BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 721
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|Author: |Medina |
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|Version: |June 24, 2015 Hearing |
| |Date: July 1, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant: |Olgalilia Ramirez |
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Subject: Student financial aid: private student loans
SUMMARY
This bill requires public, private or independent postsecondary
education institutions and requests the California Community
Colleges (CCC) to disclose data on student loan debt and to
disclose specified information to students seeking private
student loans.
BACKGROUND
Existing law requires a public, private or independent
postsecondary educational institution, except the CCC, to make
specified disclosures related to private student loans in
financial material and applications provided or made available
by the institution for the purposes of distinguishing private
loans from federal loans in individual financial aid awards.
(Education Code § 69800)
ANALYSIS
This bill:
1)Requires public, private or independent postsecondary educational
institutions and requests the CCC to make available to the
public upon request and in a prominent location on its website
the following information concerning graduates and student
loan debt.
a) The number of students who started as first-time
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postsecondary students who started and received a
certificate, associates' degree, or bachelor's degree
during most recently completed federal award year of July 1
to June 30.
b) For each type of credential in (a), the number
and percentage of students in (a) who borrowed while
enrolled through any student loan program and total
principal borrowed in each of those loan programs.
c) For each type of credential in (a), the number
and percentage of students in (a) who borrowed while
enrolled through any federal student loan program and total
principle borrowed in each of the federal student loan
programs.
d) The average principal borrowed by the students
counted in (b) and in (c) by each credential type, as
specified.
2)Requires all private, independent, and public institutions, prior
to certifying a borrower's eligibility for a private student
loan to inform the student of all unused state and federal
financial assistance.
3)Requires an institution that does not participate in federal
student loan programs to inform the students 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.
STAFF COMMENTS
1)Need for the bill. According to the author, students and their
families need clear, timely, accurate and comparable
information on student financial aid to make the best
financial and educational decisions about which postsecondary
educational institution to attend. This bill seeks to expand
financial aid information available to the student and their
families by requiring the postsecondary education institution
to annually report on cumulative student loan debt and inform
students of their unused state and federal student loan
options.
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2)Existing online tools. Several federal online tools exist to
assist prospective college students in making informed
decisions about their postsecondary education options. These
include the following:
a) The College Scorecards. In February 2013, the U.S.
Department of Education's (USDOE) College Affordability and
Transparency Center released an interactive college
scorecard, intended to provide information on a college's
affordability and value to enable parents and prospective
students to make informed decisions about which college to
attend. According to the USDOE, the Scorecard highlights
key indicators about the cost and value of institutions
across the country to help students choose a school that is
well-suited to meet their needs, priced affordably, and is
consistent with their educational and career goals. Each
Scorecard includes five key pieces of data about a college:
costs, graduation rate, loan default rate, average amount
borrowed, and employment. USDOE reports that these data
will be updated periodically, and that they plan to publish
information on average earnings in the coming year.
b) Net Price Calculators. Federal law requires any college
that participates in Title IV financial aid programs to
post on-line "net price calculators" to help parents and
students determine the potential cost of different colleges
before they apply. This calculator allows students to
calculate an estimated net price of attendance at an
institution (defined as cost of attendance minus grant and
scholarship aid) based on what similar students paid in a
previous year. The net price calculator is required for
all Title IV institutions that enroll full-time, first-time
degree- or certificate seeking undergraduate students. The
USDOE College Affordability and Transparency Center
provides a link to the net-price calculator for individual
colleges nationally.
c) Financial Aid Shopping Sheet. In 2012, the USDOE partnered
with the Consumer Financial Protection Bureau to develop
the Financial Aid Shopping Sheet to promote transparency in
student financial disclosures. The Shopping Sheet is
designed to help students better understand the amount of
grants and scholarships they would receive from a given
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institution, and the amount of loans an institution
recommends a student take out to cover out-of-pocket costs.
The Shopping Sheet is not mandatory, but the federal
government did ask institutions to voluntarily adopt the
Shopping Sheet beginning with the 2013-14 academic year.
To date, about 3,000 institutions nationally have agreed to
use the Shopping Sheet template, and many California
public, private and independent institutions including all
University of California (UC) and most California State
University (CSU) campuses are listed among those
institutions who have adopted the tool.
d) The College Navigator: The National Center for Higher
Education Management Statistics (located within the U.S.
Department of Education and the Institute of Education
Sciences) is the primary federal entity for collecting and
analyzing data related to education in the U.S. and other
nations. College Navigator provides comprehensive
information to compare colleges on criteria that includes
costs, majors offered, size of school, campus safety, and
graduation rates.
Typically, intuitions report student loan information through
the Integrated Postsecondary Education Data System, Common
Data Set, and/or U.S. Department of Education and are made
available to students and their families via the tools
mentioned above. This bill requires institutions to annually
report cumulative debt levels at the end of graduation for
each credential and loan program rather than reporting figures
for annual borrowing.
3)Private student loans. Private loans are not subsidized or
guaranteed by the federal government, have higher, variable
market-based interest rates and charge guarantee fees, making
them more expensive and less favorable for borrowers than
federal loan options. This bill seeks to minimize private
student loan borrowing by ensuring students and families are
informed about their state and federal aid eligibility before
an institution can certify students' request for private
loans.
4)Related TICAS study. According to a recent report, Student Debt
and the Class of 2013, issued by the Institute for College
Access and Success (TICAS), statewide, 55 percent of college
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seniors who graduated in 2013 had student loan debt, with an
average debt of $20,340 per borrower. Nationally, private
loans are most prevalent at for-profit colleges, with 41
percent of their seniors graduating with private loans in
2012. TICAS additionally notes that 47 percent of private
loan borrowers borrow less than they could in federal student
loans. The report highlighted high debt and low debt states,
and California was noted as being among the low debt states.
Among its recommendations, TICAS advised the collection of
better college level data on student borrowing at the point of
completion including private loans for which little data is
reported and additionally supported the improvement and
promotion of federal tools and processes that provide more and
better consumer information throughout the college process.
The report specifically noted tools such as the College
Scorecard, the Net Price Calculator, and the Shopping Sheet.
5)Prior legislation.
AB 330 (Chau, 2014) would have required the California Student
Aid Commission and Bureau for Private Postsecondary Education
to post additional links on their Internet Web sites to
provide information such as net cost, financial aid, and
student loan debt that can be used by students and families to
evaluate their college choices. AB 330 died in the Senate
inactive file.
SUPPORT
California Competes
California Faculty Association
California Federation of Teachers
East Bay Community Law Center
National Association of Social Workers
Public Advocates
The Institute for College Access and Success
OPPOSITION
None received.
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