Committee hears bill to raise student indemnification fund cap to $750,000

Assemblyman PK O'Neil presented Assembly Bill 164 to the Assembly Committee on Education in a hearing held with members and the public in Carson City and Las Vegas. The measure would raise the cap on the Account for Student Indemnification, which compensates students who paid tuition out of pocket when a licensed private postsecondary institution closes, from the current $250,000 to $750,000.

The bill's sponsor told the committee the account, created in 1995 and administered by the Commission on Postsecondary Education, functions as “an insurance policy for the student,” paid for by a one-time $5 fee charged at initial enrollment and remitted quarterly by institutions. PK O'Neil said the change responds to inflation and higher tuition costs that have increased potential liabilities since the cap was set.

Kelly Weest, administrator of the Commission on Postsecondary Education, told the committee the commission began collecting the $5 fee on July 1, 2024. She said a 2024 closure of a career college in Northern Nevada affected 226 students; 50 filed indemnification claims totaling about $530,000. Claims ranged from about $30,568 at the high end to $10.92. Weest said 10 students were waiting for payment and seven claims were in process as the commission awaited funds to pay older claims. She projected the fund would reach $250,000 in approximately two years under current collections and that, if the cap were raised to $750,000, it would take roughly four years to reach that level based on quarterly enrollment forecasts the commission prepares.

Dr. Randy Kerner, a commissioner on the Commission on Postsecondary Education, described the increase as driven by rising tuitions and said the proposed cap was a pragmatic estimate rather than a scientific calculation. He also emphasized the indemnification account is separate from state funds and cannot be used for other purposes.

Speakers from the private postsecondary sector testified in support. Jimmy Lau, representing the Nevada Association of Career Colleges, said the cap established in 1995 no longer reflects current costs and that the account is a backup safety net for students. Lucia Maloney, a Carson City parent, told the committee she supported the bill to protect families who pay out of pocket.

Committee members asked about frequency of closures and whether the fund had sufficed. Weest said the commission had used the account to pay claims from about five or six closures during her tenure over the last 10 years; other closures in the commission's history totaled six events that required indemnification. Committee member Mosca asked whether recent claims were fully paid; Weest said earlier closures had been paid out over time, but in the most recent case some students remained in line awaiting available funds and are paid in first-in, first-out order as funds accrue.

The committee record shows no opposition testimony during the hearing. PK O'Neil urged the committee to move the bill to the Assembly floor; the transcript records the hearing opened and later closed with no committee vote recorded during the session.

If approved as written, the bill would change the statutory cap on the account from $250,000 to $750,000 and would take effect July 1, 2025. The account continues to be funded by the $5 initial-enrollment fee institutions remit to the commission each quarter.

Provenance: Opening of the hearing on AB164 and sponsor remarks are recorded in the committee transcript beginning at the committee's announcement of AB164; later closing remarks and the closing of the hearing on AB164 are recorded before the committee opened the next agenda item.