Relates to the licensure of private proprietary schools; repealer

Summary of the provisions of the bill

This bill would amend Article 101 of the Education Law (sections 5001 through 5010) to eliminate the distinction between licensed private schools and registered business schools, replace the phrase "licensed private schools" with the more descriptive "licensed private career schools", adjust fees, which have not changed since 1990, and establish a candidate school category that would allow a school to operate legally while it is in the process of obtaining a non-degree-granting proprietary school license.

Section 5001 would be amended to provide for the consolidation of registered business schools and licensed private schools into one designation, eliminating the artificial distinction between these types of schools and reflecting the current heterogeneous nature of training programs offered at these schools. Section 5001(2)(f), exempting certain schools from licensure requirements, which was recently amended by Chapter 13 of the Laws of 2010 to include yoga and martial arts as subjects exempt from such licensure requirements, would be further amended to include Pilates as an additional subject exempt from such requirements. Section 5001(2)(f) would also be amended to exclude schools conducted for the purpose of teaching personal trainers from the list of schools exempt from such licensure requirements.

For greater clarity, §5001(2), exempting conferences, trade shows, workshops and such other courses of study from such licensing requirements, would also be divided into two separate paragraphs l and m without substantive change. Subdivision 2-b of §5001, exempting programs for private businesses with no tuition liability, would be amended to clarify that the exemption would apply to employees of a person or organization that has contracted with another person or organization to provide instruction at no cost. Candidate school status would be established by adding a new §5001(4) (b) (iii) to allow a practical means for prospective schools to operate legally prior to meeting all the requirements of full licensure. For further

clarity, §5001(4)(b), which addresses the period of licensure as a private career school, would be amended to include the specific fees for initial and renewal applications for such licensure. The renewal fees would be increased to reflect NYSED's current cost of supervising these schools and to meet the prospective costs for reimbursing tuition for a significant number of students when these students' schools close due to fiscal failure or non-compliance. Initial application fees would be set at certain amounts and fees for renewal would be based on the school's gross annual tuition income.

Procedures in §5001(6) for working with schools that are not financially viable would be formalized to protect the tuition reimbursement account. School transfer requirements in §5001(7) would be adjusted to be more consistent with how other states handle school transfers. The method of assessing schools in §5001 (9) would be changed from more complicated regular and special assessment formulas to one based on the number of quarterly assessments paid, whereby newer schools with the potential to fail would pay a higher assessment than schools with a history of satisfactory licensed operation. Section 5001(4)(e), relating to annual audited financial statements, would be amended to change the gross tuition criteria for submission of such statements to the commissioner and the filing schedule for such statements to bring the non-degree sector into parity with schools in the degree-granting and public school sectors.

Section 5002 would be amended by adding a new paragraph b-1 to subdivision 1 to restrict the amount of private loan payments for tuition that a school could receive on behalf of a student prior to their completing a program, thereby limiting students' loan liability as well as the tuition reimbursement account's liability for payment of loan funds for tuition payments, which is the most significant portion of the loan. Section 5002(1)(d)(1) on admission of students under the ability to benefit provision would be amended to authorize the Commissioner to accept other entrance requirement documentation, such as prerequisite coursework, professional or vendor certifications, personal interviews and/or attestations of equivalent knowledge in lieu of the examination requirement. Section 5002(3)(h) would be amended to require schools to submit for approval a school catalog that contains a weekly tuition liability chart for each program that indicates the amount of refund due a student upon withdrawal. Section 5002(4)(c)(1) and (2) would be amended to emphasize that in addition to paying the curriculum application fee, provided in section 5002(4)(a), schools would be required to pay the cost of an outside evaluation of a particular course or facility of the school. Section 5002(5) would also be amended to establish a curriculum/course application fee to fund the NYSED's curriculum unit. Fees from school and personnel license applications do not cover the cost of curriculum review, as some schools have only a handful of courses or curricula that require approval while others have between 400 and 700. Schools requiring the most evaluation would pay more, those with few programs would pay less. Section 5002(6) would be amended so that all teacher licenses would no longer be restricted to a single school location, as private career school teacher licenses currently are. This would result in a more mobile and efficient teacher pool for schools to draw from for faculty members, reduced expense for processing teacher applications and a reduced workload for

the State Education Department's Bureau of Proprietary School Supervision ("the Bureau").

