BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 595|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 595
Author: Calderon (D)
Amended: 4/22/13
Vote: 21
SENATE EDUCATION COMMITTEE : 9-0, 5/1/13
AYES: Liu, Wyland, Block, Correa, Hancock, Hueso, Huff,
Jackson, Monning
SUBJECT : Postsecondary financial aid disbursement
SOURCE : Author
DIGEST : This bill prohibits any campus of the California
Community Colleges (CCC) or the California State University
(CSU) from entering into a contract with any entity on or after
1/1/2014, that requires students to open an account with the
entity as a condition of the student receiving a financial aid
disbursement, and requires that they offer a student the option
of receiving his/her financial aid disbursement via direct
deposit, as specified. The bill also requests the University of
California (UC) to comply with these provisions.
ANALYSIS : Federal regulations establish rules for the
disbursement of federal financial aid to students. These rules
provide that schools may disburse Federal Student Aid (FSA)
funds directly to a student or parent by issuing a check or
other instrument, by initiating an electronic funds transfer to
a bank account designated by a student or parent, by disbursing
cash to the student, or by releasing a Federal Family Education
CONTINUED
SB 595
Page
2
Loan check sent by the lender. Generally, FSA funds must be
disbursed to a student within 14 days.
These rules also authorize a school to establish a policy
requiring its students to provide bank account information, or
open an account at a bank of their choosing as long as this
policy does not delay the disbursement of FSA funds to students.
In situations where a school opens a bank account on behalf of
the student, the rules require that schools comply with
conditions related to consent, notice, and costs to open or
transact on the account as well as the availability of means for
accessing funds.
This bill:
1.Prohibits any campus of the CCC or the CSU from entering into
a contract with any entity, on or after 1/1/2014, that
requires students to open an account with that entity as a
condition of the student receiving a financial aid
disbursement.
2.Requires each CCC and CSU campus to offer a student the option
of receiving a direct deposit of a financial aid disbursement
into a deposit account of the student's choosing.
3.Requires the CCC and the CSU to ensure that the contract with
the entity provides for direct deposit within one day of
receipt of disbursement monies.
4.Requests the UC to comply with these same
provisions/conditions.
Comments
According to a recent report by the U.S. Public Interest
Research Group (PIRG), Campus Debit Card Trap, banks and
financial firms are forming partnerships with colleges and
universities to produce campus ID cards and to offer student aid
disbursements on debit or prepaid cards. The federal
government requires that schools disburse financial aid refunds
to students free of charge; however, these debit cards can come
with fees for other services that can take away from students'
aid. As a result students end up bearing some costs directly,
including per-swipe fees, inactivity fees, overdraft fees, ATM
CONTINUED
SB 595
Page
3
fees and more.
The report contends that debit cards for disbursing funds may be
good for colleges, but argue that cash-strapped students absorb
the costs. The PIRG study finds that some debit cards come with
fees as high as 50 cents per swipe in transaction fees, $38.00
per overdraft and $10.00 for inactivity after 6 months without
use. The PIRG study also finds that students do not fully
realize what they are signing up for when they elect to receive
their financial aid award via debit card.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/7/13)
California Bankers Association
California Student Aid Commission
CalPIRG
Student Senate for California Community Colleges
ARGUMENTS IN SUPPORT : According to the author's office,
existing law permits our public segments of higher education to
enter into contracts with entities for the purpose of disbursing
financial aid funds, but these contracts are not prohibited from
mandating that students open an account with the partnering
entity as a precondition to receiving their financial aid funds.
In addition, it is the intent of the author's office to ensure
that a student who opts to use an entity other than a
college's/university's partnering depository institution is not
disadvantaged by selecting an alternative means that result in a
prolonged wait for receiving their financial aid disbursement.
According to the author's office, direct deposit currently
offers the timeliest means by which a student can receive their
financial aid funds. By requiring the direct deposit be
initiated within 24 hours of the receipt of the funds by the
entity, students are ensured of receiving their funds in a time
frame similar to that for students who choose the
college's/university's partnering depository institution.
PQ:ej 5/7/13 Senate Floor Analyses
CONTINUED
SB 595
Page
4
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED