Kentucky House Bill 338: The Key to Expanding KEES Opportunities?

Education Expense in the Spotlight

Student loan debt remains a hotly debated topic across the country.[1]  As of 2019, forty-three percent of those who attended college incurred education-related debt and 17% of those that had educational debt were behind on their payments.[2]  For more than a year, borrowers have enjoyed COVID-related forbearance on student loans owned by the U.S. Department of Education.[3]  The issue was popular enough for presidential candidates to discuss their plans for it leading up to the 2020 election.[4]  While President Biden has directed both the Secretary of Education and the Department of Justice to investigate legal authority for student loan forgiveness through executive action, his recent budget proposal did not address broad student loan forgiveness.[5]  The proposal’s more targeted measures did include increased funding of federal Pell Grants in an attempt to reduce debt accumulation for future borrowers.[6]

In addition to any federal changes on the horizon, Kentucky students already have one tool to reduce their educational expense through the Kentucky Higher Education Assistance Authority’s (KHEAA) programs.[7]  The Kentucky Educational Excellence Scholarship (KEES), for example, awards funding to students based on their grades, ACT or SAT scores, and Advanced Placement classes taken in high school.[8]  While students are currently limited on where they can apply these earned scholarships, there is an opportunity to expand these options with proposed House Bill 338.[9] 

Kentucky House Bill 338’s Expansion of KEES Opportunities

House Bill 338 would expand the opportunity for students to utilize KEES money.[10]  Currently, eligible high school students are only permitted to directly apply their scholarship at institutions that are eligible to participate in the federal Pell Grant program.[11]  Bill 338 eliminates this limitation.[12]  If this change is enacted, more institutions that execute an appropriate contract to administer KHEAA programs may be eligible to accept KEES funds.[13]  Notably, proprietary schools are specifically added for eligibility.[14] 

While some existing opportunities like the Work Ready Kentucky Scholarship Program are beneficial, eligibility for the program is also restricted.[15]  The Work Ready program provides scholarship funds to some students for industry-recognized certificates, but only if it falls within one of the state’s top five high-demand workforce sectors.[16]  Those sectors are currently Advanced Manufacturing, Business/IT, Construction, Healthcare, and Transportation.[17]  Similarly, some students in registered apprenticeship programs may be able to utilize their KEES money, but only through reimbursement for qualified expenses after completing applicable forms; those expenses must first be paid out of pocket.[18]

Practically, House Bill 338 would allow students more options for workforce training without committing to the time or expense of a full degree program.[19]  The changes would provide additional opportunities beyond those available through both the Work Ready Kentucky Scholarship Program and the registered apprenticeship reimbursements.  Institutions that provide training for cosmetology, welding, barbering, embalming, commercial driver’s licensing, could potentially participate.[20]  Students interested in these fields of employment would enjoy a wider variety of institutions to attend, many of which could offer a more concentrated training timeline with less expense overall compared to traditional degrees.[21]

Hesitancy Regarding Expansion of Eligible Institutions

As with any potential change, hesitancy could exist about the expansion of eligible institutions receiving direct payments of students’ financial aid funds.  There are examples of for-profit career schools accepting liability for fraud and unfair business practices in other states.[22]  In 2014, a $2 million jury verdict for a student was upheld based on a for-profit school’s deceptive practices about the student’s employment potential after completion.[23]  In 2016, the Federal Trade Commission filed suit against DeVry University for misleading consumers about students’ prospects of employment upon completion; the suit was eventually settled for $100 million.[24]  A Gainful Employment regulation existed that required institutions to disclose debt and income information for their graduated students, but this regulation was largely rescinded in 2019-2020.[25]  However, these schools are still required to provide certain types of information to prospective students, such as graduation rates and fields of employment obtained by graduates.[26]

