that debts are often created by the return of Title IV funds. This occurs when a student’s account is funded or over funded, the student takes a withdrawal from those funds and then withdraws from the classes which requires the school to return those funds to the lender when they no longer have them and then attempt to recover this money back from the student who did not use it for educational purposes.

Further, AB 1313 discriminates against students who have honored their agreements and have earned the rights to all campus services. By offering the same level of service to students who have failed in their repayment commitments, we no longer reward those honored students.

Another important factor is what the transcript and diploma signify to businesses, governmental units and licensing agencies nationwide. Historically, if a student has official copies of transcripts or diploma it implies to these entities the individual is in “good standing” with the educational institution. A “good standing” designation assumes the student is scholastically and financially responsible and has satisfied all obligations owed to their school, when in truth they are not in “good standing”.

AB 1313 removes a valuable tool to re-open communication with students who have caused a school to suffer a loss and help them achieve a “good standing” relationship again and might incentivize those paying their obligations to adopt the bad habit of defaulting.

AB 1313 intends to assist those that are the most financially challenged but removing this tool will have unintended consequences that will most certainly affect this very demographic.

As a reaction to protect their fiduciary duty, schools may have to enact new measures:

• Schools may require students to pre-pay tuition costs that are not covered by financial aid in full and up front which will impact the underprivileged
• Schools may have to perform credit worthiness tests prior to the extension of any credit or institutional loan which will impact applicants
• With a loss of revenue schools may have to raise tuition costs
• If the Schools are State or County related, the Taxpayers will see increases in State Taxes to cover this loss
• Delinquent accounts might be referred to outside collection agencies sooner to expedite payment
• Schools may need to consider litigation as an alternative collection mechanism

Considering the totality of the circumstances and impact of this bill as written, I and my many colleagues whom are intimately familiar with the student debt experience are asking you to consider the following and mutually beneficial language changes to AB 1313 as follows:

1. Amend this bill to prohibit a school from refusing to provide a transcript to an employer.
2. Amend this bill to prohibit a school from refusing to provide a transcript where a student has made ‘satisfactory repayment arrangements’ on a delinquent debt.

Proposed changes and definitions

1788.93.
Notwithstanding any provision of law, a school shall not do any of the following:
(a) Refuse to provide a transcript for a current or former student to a prospective employer on the grounds that the student owes a debt or for a current or former student that has made Satisfactory Repayment Arrangements on a delinquent debt.
(b) Condition the provision of a transcript on the payment in full of a debt, other than a fee charged to provide the transcript.
(c) Charge a higher fee for obtaining a transcript or provide less favorable treatment of a transcript request because a student owes a debt.
(d) Use transcript issuance as a tool for debt collection.

Definitions
Satisfactory Repayment Arrangements
“Satisfactory Repayment Arrangements” means making three consecutive, voluntary, on-time, monthly payments as determined by the school on a defaulted debt. A school may not establish a repayment policy that requires a student with a defaulted debt to pay the full outstanding balance within the three-month period, if such payments would create a hardship for the student.

I thank you in advance for your consideration. Know that every school has the greatest desire for opportunity and success of all of our students and prospective students.