The California Student Tuition Recovery Fund (STRF) was established to help students who suffered economic loss due to school closures. Administered by the Bureau of Private and Postsecondary Education (BPPE), the STRF supports students who are enrolled in a qualified institution. These institutions collect assessments from students, at a rate of $2.50 per $1,000 of institutional charges, to fund the STRF. The fund operates as an insurance policy for students, providing them support when schools close or fail to refund any amount owed.
It is vital that STRF be adequately funded. Should this fund reach a point where it is no longer economically solvent, students would not have California’s premier economic recovery fund to address any future large-scale closures of postsecondary institutions. At the end of the 2022-2023 fiscal year, STRF had 50 months’ worth of reserve funds available. However, the BPPE projects that STRF will only have 14.5 months’ worth in reserve funds by the end of the 2025-2026 fiscal year.
Most recently, the largest STRF claims have resulted from the closures of Corinthian College and Silicon Valley University (SVU) – each of which resulted in thousands of claims and total payouts in the millions. California state regulators ordered SVU to close in April 2018 after years of turmoil, including accusations of financial misappropriation, scrutiny over its reputation as a “visa mill”, and finally, the loss of its accreditation. Six years later, reverberations from SVU’s closure are still felt by thousands of former students, and the state program intended to help these students recoup their financial losses is straining to meet the large demand. The BPPE reports that as of May 2024, 1,358 total STRF claims have been submitted from former SVU students, and over $14.5 million has been paid out from the fund. The average SVU STRF payout per student exceeds $17,000 – over three times the average payout over the previous decade.
The unprecedented stress placed on STRF by SVU’s closure has exposed design and funding weaknesses that the state needs to address to ensure the longevity of this important fund. This blog highlights two policy gaps and recommends approaches to bridge them.
Target STRF Payout Eligibility to Those Who Need It Most
Currently, California residents are eligible to receive payments from STRF if they were enrolled in a BPPE-approved or registered postsecondary institution, prepaid their tuition, and were enrolled at the time of its closure and suffered economic loss. Eligibility requirements outlined in statute do not consider whether a student was able to complete their program: both ongoing students and degree recipients can access the fund. This broad scope of eligibility can contribute to the unexpectedly large amount of STRF payments. According to the May 2024 BPPE Advisory Committee, there have been 256 payouts totaling $4.5 million for fiscal year 2023-24. Students who are unable to complete their programs or teach-out plans and students who prepaid tuition or took out loans to cover costs for uncompleted programs face the most severe economic ramifications of school closures.
Data show that completing a degree is key to unlocking the full range of benefits of higher education, including securing meaningful employment, and setting up students for success as they repay their loans. Limiting STRF eligibility to students who were unable to complete due to school closure would prioritize students who have experienced the greatest amount of harm while ensuring that STRF remains secure into the near future.
Furthermore, California could explicitly account for non-completers while also maintaining STRF eligibility discretion for the Bureau to approve any other students deemed appropriate based on their circumstances.
Extend the STRF Lookback Period
For students affected by sudden school closures, California’s STRF fund works alongside federal student aid protections, including a closed school discharge for federal student loans. The U.S. Department of Education currently has a closed school loan discharge withdrawal lookback period of 180 days, meaning that students who attended a school that closed can apply for loan discharge within 180 days of the school’s closure. The California Education Code allows students to qualify for the STRF if they are enrolled up to 120 days before a school’s closure. This is 60 days fewer than the federal 180-day standard, limiting the number of eligible students and potentially causing confusion. Aligning California’s timeline with the federal standard by extending it to 180 days would increase eligibility and simplify the process for students.
Conclusion
California is a national exemplar for the protections it provides to residents who enroll in private postsecondary institutions, and STRF is a critical piece of those protections. Unfortunately, the number of students affected by school closures has grown significantly, especially as large online education providers that are structured as corporations have grown across the country. These proposed adjustments to STRF will prioritize students who have suffered the most harm due to school closures, protect the fiscal viability of this critical consumer protection, and reduce student confusion/administrative complexity.
We urge policymakers to consider these STRF recommendations to ensure the program continues to serve as an economic backstop. While these are two options, these are not the only solutions available to meet both STRF and the Bureau’s need to strengthen themselves financially. For instance, policymakers should consider other recommendations such as using STRF to cover claim administration, to facilitate students’ access to transcripts, to cover OSAR functions, and by increasing application fees. By strengthening STRF, we are not just protecting students, but also upholding the economic value of a postsecondary education and the promise it holds for all students.
