BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 1210
Author: Lara (D), et al
Amended: 5/27/14
Vote: 21
SENATE EDUCATION COMMITTEE : 5-0, 4/9/14
AYES: Block, Correa, Galgiani, Hancock, Monning
NO VOTE RECORDED: Liu, Wyland, Hueso, Huff
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : California DREAM Loan Program
SOURCE : California State Student Association
California State University
University of California
University of California Student Association
DIGEST : This bill establishes the California DREAM Loan
Program (CDLP) for purposes of extending loans to students who
meet the requirements established by AB 540 (Firebaugh, Chapter
814, Statutes of 2001) and have financial need, and authorizes
any campus of the University of California (UC) and the
California State University (CSU) to participate, as specified.
This bill also declares the Legislature's intent that funds be
appropriated to participating institutions annually for the
program; requires that participating institutions annually
contribute discretionary funds as specified, in their CDLP
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revolving fund; and entitles each participating institution to
an administrative cost allowance equal to 5% of the loan funds
it awards each year.
ANALYSIS : Existing law provides that, beginning January 1,
2013, AB 540 students are eligible to apply for, and participate
in, any student financial aid program administered by the State
of California to the full extent permitted by federal law. The
California Student Aid Commission (CSAC) is required to
establish procedures and forms that enable AB 540 students to
apply for, and participate in, all student financial aid
programs administered by the State of California to the full
extent permitted by federal law. Existing law prohibits
AB 540 students from being eligible for Competitive Cal Grant A
and B Awards, unless specified conditions are met.
Existing law provides that a student attending CSU, the
California Community Colleges (CCCs), or UC who is exempt from
paying nonresident tuition under the provisions of AB 540 is
eligible to receive a scholarship derived from nonstate funds
received, for the purpose of scholarships, by the segment at
which he/she is a student.
Existing law requires the Trustees of the CSU and the Board of
Governors of the CCC, and request the UC Regents, to establish
procedures and forms that enable AB 540 students to apply for,
and participate in, all student aid programs administered by
these segments to the full extent permitted by federal law.
This bill:
1.Establishes the CDLP, a voluntary campus-based student loan
program to provide loans to UC and CSU students, who meet
specified requirements, beginning in the 2015-16 academic
year.
2.Establishes the following requirements for student
participation in the CDLP:
A. Requires that the student be exempt from paying
nonresident tuition under the provisions established by AB
540.
B. Requires that the student has applied for financial aid
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using the CSAC developed CDLP Application.
C. Requires that the student be enrolled at least half-time
in good standing in an instructional program at a
participating institution.
D. Requires that the student be determined to have
financial need by the participating institution, maintain
satisfactory academic progress, not be incarcerated, and
not be in default on federal, state or other student loans
issued by the UC or the CSU.
E. Requires that the student be enrolled in a CDLP eligible
to participate in the Cal Grant program.
1.Establishes a certification process for determining that the
requirements outlined in #2 are met. Specifically it:
A. Requires that CSAC or the participating institutions
require that the student affirm in writing that they meet
these requirements.
B. Requires a student seeking an award to authorize CSAC to
access any information pertinent to certifying that the
student meets these requirements.
C. Requires CSAC, in collaboration with the participating
institution to certify that the student satisfies these
requirements prior to a participating institution issuing
an award to a student.
1.Establishes the responsibilities of a UC or CSU campus
(participating institution) that chooses to participate in the
CDLP. Specifically, a participating institution is required
to:
A. Determine a student's eligibility for a loan.
B. Award loan funds to students.
C. Provide entrance and exit loan counseling comparable to
that required by federal student loan programs.
D. Service the loans, collect loan repayments and perform
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all due diligence required by the Fair Credit Reporting
Act.
E. Establish mechanisms for recording annual and aggregate
amounts borrowed, in order to ensure compliance with the
borrowing limits established for the program.
1.Establishes the features of the CDLP. Specifically it:
A. Prohibits the loan amount from exceeding the student's
financial need.
B. Caps the annual amount of a loan at $4,000 and the
aggregate amount from the program at a single institution
at $20,000.
C. Requires the interest rate for loans under the CDLP be
the same as the then-current interest rate for
undergraduate loans under the William D. Ford Federal
Direct Loan Program.
D. Sets the repayment term at 10 years, to begin six months
after a student graduates or ceases to maintain at least
half-time enrollment in a degree or DREAM certificate
program.
