SB 565, as introduced, McGuire. College loans: rates.
Existing law authorizes educational institutions of collegiate grade to make loans or forbearances to finance student educational expenses including tuition, room and board, and other costs of attendance or living at the institution, at rates not to exceed the higher of 10% per annum or 5% per annum plus the rate established by the Federal Reserve Bank of San Francisco, as provided.
This bill would change those rates to 7.5% per annum or 3% per annum plus the rate established by the Federal Reserve Bank of San Francisco, as provided. The bill would also update an obsolete reference.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 28000 of the Financial Code is amended
2to read:
(a) Pursuant to the authority contained in Section 1 of
4Article XV of the State Constitution, and subject to subdivision
5(b), educational institutions of collegiate grade are authorized to
6make loans or forbearances to finance student educational expenses
7including tuition, room, and board, and other costs of attendance
8or living at the institution, at rates not to exceed the higher of:
P2 1(1) begin deleteTen percent per annum.end deletebegin insertSeven and one-half percent per
2annum.end insert
3(2) begin deleteFive
end delete
4the Federal Reserve Bank of San Francisco on advances to member
5banks under Sections 13 and 13(a) of the Federal Reserve Act as
6now in effect or hereafter from time to time amended or, if there
7is no such single determinable rate of advances, the closest
8counterpart of this rate as shall be designated by the Commissioner
9ofbegin delete Financial Institutionsend deletebegin insert Business Oversightend insert of the State of
10California unless some other person or agency is delegated such
11authority by the Legislature. The date of determining the applicable
12rate established by the Federal Reserve bank shall be the 25th day
13of the month preceding the earlier of the date of execution of the
14contract
to make the loan or forbearance, or the date of making
15the loan or forbearance.
16(b) Where the institution has obtained a loan specifically in
17order to make loans to finance student educational expenses, the
18rate of interest shall not exceed the lower of:
19(1) The rate determined pursuant to subdivision (a).
20(2) One percentage point in excess of the interest rate imposed
21upon the loan made to the institution, as of the date of execution
22of the contract to make the student loan to such extent the foregoing
23creates and authorizes a class of exempt persons pursuant to Section
241 of Article XV of the Constitution.
25(c) Solely with respect to loans or forbearances made by
26educational institutions of collegiate grade to their faculty or staff,
27secured by real
property consisting of a residential dwelling, these
28institutions are hereby declared to be an exempt class of persons
29as this term is used in Section 1 of Article XV of the Constitution.
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