BILL ANALYSIS Ó AB 721 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 721 (Medina) As Amended July 8, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 78-0 |(June 2, 2015) |SENATE: |40-0 | (August 24, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: HIGHER ED. 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 certifying a private student loan, to provide the student information concerning all state and federal financial aid, including federal student loan moneys, available to that student. AB 721 Page 2 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 Web sites. The Senate amendments require institutions to make average graduate loan debt information available within 12 months of a completed academic year, and clarify that average graduate loan debt information shall be provided for each type of credential offered by the institution. 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 Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. 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 AB 721 Page 3 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 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. Generally, private loans are recommended as a last resort for students, once all federal loans have been exhausted. 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 AB 721 Page 4 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. Analysis Prepared by: Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0001270