BILL ANALYSIS �
SB 1289
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1289 (Corbett) - As Amended: June 26, 2012
Policy Committee: Higher
EducationVote:6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires private or independent postsecondary
educational institutions, the California State University (CSU),
and the University of California (UC) if the UC Regents concur,
to provide specified information to students regarding federal
and private student loans. Specifically, this bill:
1)Requires each institution to provide the specified information
in all printed and online financial aid materials distributed
by the institution to applicants and students and also with
private loan application made available by the institution.
2)Allows the institutions to continue using financial materials
in print before January 1, 2013 if an insert containing the
required information is included.
3)Requires each institution, as part of a financial aid award
package including private loans, to provide specified
information regarding those loans.
4)Requires any institution providing a private loan lenders list
to provide general information about loans available through
the lender and the basis for each lender's inclusion on the
list.
5)Requests the California Community Colleges to comply with all
of the above.
FISCAL EFFECT
Costs for CSU and UC to update financial aid materials and
SB 1289
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comply with the bill's notice requirements will be minor and
absorbable.
COMMENTS
1)Background . The cost of higher education has unquestionably
increased over the last decade, forcing students to take out
increasingly high levels of debt to finance their education.
Students have two options when looking to take out loans -
federal loans and private loans. Federal loans, like Stafford
Direct Loans, have fixed rates with set caps, limits on fees,
and flexible repayment options. While federal loans make up
the majority of student loan borrowing, there are limits to
how much money students can borrow under federal loan
programs; the remaining unmet needs to cover total educational
expenses are often financed through private loans.
According to the Institute on College Access and Success
(TICAS), private student loans are one of the riskiest ways to
finance a college education. According to TICAS, like credit
cards, private student loans usually have variable interest
rates that are higher for those who can least afford them - as
high as 18% in 2008. But unlike credit card debt, these loans
are nearly impossible to discharge in bankruptcy. Private
student loan borrowers are also not eligible for the important
deferment, income-based repayment, or loan forgiveness options
that come with federal student loans.
2)Purpose . According to the author, consumers, especially
students without parental support and parents whose first
child is headed to college, lack readily accessible and
understandable information about the cost of a college
education. They also lack unbiased, expert advice on the best
way to borrow money to finance their education.
3)Opposition . The California Association of Private
Postsecondary Schools argues that similar disclosures are
already required under the federal Truth in Lending Act and
under U.S. Department of Education financing aid regulations.
4)Prior Legislation . SB 1355 (Corbett) of 2008, a substantially
similar bill, was vetoed by Governor Schwarzenegger, who
argued that the federal disclosure requirements are
sufficient.
SB 1289
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Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081