Amended in Assembly May 28, 2015

Amended in Assembly April 13, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 721

Introduced by Assembly Member Medina

February 25, 2015

An act to amend Sections 69800 and 69800.5 of, and to add Section 69800.2 to, the Education Code, relating to student financial aid.

LEGISLATIVE COUNSEL’S DIGEST

AB 721, as amended, Medina. Student financial aid: private student loans.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lender’s inclusion on the list.

This bill would require the public, private, or independent institution to make available to the public upon request and in a prominent location on its Internet Web site specified student loan debt statistics on graduates, to provide students information concerning unused federal student loan moneys available to them before certifying their eligibility for private student loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 69800 of the Education Code is amended
to read:

69800.  

A public, private, or independent postsecondary
educational institution, except the California Community Colleges,
shall do all of the following:

(a) (1) State both of the following in all printed and online
financial aid materials issued or distributed by the institution to
applicants for admission or matriculated students and with private
loan applications provided or made available by the institution:

(A) Federal student loans are required by law to provide a range
of flexible repayment options, including, but not limited to,
income-based repayment and income-contingent repayment plans,
and loan forgiveness benefits, which other student loans are not
required to provide.

(B) Federal direct loans are available to students regardless of
income.

(2) The institution may continue to use financial aid materials
that are printed before January 1, 2013, if the institution includes
an insert with the printed material that provides the information
required in paragraph (1). All financial aid materials printed on or
after January 1, 2013, shall include the information required in
paragraph (1).

(b) Clearly distinguish private loans from federal loans in
individual financial aid awards by stating, for any private loans
included by the institution as part of the institution’s award
package, all of the following:

(1) Whether the rate is fixed or variable.

(2) An explanation that private student loan lenders can offer
variable interest rates that can increase or decrease over time,
depending on market conditions.

(3) An explanation that private student loans have a range of
interest rates and fees and students should determine the interest
rate of, and any fees associated with, the private student loan
included in their financial aid award package before accepting the
loan.

(4) An explanation that students should contact the lender of
the private student loan or their postsecondary educational
institution’s financial aid office if they have any questions about
a private student loan.

(5) An explanation that the interest rate on a private loan may
depend on the borrower’s credit rating.

(c) If the institution provides a private loan lender list, it also
shall provide general information about the loans available through
the lender and disclose the basis for each lender’s inclusion on the
list. The institution shall also disclose with the list that the student
has the ability to choose any lender.

(d) (1) Make available to the public upon request and in a
prominent location on its Internet Web site the following
information concerning graduates and student loan debt:

(A) The number of students who started as first-time
postsecondary students at the institution and received a certificate,
associate’s degree, or bachelor’s degree during that academic year.

(B) (i) The number and percentage of the students identified
pursuant to subparagraph (A) who borrowed at any time while
enrolled at the institution through any student loan program,
including, but not necessarily limited to, institutional loans, state
loans, federal Perkins loans, federal Stafford subsidized and
unsubsidized loans, and private loans that were certified by the
institution, including both federal direct student loans and federal
family education loans.

(ii) The total principal borrowed in those loans described in
clause (i).

(C) (i) The number and percentage of the students identified
pursuant to subparagraph (A) who borrowed at any time while
enrolled at the institution through a federal student loan program,
including, but not necessarily limited to, federal Perkins loans,
federal Stafford subsidized and unsubsidized loans, federal direct
student loans, and federal family education loans, but excluding
institutional loans, state loans, and private loans.

(ii) The total principal borrowed in those loans described in
clause (i).

(D) The average cumulative principal borrowed by those
students counted for purposes of the calculations required by
subparagraphs (B) and (C), calculated by dividing the sum
identified in clause (ii) of each of those subparagraphs by the
number of students receiving the loans described in the respective
subparagraph. The institution shall report average loan debt
information for certificate, associate degree, and bachelor degree
programs separately.

(2) For purposes of this subdivision, “loans” shall include
cosigned loans that financed a student’s own enrollment or
attendance, but shall not include parental loans.

SEC. 2.  

Section 69800.2 is added to the Education Code, to
read:

69800.2.  

(a) Before certifying a borrower’s eligibility for a
private student loan, a public, private, or independent
postsecondary educational institution shall begin delete comply with Section
69800, and end delete provide to the student information concerning all
unused federal student loan moneys available to that student.

(b) An institution that does not participate in federal student
loan programs shall, before processing a private loan, inform the
student that the institution does not participate in federal loan
programs and that the student may be eligible for federal loans at
a participating institution. The institution shall provide the student
with information regarding the Cal Grants Web link on the
California Student Aid Commission’s Web site and the Federal
Student Aid Web link on the United States Department of
Education’s Web site.

SEC. 3.  

Section 69800.5 of the Education Code is amended to
read:

69800.5.  

begin delete Except as provided in Section 69800.2, the end delete begin insert The end insert begin insert end insert
California Community Colleges may, and are requested to, comply
with the provisions of Section 69800.