On October 12, 2001, Governor Davis signed into law Assembly Bill 540 (Stats. 2001, ch.814) which adds a new section to the California Education Code. Section 68130.5 creates a new exemption from payment of nonresident tuition for certain nonresident students who have attended high school in California and received a high school diploma or its equivalent.

1. The new law does not grant residency, it requires that certain nonresident students be exempted from paying nonresident tuition.
2. Students exempted from paying nonresident tuition pursuant to section 68130.5 do not become residents for eligibility purposes for any state-funded program (e.g., EOP&S, Cal Grant programs, or for purposes of a BOG Fee Waiver).
3. Students who meet the exemption requirements and who are unlawful immigrants are not eligible for any federal or state financial aid program. Many private sources have created scholarships specific to students not eligible for traditional financial aid programs. (scholarship link)
4. Students exempted from paying nonresident tuition pursuant to section 68130.5 are not eligible for the Governor’s Merit Scholar Programs because these scholarships are only available for California residents.
5. Students must meet all requirements in section 68130.5 (a) (1) – (4) to be eligible for the exemption.
   a. The student must have attended a California high school for three or more years. There are no provisions for partial attendance (e.g. two years and 7 months). The law does not require consecutive attendance nor require that the student attended the last three years in California (in the case of four-year high schools).
   b. Such attendance could be at multiple California high schools. Attendance at continuation high schools, charter high schools and K-12 approved independent education is acceptable.
   Attendance at a home school is not acceptable unless the home schooling was provided in a manner recognized under state law. The law does not distinguish between public and private high schools. There is no time limit on how far in the past the student might have attended a California high school.
   c. The student must have graduated from a California high school or attained the equivalent thereof (e.g., a GED or a high school proficiency exam).
   d. Except for nonimmigrant aliens, any nonresident student who meets the first two requirements shall be exempted from nonresident tuition even if he or she is a US citizen or lawful immigrant.
   e. If the student has filed an application with the INS to legalize status, the student may already be eligible for resident fee status if the student has resided in California for more than one year since the time of INS application. (See Title 5 Section 54045.)
6. Students who are nonimmigrant aliens (the most common being the F series student visas and B series visitor visas), are not eligible for this exemption. (A full description of nonimmigrant alien classification may be found in paragraph 15 of subsection (a) of Section 1101 of Title 8 of the U.S. Code.) People who entered the country as nonimmigrant aliens but subsequently have gone out of status are not eligible for this exemption until they apply to INS to change their status to something other than nonimmigrant.
7. High School transcripts are required to apply for AB540.