Safeguards for Kentucky Students

While scrutiny of career colleges and for-profit institutions is justified in some cases, the risk of abuse by an unscrupulous school is mitigated by requirements related to or included in House Bill 338.  For example, any participating proprietary school must be licensed by either the Kentucky Commission on Proprietary Education, Kentucky Board of Barbering, Kentucky Board of Cosmetology, Kentucky Board of Nursing, or the Kentucky Board of Embalmers and Funeral Directors.[27]

Further, each Board or Commission has its own requirements for licensing.  For example, “no proprietary school shall be issued a license . . . unless the application is accompanied by a fee as established by the commission and a good and sufficient surety bond or other collateral in a form approved by the commission”.[28]  These surety bonds may be used to indemnify any student suffering loss as a result of any fraud related to enrollment as represented by the application for the license, providing an additional layer of protection for potential students.[29]  All schools licensed by the Commission on Proprietary Education are also required to contribute to a “student protection fund”.[30]  This fund would be used to pay off debt, including refunds to students due to the closing of the school or loss of accreditation.[31]  The fund’s balance is to remain at a minimum of $500,000.[32]

In addition to the specific requirements for licensing by each Board or Commission, any proprietary school seeking participation in the KEES program would also have to have its principal headquarters or campus located physically in Kentucky.[33]  Layered on top of this, the organization would be required to have operated for at least five years before eligibility is achieved.[34]

Conclusion

Student loan debt is likely to remain a hot topic for political discussion.  While federal changes may or may not be on the horizon for existing borrowers, Kentucky already has the opportunity to reduce the debt potential for some students through the passage of House Bill 338.  Scrutiny of organizations receiving student financial aid funds may be reasonable, but worries about any potential wrongdoing are assuaged by the oversight of licensing boards, the existence of student protection funds and surety bonds, the five years of operation requirement, and the physical headquarters within Kentucky criteria.  House Bill 338 should be utilized so that Kentucky students can apply their KEES funds in a wider variety of ways, potentially entering the workforce sooner and reducing their accumulated debt in the process.

FOOTNOTES

[1] See generally Mark Kantrowitz, Policy Options for Student Loan Forgiveness, Forbes (Apr. 9, 2021, 4:31 PM), https://www.forbes.com/sites/markkantrowitz/2021/04/09/policy-options-for-student-loan-forgiveness/?sh=48a0ecd54957 (discussing current policies being considered).

[2] Report on the Economic Well-Being of U.S. Households in 2019, The Fed. Reserve(May 21, 2020), https://www.federalreserve.gov/publications/2020-economic-well-being-of-us-households-in-2019-student-loans-other-education-debt.htm.

[3] See Coronavirus and Forbearance Info for Students, Borrowers, and Parents, Office of Fed. Student Aid, https://studentaid.gov/announcements-events/coronavirus (last visited Apr. 7, 2021).

[4] See, e.g., Donna Fulscaldo, Student Loan Forgiveness: Where The Top Democratic Presidential Candidates Stand, Forbes (Sept. 12, 2019, 7:00 AM), https://www.forbes.com/sites/advisor/2019/09/12/student-loan-forgiveness-where-the-top-democratic-presidential-candidates-stand/?sh=522e02fa7dbc.

[5] Letter from Shalanda D. Young, Acting Director, Office of Mgmt. and Budget to Patrick Leahy, Appropriations Committee Chairman, U.S. Senate (Apr. 9, 2021), https://www.whitehouse.gov/wp-content/uploads/2021/04/FY2022-Discretionary-Request.pdf; See also Adam S. Minsky, The Changes of Mass Student Loan Forgiveness May Have Just Increased, FORBES (Apr. 2, 2021, 8:26 AM), https://www.forbes.com/sites/adamminsky/2021/04/02/the-chances-of-mass-student-loan-forgiveness-may-have-just-increased/?sh=6dde85c25a29. 

