BILL ANALYSIS Ó
SB 1289
Page 1
SENATE THIRD READING
SB 1289 (Corbett)
As Amended August 13, 2012
Majority vote
SENATE VOTE :25-11
HIGHER EDUCATION 6-2 APPROPRIATIONS 12-5
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|Ayes:|Block, Brownley, Fong, |Ayes:|Fuentes, Blumenfield, |
| |Galgiani, Lara, | |Bradford, Charles |
| |Portantino | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Olsen, Miller |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Requires private or independent postsecondary
educational institutions, the California State University (CSU),
and the University of California (UC) if the UC Regents concur,
to provide specified information to students regarding federal
and private student loans. Specifically, this bill :
1)Requires each institution to provide the specified information
in all printed and online financial aid materials distributed
by the institution to applicants and students and also with
private loan application made available by the institution.
2)Allows the institutions to continue using financial materials
in print before January 1, 2013, if an insert containing the
required information is included.
3)Requires each institution, as part of a financial aid award
package including private loans, to provide specified
information regarding those loans.
4)Requires any institution providing a private loan lenders list
to provide general information about loans available through
the lender and the basis for each lender's inclusion on the
list.
SB 1289
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5)Requests the California Community Colleges to comply with all
of the above.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor and absorbable costs for CSU and UC to update
financial aid materials.
COMMENTS : Students have two options when looking to take out
loans-federal loans and private loans. Federal loans, like
Stafford Direct Loans, have fixed rates with set caps, limits on
fees, and flexible repayment options. While federal loans make
up the majority of student loan borrowing, there are limits to
how much money students can borrow under federal loan programs;
the remaining unmet needs to cover total educational expenses
are often financed through private loans.
According to the Institute on College Access and Success
(TICAS), private student loans are one of the riskiest ways to
finance a college education. According to TICAS, like credit
cards, private student loans usually have variable interest
rates that are higher for those who can least afford them - as
high as 18% in 2008. But unlike credit card debt, these loans
are nearly impossible to discharge in bankruptcy. Private
student loan borrowers are also not eligible for the important
deferment, income-based repayment, or loan forgiveness options
that come with federal student loans.
In 2008 the federal government enacted the Higher Education
Opportunity Act (HR 4137), which prohibits private education
loans from being granted before applicants submit a signed
self-certification form that institutions of higher education
provide to students. The private education loan
self-certification form contains numerous disclosures, including
information that free federal aid might be available in addition
to, or in the place of, a private education loan. This form
also strongly encourages students to pursue free or lower-cost
financial aid through an institution's federal financial aid
office. The private self-certification must also include the
estimated total cost of attendance, the financial assistance for
the period covered by the loan, and the difference between the
total cost and estimated financial aid. Borrowers need to
submit the self-certification prior to receiving a private or
direct student loan.
SB 1289
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Analysis Prepared by : Sandra Fried / HIGHER ED. / (916)
319-3960
FN: 0004743