Amended in Senate April 22, 2014

Amended in Senate March 24, 2014

Senate Bill No. 1210

Introduced by Senator Lara

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(Coauthors: Senators Correa, De León, and Steinberg)

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February 20, 2014

An act to add Article 23 (commencing with Section 70030) to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, relating to postsecondary education.

LEGISLATIVE COUNSEL’S DIGEST

SB 1210, as amended, Lara. Postsecondary education: California begin delete Student Education Access end delete begin insert DREAM end insert Loan Program.

Existing law establishes the University of California, under the administration of the Regents of the University of California, and the California State University, under the administration of the Trustees of the California State University, as 2 of the segments of public postsecondary education in this state. Existing law authorizes the regents and the trustees to require that mandatory systemwide fees and tuition, among other fees, be paid by students at campuses of the University of California and the California State University, respectively.

This bill would establish the California begin delete Education Access end delete begin insert DREAM end insert Loan Program. The bill would provide that, commencing with the 2015-16 academic year, a student attending a participating campus of the University of California or California State University may receive a loan, referred to as a begin delete State Education Access Loan (SEAL), end delete begin insert DREAM loan, end insert through the program if the student satisfies specified requirements, including a requirement that the student be exempt from paying nonresident tuition or meet equivalent requirements adopted by the regents. The bill would require the Student Aid Commission, in collaboration with the participating campus, to certify that the student satisfies these requirements. The bill would require the student to affirm in writing that he or she satisfies one of these requirements, and would require the student to authorize the commission to access any information pertinent to certify that the student satisfies these requirements. The bill would require a participating campus to determine the amount of the loan offered to an individual student by the campus, subject to enumerated specifications.

The bill would state the intent of the Legislature that funds shall be appropriated in the annual Budget Act each fiscal year, commencing with the 2015-16 fiscal year, to participating campuses based upon the number of eligible students attending each respective campus who submitted a specified financial aid application during the prior academic year. The bill would require a participating campus to deposit these funds in a begin delete SEAL end delete begin insert DREAM end insert revolving fund established by each campus, subject to specified exceptions. The bill would require each participating campus to contribute its discretionary funds into its begin delete SEAL end delete begin insert DREAM end insert revolving fund so that the begin delete campus’s end delete begin insert campus end insert begin insert ’ end insert contribution equals or exceeds 25% of all funds in the campus’s begin delete SEAL end delete begin insert DREAM end insert revolving fund at the start of each academic year before begin delete SEAL end delete begin insert DREAM end insert loans are awarded for that academic year. The bill would require the California State University and the University of California to annually report to the Legislature as part of their respective annual financial aid reports the dollar amount of each begin delete SEAL end delete begin insert DREAM end insert loan awarded and number of students for whom a begin delete SEAL end delete begin insert DREAM end insert loan was awarded that academic year begin insert , and require each participating campus to annually report the total amount of funding in the institution’s DREAM revolving fund, the annual amount contributed by the state, and the annual amount contributed by the institution to the institution’s DREAM revolving fund, and the annual administrative costs of the DREAM Program at the institution end insert .

The bill would require a participating campus to determine a student’s eligibility for a begin delete SEAL end delete begin insert DREAM end insert loan, award begin delete SEAL end delete begin insert DREAM end insert loans to students, and establish mechanisms for recording the annual amount of the begin delete SEAL end delete begin insert DREAM end insert loan borrowed by each recipient, and the aggregate amount of begin delete SEAL end delete begin insert DREAM end insert loans borrowed by each recipient.

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The bill would require the trustees and request the regents to adopt regulations providing for the withholding of institutional services from current and former students who have been notified in writing that they are in default on DREAM loans.

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The bill would provide that each participating campus is entitled to an administrative cost allowance to equal a specified amount for an award year if the campus advances funds through the begin delete SEAL program end delete begin insert DREAM Program end insert to students that academic year.