Section 5003 would be amended to establish more practical timeframes for disciplinary proceedings. A new subparagraph (4) would be added to §5003(1)(c) to establish procedures for handling written complaints by students attending candidacy schools alleging failure of the school to disclose its candidacy status and the implications and to obtain the required attestation from the student. If such a violation is found, the school would be required to provide the student a full refund of all monies received from the student. Section 5003(6) would be amended to increase the fines established in 1990 so they reflect NYSED's current cost of school oversight. Section 5003(6) would be amended to expand the list of violations that may result in the imposition of a civil penalty, including failure to offer an approved course or program.

Subdivision 3 of section 5004 would be amended to increase the amount of gifts and other non-monetary consideration a school may provide to students or former students from $25 to $75. Subdivision 4 of section 5004 would be amended to increase private school agent fees from $100 to $200, while extending the term of a private school agent's certificate from 2 years to 3 years.

Section 5005 would not be amended.

Section 5006 on teachout plans would be amended to allow NYSED to intervene more effectively when a private career education school ceases instruction. Currently, schools that are closing are required to develop teachout plans that arrange to have students continue to receive instruction from other private career schools upon closure of the school. NYSED's experience is that schools that must close have little incentive to establish teachouts, so authorizing NYSED to arrange for a teachout plan would provide greater protection for students.

Section 5007 on refunds to students enrolled in schools that are closing would be amended to expand expenses eligible for reimbursement. Section 5007(4)(a) and (c) on refunds to students would be amended to provide for refunds of tuition, fees and book charges paid by or on behalf of the students in cash or through loans, excluding funding obtained through government agencies. Section 5007(5)(b) would be amended to authorize the Commissioner to refund expenditures for fees, books and tuition to students of schools that have closed. Section 5007(8) would be amended to protect the interests of students in restitution from the tuition reimbursement account by extending the time within which the Commissioner or the Attorney General may seek recovery of a refund from a school from 30 days to 90 days from payment of the refund by the tuition reimbursement account. The provisions for special assessments for new schools in section 5007(10) would be amended to be consistent with the assessment changes in section 5001, and to reflect NYSED's experience with assessing schools that have not been in operation for an entire year. The requirement in section 5007(11) for an annual fund audit of the tuition reimbursement account would be changed to mandate a two-year audit.

Section 5008 would be amended to provide details regarding trust accounts for schools determined to be in financial jeopardy.

Section 5009 would be amended to remove the annual reporting requirement.

Section 5010 would be amended to remove the requirement to have a student representative on the advisory council. NYSED has been unable to find a student willing to serve in this capacity. Term limits for members would be mandated, although members could be reappointed. This would ensure that members of the advisory council continue to be affiliated with schools in the non-degree proprietary sector. Provisions that are no longer relevant to the council, including limiting the scope of its advisory responsibilities, would be deleted.

Statement in support of the bill

The law pertaining to non-degree proprietary schools was last amended substantially in 1990. Since then, the number of these schools has increased and their nature has changed. Only one-tenth of licensed schools currently receive federal Title IV funds for students in strictly business or trade programs. Schools today offer hybrid programs such as medical office assisting, where coding and recordkeeping are combined with clinical service such as phlebotomy. Most schools have ceased to rely on Title IV, state TAP or other similar funding sources and have turned to private sources such as Sallie Mae, banks, etc.

The law needs to be updated to reflect and conform to the current needs of this area of higher education and of this vital business industry, and to provide the Bureau of Proprietary School Supervision of the State Education Department the flexibility it needs to adequately continue to supervise proprietary schools, protect students and taxpayers, and preserve and strengthen this important educational and economic industry.

Currently, there are more than 450 licensed, registered, or certified schools. In addition, approximately 200 schools are pending licensure. Furthermore, more than 1,000 schools currently operating in New York State are unlicensed (although some may be operating under a legal exemption, the vast majority of these unlicensed schools are operating illegally).

