BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1417 (Galgiani) - Public postsecondary education: student
loan payment program
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|Version: March 29, 2016 |Policy Vote: ED. 6 - 1 |
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|Urgency: No |Mandate: No |
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|Hearing Date: April 18, 2016 |Consultant: Jillian Kissee |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: This bill requires the California State University
(CSU) Trustees, and requests the University of California (UC)
Regents, to develop and implement a program to provide an
incentive, defined as $2,500 towards student loan debt, to
qualified students who complete an undergraduate degree within
four years.
Fiscal
Impact: Combined costs to the UC and the CSU to implement this bill
estimated to be in the mid tens of millions. Costs would
fluctuate depending upon each segment's graduation rate and of
those, students who incur debt. The CSU also indicates
administrative costs in the hundreds of thousands associated
with making the payments towards students' outstanding loan debt
and related transactions with the loan servicer. (General Fund)
SB 1417 (Galgiani) Page 1 of
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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. 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.
2) Unsubsidized Stafford Loans: Not based on financial need;
these loans generally cover the difference between the
subsidized Stafford Loan and the total cost of attending
college.
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.
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.
Other loan programs offered at the state level are related to
assisting with debt for a student going into the teaching
profession. Awards for these programs are currently suspended.
Proposed Law:
This bill requires the CSU Trustees, and requests the UC
Regents, to develop and implement a program to provide an
incentive to qualified students who complete an undergraduate
degree within four years. The bill defines "incentive" as a
one-time $2,500 payment towards the eligible student's
outstanding loan debt. A qualified student is defined as a
California resident or certain students eligible for resident
tuition under the provisions of AB 540 (Chapter 814, Statutes of
2001).
SB 1417 (Galgiani) Page 2 of
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Related
Legislation: SB 15 (Block), among other things, establishes a
Graduation Incentive Grant (GIG) program for CSU undergraduate
students to incentivize timely degree completion. The GIG would
provide grant awards of up to $4,500 for students who meet
annual unit completion requirements as they move to complete
their degree programs within four years. SB 15 is pending in
the Assembly Higher Education Committee.
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. SB 1450 is pending in
the Senate Education Committee.
Staff
Comments: The UC estimates costs to implement this bill of about $29
million and the CSU estimates costs of about $37 million. The
UC estimate assumes a four year graduation rate of 62 percent
and of those students, 55 percent graduating with loan debt.
For the CSU, these assumptions are 19 percent and 50 percent,
respectively.
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