BILL ANALYSIS Ó
AB 2377
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Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Das Williams, Chair
AB 2377 (Pérez) - As Introduced: February 21, 2014
SUBJECT : Student loans: California Student Loan Refinancing
Program.
SUMMARY : Establishes the California Student Loan Refinancing
Program to provide loan refinancing options to students who meet
specified requirements. Specifically, this bill :
1)Finds and declares, among other provisions, California
students face high levels of student loan debt; in the 1980's
the California State Treasurer administered a student loan
program that provided borrowers access to low-interest loans;
in 1995 the California Educational Facilities Authority (CEFA)
took over administration of the loan program; and, the CEFA
has authority for issuing bonds for, among other things, the
refinancing of existing debt.
2)Establishes the California Student Loan Refinancing Program
(Program), to be administered by the California State
Treasurer's office, with guidance from CEFA to help eligible
students and graduates refinance loan debt at favorable rates
and to create a revolving fund so that additional refinancing
may occur to help more students and graduates.
3)Provides that the Program may use CEFA's authority to issue
bonds pursuant to existing law for purposes of providing
student loan refinancing options that include loan
consolidation, interest rate buy-down, debt restructuring,
establishing a loan loss reserve account, and alignment with
various federal student loan alternative repayment programs.
4)Establishes Program eligibility requirements, as follows:
a) Residency in California;
b) Completion of a bachelor's degree;
c) Employment in a public service program or by a nonprofit
organization;
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d) Ability to repay, as determined by CEFA;
e) Any additional qualification imposed by the Treasurer.
5)Authorizes the Board of CEFA to develop and adopt regulations
and procedures for the implementation of this article,
including program administration requirements and provisions
to ensure solvency of the financing.
EXISTING LAW establishes CEFA, housed in the State Treasurer's
Office, for the purpose of issuing revenue bonds to (1) assist
postsecondary education institutions in the expansion and
construction of educational facilities; (2) provide public and
private institutions with additional means to assist students in
financing cost of attendance; (3) to develop housing on or near
institutions; and, to make grants to private institutions to
assist students in preparing for higher education. CEFA is
authorized to issue tax-exempt bonds, and therefore may provide
more favorable financing than might otherwise be obtainable.
The law specifically provides that bonds issued by CEFA shall
not be a debt, liability, or claim on the faith and credit or
the taxing power of the State of California or any of its
political subdivisions. The full faith and credit of the
participating institution is normally pledged to the payment of
the bonds. The CEFA consists of 1) the Director of Finance, 2)
the Controller, 3) the Treasurer, who serves as chairperson, and
4) two members appointed by the Governor for four year terms, as
specified.
FISCAL EFFECT : Unknown
COMMENTS : Background . In the 1980s, the California State
Treasurer administered the California Student Loan Authority
(CSLA); a student loan program to purchase federally reinsured
educational loans from eligible lending institutions by issuing
tax-exempt revenue bonds, thereby expanding student access to
such low-cost federally reinsured loans. In 1995, the
California Student Loan Authority merged with CEFA, the
functions were expanded under CEFA to include direct student
lending from proceeds of tax-exempt revenue bonds issued by
CEFA. After the CSLA & CEFA merger, CEFA developed two fixed
rate student loan programs for higher education:
1) Cal Loan Bond Program (needs-based)
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2) Cal-Edge Bond Program (credit-based)
According to information provided by the Treasurer's Office, the
minimum loan amount was $2,500 and the maximum loan amount was
$50,000 (undergrad) and $75,000 (graduate). Most loans were
between $5,000 - $10,000. Some individuals took out multiple
loans. The last loan made was about 10 years ago.
Purpose of this bill . According to the author, "While the
Legislature has continued to fight for college affordability on
the front end, very little has been done to assist the students
that have already incurred loan debt. College graduates must
begin the process of servicing their student loan debt very
shortly after they graduate; however, depending on the type of
loans they have, their options for reducing debt repayment or
creating other repayment pathways tied to their employment
circumstances are limited." The author notes that student loan
refinancing can have a huge impact on a borrower, potentially
saving thousands in interest over the life of the loan(s). This
bill provides CEFA authority for loan consolidation, interest
rate buy-down, debt restructuring, establishing a loan loss
reserve account, and alignment with various federal student loan
alternative repayment programs.
Arguments in support . Several community college districts
support this bill, arguing "Student loan debt is a drag on our
economy, preventing graduates from entering graduate schools,
achieving financial independence, buying property, starting
businesses, or otherwise reinvesting in the state." Supporters
argue that this bill "would allow individuals that have borne
the cost of higher education the ability to refinance existing
loan debt, thus helping alleviate them from this significant
financial burden."
REGISTERED SUPPORT / OPPOSITION :
Support
California Communities United Institute
California Teachers Association
Los Angeles Community College District
Los Rios Community College District
South Orange County Community College District
Yosemite Community College District
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Opposition
None on file.
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960