BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: SB 1417
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|Author: |Galgiani |
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|Version: |March 29, 2016 Hearing |
| |Date: April 6, 2016 |
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|Urgency: |No | Fiscal: |Yes |
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|Consultant:|Kathleen Chavira |
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Subject: Public postsecondary education: student loan payment
program
SUMMARY
This bill requires the California State University (CSU), and
requests the University of California (UC), to develop and
implement a $2500 loan forgiveness grant for students who are
California residents, and for students eligible for resident
tuition under the provisions of AB 540, if they complete their
degree within four years.
BACKGROUND
Existing federal law provides for student loans through the
William D. Ford Federal Direct Loan Program, administered by the
Federal Student Aid Office within the United States Department
of Education (USDE). These include:
1) Subsidized Stafford Loans: These are needs-based loans
that cover the difference between a student's resources and
the cost of attending a college or university, the amount
of loan is dependent on the level of need, dependent
status, and year in college. The federal government pays
the interest while the student is attending the college or
university and subsidizes the interest throughout the life
of the loan.
2) Unsubsidized Stafford Loans: Not based on financial need,
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these loans generally cover the difference between the
subsidized Stafford Loan and the total cost of attending
college. Loans are made by private lending institutions
and repayment is guaranteed by the federal government. The
federal government sets the interest rates and fees.
3) PLUS (Parent Loans for Undergraduate Students) are
available to creditworthy parents of dependent students.
These are not needs-based and are federally guaranteed. In
addition, these types of loans have been expanded for
graduate or professional degree students. The borrower is
responsible for paying the interest on PLUS loans during
all periods, starting from the date the loan is first
disbursed.
Existing federal law also provides for the Federal Perkins Loan
Program. The Federal Perkins Loan Program is a school-based
loan program for undergraduates and graduate students with
exceptional financial need. Under this program, the school is
the lender.
Existing state law establishes the Assumption Program of Loans
for Education (APLE) program, administered by the California
Student Aid Commission, to provide loan assumption benefits to
credentialed teachers. APLE program "forgives" up to $11,000 of
college loan debt for a person who teaches for four consecutive
years in a qualifying school or subject area (paying $2,000 for
the first year of teaching service and $3,000 for each of the
next three years of teaching). Qualifying schools include those
with high proportions of low-income youth or emergency permit
teachers and those located in rural areas. The subject area
shortages are annually determined by the Superintendent of
Public Instruction and may vary from year to year; math, science
and special education have been listed consistently for many
years. (Education Code § 69612)
Additional loan forgiveness of $1,000 per year for up to four
years is provided for those who teach math, science or special
education (for a total of $15,000) and an additional $1,000 is
provided for those who teach math, science or special education
in schools with an academic performance index (API) of 1 or 2
(for a total of $19,000).
(EC § 69613.8)
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ANALYSIS
This bill:
1) Requires the Trustees of the California State University
(CSU) to develop and implement a program to provide a
$2,500 payment toward a qualified student's outstanding
student loan debt if the student completes an undergraduate
degree within four years.
2) Requests the Regents of the University of California (UC)
to develop and implement a program to provide a $2,500
payment toward a qualified student's outstanding student
loan debt if the student completes an undergraduate degree
within four years.
3) Defines a qualified student as one who is a California
resident or a student who is eligible for resident tuition
under the provisions of AB 540.
STAFF COMMENTS
1) Need for the bill. According to the author, no financial
aid program currently exists that would provide qualified
students with an incentive to complete an undergraduate
degree within 4 years. The author contends that this bill
will provide much needed debt relief to undergraduates who
complete their degree programs within four years, as well
as expand access to courses for entering freshmen as
overcrowding is reduced.
2) Related TICAS Report. According to The Institute for
College Access and Success (TICAS) and its Project on
Student Debt, 69% of seniors who graduated from public and
nonprofit colleges in 2014 had student loan debt, with an
average nationally of $28,950 per borrower. TICAS reports
that the share of graduates with debt rose modestly over
the last decade (from 65% to 69%). TICAS also reports that
average debt in California is $21,382 at public and private
non-profit colleges and that about 55% of students graduate
with debt, ranking California 46th and 38th nationally,
respectively.
3) Student loans at the University of California (UC) and the
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California State University (CSU). According to the UC,
during 2013-14, 45% of UC undergraduates graduated with no
debt at all, and for those who did borrow, the average loan
debt was about $20,600. The CSU reports that 51% of
baccalaureate recipients graduated with zero education loan
debt, and the remaining 49% had an average loan debt of
$14,388.
According to the CSU, in 2014-15, 80% of all CSU students
(367,500) received over $4 billion in total financial
assistance and about 75% of undergraduate financial aid
recipients had their tuition fees fully covered by grants
or waivers.
Both the UC and the CSU report a loan debt lower than the
California average of $21,382, and below the national
average of $28,950.
4) Non-need based financial assistance. This bill establishes
a financial aid award, post-graduation, based upon a
student's completion of a degree program within four years.
