BILL NUMBER: SB 565	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator McGuire

                        FEBRUARY 26, 2015

   An act to amend Section 28000 of the Financial Code, relating to
college loans.


	LEGISLATIVE COUNSEL'S DIGEST


   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 1.  Section 28000 of the Financial Code is amended to read:

   28000.  (a) Pursuant to the authority contained in Section 1 of
Article XV of the State Constitution, and subject to subdivision (b),
educational institutions of collegiate grade are authorized 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:
   (1)  Ten percent per annum.   Seven and
one-half percent per annum. 
   (2)  Five   Three  percent per annum
plus the rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Sections 13 and 13(a) of
the Federal Reserve Act as now in effect or hereafter from time to
time amended or, if there is no such single determinable rate of
advances, the closest counterpart of this rate as shall be designated
by the Commissioner of  Financial Institutions 
 Business Oversight  of the State of California unless some
other person or agency is delegated such authority by the
Legislature. The date of determining the applicable rate established
by the Federal Reserve bank shall be the 25th day of the month
preceding the earlier of the date of execution of the contract to
make the loan or forbearance, or the date of making the loan or
forbearance.
   (b) Where the institution has obtained a loan specifically in
order to make loans to finance student educational expenses, the rate
of interest shall not exceed the lower of:
   (1) The rate determined pursuant to subdivision (a).
   (2) One percentage point in excess of the interest rate imposed
upon the loan made to the institution, as of the date of execution of
the contract to make the student loan to such extent the foregoing
creates and authorizes a class of exempt persons pursuant to Section
1 of Article XV of the Constitution.
   (c) Solely with respect to loans or forbearances made by
educational institutions of collegiate grade to their faculty or
staff, secured by real property consisting of a residential dwelling,
these institutions are hereby declared to be an exempt class of
persons as this term is used in Section 1 of Article XV of the
Constitution.