[6] See Letter from Shalanda D. Young, Acting Director, Office of Mgmt. and Budget to Patrick Leahy, Appropriations Committee Chairman, U.S. Senate (Apr. 9, 2021), https://www.whitehouse.gov/wp-content/uploads/2021/04/FY2022-Discretionary-Request.pdf.

[7] KHEAA-Administered Programs, KY. HIGHER EDUC. ASSISTANCE AUTH., https://www.kheaa.com/website/kheaa/kheaaprograms?main=1 (last visited Apr. 8, 2021).

[8] See Kentucky Educational Excellence Scholarship (KEES), KY. HIGHER EDUC. ASSISTANCE AUTH., https://www.kheaa.com/website/kheaa/kees?main=1 (last visited Apr. 8, 2021)

[9] See generally H.B. 338, 2021 Gen. Assemb., Reg. Sess. (Ky. 2021) (removing some restrictions on institutions eligible to accept KEES funds).
[10] Ky. H.B. 338.

[11] Ky. Rev. Stat. Ann. § 164.740 (West 2020).

[12] See generally Ky. H.B. 338 (eliminating the requirement for Pell Grant participation).

[13] Id.; Ky. Rev. Stat. Ann. § 164.001 (West 2020).

[14] See Ky. H.B. 338.

[15] Ky. Rev. Stat. Ann. § 164.787 (West 2020).

[16] Id.

[17] KEES for Registered Apprentices and Qualified Workforce Trainees, KY. HIGHER EDUC. ASSISTANCE AUTH., https://www.kheaa.com/website/kheaa/keesapprentice?main=1 (last visited Apr. 6, 2021).

[18] See generally id. (discussing reimbursement process); Ky. Rev. Stat. Ann. § 164.7884.

[19] See generally H.B. 338, 2021 Gen. Assemb., Reg. Sess. (Ky. 2021) (expanding eligible institutions).

[20] Id.

[21] See generally Mel Bondar, The Financial Case for Trade School Over College, US News (Apr. 12, 2016, 10:55 AM), https://money.usnews.com/money/blogs/my-money/articles/2016-04-12/the-financial-case-for-trade-school-over-college (discussing potential economic savings of trade school education).

[22] Brent Hunsberger, Defunct Trade School Agrees to $3.2 Settlement with Ex-Students in Oregon, THE OREGONIAN (Jan. 10, 2019), https://www.oregonlive.com/business/2009/12/defunct_trade_school_agrees_to.html; Press Release, Dept. of Justice, For-Profit Education Company to Pay $13 Million to Resolve Several Cases Alleging Submission of False Claims for Federal Student Aid (June 24, 2015), https://www.justice.gov/opa/pr/profit-education-company-pay-13-million-resolve-several-cases-alleging-submission-false.

[23] Kerr v. Vatterott Educ. Ctr., Inc., 439 S.W.3d 802 (Mo. Ct. App. 2014).

[24] Fed. Trade Comm’n v. DeVry Educ. Grp., Inc., 2016 WL 6821112 (C.D. Cal. 2016); Press Release, Fed. Trade Comm’n, DeVry University Agrees to $100 Million Settlement with FTC (Dec. 15, 2016), https://www.ftc.gov/news-events/press-releases/2016/12/devry-university-agrees-100-million-settlement-ftc.

[25] See generally Department of Education, Program Integrity: Gainful Employment, 84 Fed. Reg. 31,392 (July 1, 2019) (to be codified at 34 C.F.R. pts. 600, 668) (rescinding much of the Gainful Employment regulation).

[26] 34 C.F.R. § 668.41 (2020).

[27] H.B. 338, 2021 Gen. Assemb., Reg. Sess. (Ky. 2021).

[28] Ky. Rev. Stat. Ann. § 165A.360 (West 2021).

[29] Id.

[30] See id. § 165A.450.

[31] Id.

[32] Id.

[33] H.B. 338, 2021 Gen. Assemb., Reg. Sess. (Ky. 2021).

[34] Ky. H.B. 338.