The only criteria to be met are that the student completed
a degree in four years and met California residency
requirements at the time he/she was a student.
Traditionally, this committee has supported need-based
financial aid. As drafted, this bill would extend a $2500
loan payment award to all qualifying student loan
recipients without any determination of financial need.
5) Funding? This bill requires the development and
implementation of a loan payment award but makes no clear
provision as to the source of funds for this purpose. Are
the UC and CSU expected to redirect general fund monies or
student tuition funds paid by other students or the state
through the Cal Grant program? Would redirection of funds
at the campus level come at the expense of other programs
to provide campus based institutional financial aid awards
to students with potentially greater financial need? Is
there an expectation that the Legislature and Governor
would appropriate funding in the Budget for this purpose?
If the state does allocate additional funding for student
financial assistance, should these monies be used to pay
for federal loan programs or to expand California's grant
based financial aid programs?
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6) Existing loan forgiveness programs. The United States
Department of Education (USDOE) provides information on a
variety of student loan forgiveness programs. These
include the following:
a) The Public Service Loan Forgiveness (PSLF)
Program forgives the remaining balance on Direct Loans
after a student makes 120 qualifying monthly payments
under a qualifying repayment plan while working
full-time for a qualifying employer. A qualifying
employer can include Government organizations at any
level (federal, state, local, or tribal), tax-exempt
Section 501(c)(3) not-for-profit organizations and
other types of not-for-profit organizations that
provide certain types of qualifying public services.
Serving in a full-time AmeriCorps or Peace Corps
position also counts as qualifying employment for the
PSLF Program. The USDOE additionally notes that some
or part of a federal student loan can be forgiven for
service in the U.S. armed forces, as a nurse or
medical technician, law enforcement or corrections
officer, Head Start worker, child or family services
worker, or a professional provider of early
intervention services.
b) Teacher Loan Forgiveness. A loan recipient can
qualify for as much as $17,500 of subsidized or
unsubsidized loan forgiveness for teaching full-time
in a low-income elementary or secondary school or
educational service agency for five consecutive years.
In addition, up to 100% of a Federal Perkins Loan may
be cancelled for full-time service in a public or
nonprofit elementary or secondary school system as a
teacher in a school serving students from low-income
families, or as a special education teacher, or
teacher in the fields of mathematics, science, foreign
languages, or bilingual education, or in any other
field of expertise determined by a state education
agency to have a shortage of qualified teachers in
that state.
The Committee may wish to consider:
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In light of existing federal loan forgiveness
programs, would a $2500 award provide sufficient
incentive to complete a program in four years?
Should state funds be used to pay for loans
that might otherwise be forgiven by the federal
government?
1) State loan forgiveness program. As noted in the background
of this analysis, the Legislature has previously authorized
the Assumption Program of Loans for Education (APLE)
program to provide up to $19,000 in loan forgiveness to
teachers. Current law links these awards to funding
provided in the annual Budget Act. Beginning in 2012-13,
funding for existing loan forgiveness programs has been
vetoed or otherwise omitted from the annual Budget Act.
In addition, this Committee has heard and passed several
bills attempting to modify, expand, and fund the APLE
program, including the following:
a) SB 62 (Pavley, 2015) this bill makes various
programmatic changes to the APLE program and
reestablishes the Governor's Teaching Fellowship
Program. SB 62 is currently awaiting action in the
Assembly Appropriations Committee.
b) SB 1264 (Pavley, 2014) proposed to establish the
Educator Excellence Program, an assumption loan
program for up to 6,500 teachers who satisfied
specified criteria. The bill was heard and passed by
this Committee on April 30, 2014, but failed passage
in the Senate Appropriations Committee.
c) SB 212 (Pavley, 2013) appropriated $5 million,
from an unspecified fund source, for 7,200 new
warrants for the assumption of school loans for
teachers in identified areas of a shortage of
teachers. The bill was heard and passed by this
Committee on May 1, 2013, but failed passage in the
Senate Appropriations Committee.
2) Similar Legislation. This bill is intended to incentive
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completion of a degree program within four years. Similar
legislation to improve completion:
a) SB 15 (Block), among other things, establishes a
Graduation Incentive Grant (GIG) program for
California State University (CSU) undergraduate
students to incentivize timely degree completion. The
GIG would provide up to $4,500 in grant award for
students who meet annual unit completion requirements
as they move to complete their degree programs within
four years. SB 15 was heard and unanimously passed by
this Committee in May 2015, and is currently awaiting
action in the Assembly Higher Education Committee.
b) SB 1450 (Glazer) requires the CSU trustees and
the California Community College Board of Governors to
establish and authorize campuses to develop a program
to grant students who meet specified criteria priority
enrollment, enhanced academic advising, tuition
freezes and tuition waivers, to ensure their
completion of an associate degree within two years and
a baccalaureate degree within four years.
SUPPORT
None received.
OPPOSITION
None received.
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