BILL ANALYSIS Ó
AB 721
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ASSEMBLY THIRD READING
AB
721 (Medina)
As Amended May 28, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Higher |12-0 |Medina, Baker, | |
|Education | |Bloom, Harper, | |
| | |Irwin, | |
| | |Jones-Sawyer, | |
| | |Levine, Linder, | |
| | |Low, Santiago, | |
| | |Weber, Williams | |
| | | | |
|----------------+------+--------------------+----------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, | |
| | |Eggman, Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
AB 721
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| | | | |
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SUMMARY: Establishes requirements on institutions related to
disclosure of student loan data and disclosure of information to
students seeking private loans. Specifically, this bill:
1)Requires public, private or independent colleges, except
California Community Colleges (CCC), to provide average graduate
loan debt information publically, on the institution's Internet
Web site.
2)Requires public, private and independent institutions, prior to
processing a private student loan, to provide the student
information concerning all unused federal student loan moneys
available to that student.
3)Requires an institution that does not participate in federal
student loan programs to inform the student of such and that the
student may be eligible for federal loans at a participating
institution. The institution is required to provide the student
with information regarding the Cal Grants and Federal Student
Aid websites.
EXISTING LAW requires public, private and independent
postsecondary educational institutions, except the CCC, to state
in printed and online financial aid materials and with private
loan applications specified information related to federal student
loans and private loans.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
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1)Negligible fiscal impact to the University of California (UC)
and the California State University (CSU), as both segments
already comply with the reporting requirements of this bill.
2)Minor absorbable costs for CCC districts to provide the required
information to students when certifying private student loans;
currently 22 CCC districts, involving 29 campuses, certify about
700 students for private loans.
COMMENTS: Average graduate loan debt data. This bill would
require public, private, independent postsecondary education
institutions, except CCCs, to disclose average debt of graduates
by degree level. California's public and most nonprofit, private
four-year institutions disclose this data currently to one or more
of several organizations (United States News & World Report,
Peterson's and College Board) that conducts annual surveys of
colleges that include questions about student loan debt. To make
the annual surveys easier for colleges, the organizations use
questions from a shared survey instrument called the Common Data
Set (CDS). The Institute for College Access and Success (TICAS),
in creating the annual Project on Student Debt, licenses and uses
the data from one of the surveying organizations. According to
TICAS, one limitation of the CDS is that very few for-profit
colleges report debt data through CDS and national data show that
borrowing levels at for-profit colleges are, on average, higher
than borrowing at other types of colleges. The data disclosure
requirements of this bill are based on the CDS.
Other loan reporting requirements. In addition to CDS, there are
two other notable formats in which institutions report student
loan information. The Integrated Postsecondary Education Data
System (IPEDS) is required for all institutions and includes
annual, but not cumulative, student loan debt information.
Federal "gainful employment" (GE) rules will require most
for-profit programs, and certificate programs at non-profit and
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public institutions, to provide program-level median graduate loan
debt data. The GE rules are scheduled to take effect July 1,
2015; pending the outcome of ongoing industry litigation. Some
for-profit institutions have expressed concern about the reporting
requirements contained in this bill, arguing that these
requirements are duplicative/conflicting with GE reporting
requirements. According to the author, in order for a student to
compare loan debt data across higher education institutions, all
institutions must disclose the same data. This bill follows the
CDS average graduate loan debt for several reasons, including that
this formula is based on the cost of a student to start and
complete at the institution (whereas GE median graduate debt
figures may be affected by outliers of students who transfer in a
significant number of educational credits) and that most
California institutions are already voluntarily reporting this
data, thereby reducing the cost of compliance with the
requirements of this bill.
Private loans vs. federal loans. Private loans typically have
variable interest rates and are not eligible for deferment,
income-based repayment, or loan forgiveness that is available with
federal loans. Private student loans are also much harder than
other forms of consumer debt to discharge in bankruptcy court.
Generally, private loans are recommended as a last resort for
students. Data shows, however, that many students who obtain
private loans have unused federal loan moneys available.
According to TICAS, in 2011-12, 47% of private loan borrowers
borrowed less than they could have under the federal Stafford loan
program. This bill would require institutions to notify students,
prior to certifying a private student loan, of the student's
eligibility for federal student loan moneys, and, if the
institution does not participate in federal loans, to notify
students that the student may be eligible for federal loans at a
participating institution. The institution would be required to
provide the student with information regarding the Cal Grants and
Federal Student Aid Web sites.
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Analysis Prepared by:
Laura Metune / HIGHER ED. / (916) 319-3960 FN:
0000689