NYSED needs to maintain its ability to regulate the industry and to strengthen schools that provide a quality education to some of this state's most vulnerable adult learners while enforcing health, safety, financial and other regulatory safeguards against those schools who, either inadvertently or intentionally do not adhere to the industry's standards and their legal obligations. Consistent, fair and assured enforcement will even the playing field for all non-degree schools subject to regulation, which will in turn increases competition among such schools and increase the quality of each school's training programs.

In addition, more stability is absolutely crucial to maintain the tuition reimbursement account (TRA), which is used to repay students when their school refuses to issue a refund to them for overpayments

or in those dire cases when schools close their doors, sometimes overnight, and either are unable or unwilling to meet their contractual commitments for training the students. Students in these situations are left out in the cold, sometimes after they have made significant investments of time and money into their training, with nothing to show for it. In these situations, NYSED must have the resources to step in, make these students financially whole and work to provide alternative educational opportunities for them almost immediately.

In the past decade, the TRA faced near bankruptcy when a chain of schools on Long Island closed, leaving students stranded without either a quality education nor access to refunds of their substantial investment in the form of tuition, fees and book charges. The law pertaining to the TRA has not been updated or reinforced since 1993. The amendments pertaining to financial probation, financial viability, and trust accounts are intended to prevent future situations where at risk students nearly lose all of their investment of time and money. The amendment also creates a private loan disbursement schedule to prevent lenders from disbursing loan payments greater than five thousand dollars in one disbursement. The disbursement schedules apply to the tuition portion of the loan, and not to the rest of the loan, which the student would need to use for books, fees and living expenses. This guarantees that the tuition reimbursement account is to be used for student protection and not as a substitute for guaranteed student loans.

Current law limits private career school teachers to teaching a particular subject only at a single school location. Removing that limitation would allow these teachers to teach that subject at any licensed school in the state. The state's schools would greatly benefit by being able to transfer teachers from one location of a school chain to another without the unnecessary requirement that these teachers need to be dually licensed. Schools would also have a larger supply of substitute teachers. With teachers given the freedom to move from school to school, salary schedules could become more competitive within this sector. Also, students would have the same access to teachers previously licensed at only one school and teachers with a record of successful student course completion and high placement rates could become more in demand from other schools.

Budgetary implications of the bill

This bill would generate some additional funds necessary for NYSED to adequately oversee, investigate, discipline and help make this important higher education sector stronger. Current tuition levels generate approximately $3.0 million in revenue. The proposed changes in the first year the legislation is implemented would generate approximately $800,000 (based on current school figures and estimates). This increase is over the 2008-09 year, the last completed fiscal year for which figures are available.

Prior legislative history

In 2009, this bill was introduced in the Senate as S.6013, referred to the Senate Rules Committee, and no further action was taken. Subsequently, this bill was introduced in the Senate as S.6043 and in

the Assembly as A.8773. S.6043 was referred to the Senate Rules Committee and no further action was taken. A.8773 was referred to the Assembly Higher Education Committee and no further action was taken. In 2010, it was again referred to both the Senate and Assembly's Committee on Higher Education, but no further action was taken.

In 2008, this bill was introduced in the Senate as S.7592, referred to the Senate Education Committee, discharged and committed to the Senate Higher Education Committee, and then reported and committed to the Senate Finance Committee. No further action was taken.

Effective date

This bill would take effect on the one hundred twentieth day after it shall have become a law; provided that subparagraph (iii) of paragraph b of subdivision 4 of section 5001 of the Education Law, which relates to candidacy. status, would expire and be deemed repealed three years after such effective date; and provided, further, that the amendments made to paragraph g of subdivision 10 of section 5007 of the Education Law, which relate to the Tuition Reimbursement Account, would not affect the repeal of such paragraph and would be deemed repealed therewith, and provided, further, however, that effective immediately, the Commissioner of Education would be authorized and directed to promulgate any rules or regulations deemed necessary to implement the provisions of this act on such effective date.