BILL ANALYSIS Ó
SB 845
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Date of Hearing: June 18, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 845 (Correa) - As Amended: May 7, 2014
Policy Committee: Higher
EducationVote:11-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the governing boards of the California State
University (CSU) and the California Community Colleges (CCC) and
requests the governing boards of the University of California
(UC) and accredited private postsecondary educational
institutions to develop model contracts for the disbursement
within their respective systems of student financial aid through
debit cards or credit cards. Specifically, this bill:
1)Requires the model contracts to be developed in consultation
with stakeholders and requires solicitation and consideration
of public comment prior to finalizing the contracts.
2)Requires that the governing boards require every model
contract and every related binding contract negotiated by an
institution under a board's jurisdiction to be available
online.
3)Requires every model contract to consider the best interest of
students and, at a minimum, to include provisions reflecting
conditions required for compliance with federal regulations
governing disbursement of federal financial aid and to
consider other specified elements.
FISCAL EFFECT
Minor and absorbable costs for the governing boards of the CSU,
CCC and UC to adopt the model contracts, and to post these and
related contracts on their respective websites.
COMMENTS
SB 845
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1)Background . When students receive financial aid, whether in
the form of a scholarship, grant, or student loan, schools
apply that money first to cover tuition and fees then disburse
the rest to the student. Many campuses are providing this
disbursement through special debit cards that sometimes double
as student identification cards.
Recent reports and media attention have raised concerns about
whether the terms and conditions of the debit cards that
servicers use to deliver financial aid credit balances to
students are in the best interest of students. According to a
May 2012 U. S. Public Interest Research Group (PIRG)
Educational Fund report, some debit cards come with
transaction fees as high as 50 cents per swipe, $38.00 per
overdraft and $10.00 for inactivity after six 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.
Reports on this topic have also been issued this year by the
U.S. Department of Education's (USDE's) Office of Inspector
General and by the U.S. Government Accountability Office
(GAO). Last fall, the USDE commenced a negotiated rule making
process to expand the rules governing disbursement of
financial aid via debit cards. Following four meetings, the
rule-making committee failed to reach consensus; as such, the
department is now able to propose whatever regulatory language
it sees fit without going through another rule making process.
2)Purpose . According to the author, several of the contracts
entered into by individual campuses for financial aid
disbursement have been criticized for failing to uphold the
best interests of students, yet none of the systems have
stepped in to provide guidance or assistance to their campuses
in this regard. This bill therefore requires, or requests as
appropriate, that governing boards develop model contracts for
use by the campuses within their systems.
3)Related Legislation . AB 1927 (Frazier), pending in Senate
Banking and Finance, is similar to this bill, but requires the
governing boards to adopt policies containing specified
elements.
4)Prior Legislation . In 2013, AB 1162 (Frazier), which was
SB 845
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similar to AB 1927, failed in Senate Banking and Finance.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081