E. Prohibits the accrual of interest on the loan while a
student is enrolled at least half-time in a degree or
certificate program or during the six months.
F. Requires the participating institution to determine
eligibility for deferment or forbearance in accordance with
the standards of the Federal Direct Loan Program.
G. Requires the use of a promissory note approved by the
Treasurer, to be issued into the CDLP.
1.Provides for the funding of the CDLP. Specifically it:
A. Declares the Legislature's intent that budget act
funding for the purposes of the CDLP be appropriated
annually to participating institutions.
B. Requires that the Budget Act allocate funding based upon
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the number of eligible students attending the institution
who applied for student financial aid the prior academic
year.
C. Requires each participating institution to deposit
appropriated funds into a CDLP revolving fund established
by each institution for the purposes of awarding loans and
revolving loan repayments.
D. Requires each participating institution beginning each
academic year, before CDLP loans are awarded for that year,
to contribute discretionary funds into its CDLP revolving
fund so that the institution's contribution of funds equals
or exceeds the following amounts:
(1) 25% of all the funds for the institution's
CDLP revolving fund for the institution's first and
second year of participation.
(2) 33% of all the funds for the institution's
CDLP revolving fund for the institution's third and
fourth year of participation.
(3) 50% of all the funds for the institution's
CDLP revolving fund for the institution's fifth year
of participation, and every year thereafter.
A. Requires that an institution that terminates
participation in the CDLP, continue to service the CDLP,
collect CDLP repayments, and perform all due diligence
required by the federal Fair Credit Reporting Act until the
last students at that institution issued loans under the
CDLP prior to the institution terminating its participation
have repaid their loans, as specified.
B. Requires that the UC and CSU annually report the dollar
amount of each CDLP awarded and the number of students
awarded a CDLP, as specified.
1.Requires the CSU Trustees and the UC Regents to adopt
regulations providing for the withholding of institutional
services from students or former students who have been
notified in writing at the student's or former student's last
known address that he/she is in default on a loan or loans
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under the CDLP, as specified.
2.Entitles each participating institution to an annual
administrative cost allowance, to offset costs of
administering the CDLP, equal to 5% of the institution's total
CDLP funds awarded each year, and requires that the
institution be responsible for administrative costs in excess
of the allowance.
3.Provides for immunity to the UC and the CSU from the awarding
of any monetary damages, loans, or other retroactive relief in
the event of any lawsuits as a result of implementing the
student CDLP.
4.Defines various terms for purposes of the bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, the cost of
the CDLP will depend on the number of participating CSU and UC
campuses, and the number of participating students on each
campus. The state's direct contribution level is linked to that
of the campuses; the more campuses and students who participate,
the higher the direct state contribution amount.
State share: Costs will vary by year but, based on needs
projections, are likely to be approximately $4 million for the
first year (General Fund). Costs will likely rise as the CDLP
becomes more widespread and popular.
CSU/UC share: Costs will vary by year, and by whether or not
campuses participate. Based on the universe of potential
borrowers, first year costs will likely be approximately $1
million total.
Administration: The UC and CSU will be allowed to retain 5%
of the CDLP costs for administration and both institutions
believe that amount will be sufficient to cover their
administrative costs.
CSAC: Potentially significant ongoing costs to certify
student eligibility to participate in the CDLP.
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SUPPORT : (Verified 5/23/14)
California State Student Association (co-source)
California State University (co-source)
University of California (co-source)
University of California Student Association (co-source)
American Civil Liberties Union of California
California Dream Network
California Immigrant Policy Center
Coalition for Humane Immigrant Rights of Los Angeles
Equality California
National Council of La Raza
Parent Institute for Quality Education
ARGUMENTS IN SUPPORT : According to the author, the state has
demonstrated a willingness to invest in undocumented students by
enabling them to pay in-state tuition at the state's public
higher education institutions, and qualifying them for Cal
Grants and institutional aid. However, these undocumented
students, while eligible for state aid, are still unable to
access federal student loans. As a result, they have a "gap" in
their financial aid packages of $3,000-$6,000 annually. Unless
these students fill the gap that exists beyond the student
contribution already required of them by working additional
hours for pay, taking extraordinary steps to reduce their
expenses, or finding other outside
resources, they risk having to withdraw from college. According
to the UC, because they already administer campus based federal
student loans, the CDLP could be administered at the campuses at
minimal additional cost.
PQ:e 5/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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