Amended in Senate June 24, 2015

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 begin insert state and federal financial assistance including unused end insert 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.
begin insert For purposes of this paragraph, “academic year” means the most
recently completed federal award year of July 1 to June 30. end insert

(B) (i)  begin delete The end delete begin insert For each type of credential specified in
subparagraph (A), the end insert 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 begin insert for each type of credential end insert in
those loans described in clause (i).

(C) (i)  begin delete The end delete begin insert For each type of credential specified in
subparagraph (A), the end insert 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 begin insert for each type of credential end insert 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) begin insert by credential type end insert , calculated by
dividing the sum identified in clause (ii) of each of those
subparagraphs begin insert for each type of credential end insert by the number of begin insert that
type of credential issued for end insert students receiving the loans described
in the respective subparagraph. begin delete The institution shall report average
loan debt information for certificate, associate degree, and bachelor
degree programs separately. end delete

(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 provide to the student
information concerning all unused begin insert state and end insert federal begin insert financial
assistance, including unused federal end insert student loan moneys available
to that student.

(b) An institution that does not participate in federal student
loan programs begin delete shall, before processing a private loan, inform the
student end delete begin insert shall inform students end insert that the institution does not participate
in federal loan programs and that begin delete the student end delete begin insert students end insert 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.  

The California Community Colleges may, and are
requested to, comply with the provisions of Section 69800.