The bill would provide that if a state court finds that a specified provision of this program or similar provision adopted by the Regents of the University of California is unlawful, the court may order, as equitable relief, that the participating campus subject to the lawsuit terminate all loans awarded pursuant to that provision without money damages, loans, or other retroactive relief being awarded, and that the California State University and the University of California are immune from any imposition of money damages, loans, or other retroactive relief for actions taken under this program.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

This act shall be known, and may be cited, as the
California begin delete State Education Access end delete begin insert DREAM end insert Loan Act.

SEC. 2.  

The Legislature finds and declares all of the following:

(a) California has expanded access to higher education for
thousands of hard-working, high-achieving students who attended
and graduated from a California high school but were ineligible
to pay in-state tuition and fees to attend a campus of the California
State University and the University of California, including many
students who were denied access to state financial aid or financial
aid offered at these campuses.

(b) Since 2002, students have been exempt from paying
nonresident tuition and fees at the California Community Colleges,
the California State University, and the University of California
pursuant to Section 68130.5. Commencing in 2011, these students
were eligible for state financial aid or financial aid offered by these
public institutions. Nevertheless, many of these students remain
ineligible for federal student aid for reasons beyond their control.
Lack of access to federal student loans presents a substantial barrier
for these students to obtain a baccalaureate degree from the
California State University or the University of California.

(c) The California begin delete State Education Access end delete begin insert DREAM end insert Loan Act
begin delete (California SEAL Act) end delete addresses this barrier by providing access
to additional state aid so students may take full advantage of the
educational opportunities offered at the California State University
and the University of California.

(d) The California begin delete SEAL end delete begin insert DREAM Loan end insert Act represents an
important step in the state’s ongoing efforts to provide access to
all academically qualified students pursuing the dream of a college
or university degree. Through the enactment of this measure,
California will keep faith with the state’s longstanding promise to
make higher education accessible and affordable to every qualified
student.

SEC. 3.  

Article 23 (commencing with Section 70030) is added
to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education
Code, to read:

 

Article 23.  California begin delete Student Education Access end delete begin insert DREAM end insert Loan
Program

 

70030.  

This article shall be known, and may be cited, as the
California begin delete Student Education Access end delete begin insert DREAM end insert Loan Program.

70031.  

The California begin delete State Education Access end delete begin insert DREAM end insert Loan
Program, which may also be referred to as the begin delete SEAL program end delete
begin insert DREAM Program end insert , is hereby established.

70032.  

As used in this article, the following terms have the
following meanings:

(a) An “academic year” is July 1 to June 30, inclusive. The
begin delete starting end delete begin insert start end insert date of a session shall determine the academic year
in which it is included.

(b) “Award year” means one academic year, or the equivalent,
of attendance at a qualifying institution.

(c) “Commission” means the Student Aid Commission.

(d) “Cost of attendance” means the student’s tuition and fees,
books and supplies, living expenses, transportation expenses, and
any other student expenses used to calculate a student’s financial
need for purposes of federal Title IV student aid programs.

(e) “Enrollment status” means part-time status or full-time status
of a student at a qualifying institution.

(f) “Expected family contribution” means a student’s expected
family contribution calculated according to the federal
methodology pursuant to subdivision (a) of Section 69506 (as
established by Title IV of the federal Higher Education Act of
1965, as amended (20 U.S.C. begin delete Secs. end delete begin insert Sec. end insert 1070 et seq.)).

(g) “Financial need” means a student’s financial need calculated
pursuant to the federal financial need methodology (as established
by Title IV of the federal Higher Education Act of 1965, as
amended (20 U.S.C. begin delete Secs. end delete begin insert Sec. end insert 1070 et seq.)).

(h) “Instructional program” means a program of study that
results in the award of a baccalaureate degree or undergraduate
certificate, or undergraduate coursework in a program of study
leading directly to a first professional degree for which no
baccalaureate degree or undergraduate degree is awarded.

(i) “Participating institution” means any campus of the California
State University or the University of California that elects to
participate in the begin delete SEAL program end delete begin insert DREAM Program end insert pursuant to
the requirements specified for a qualifying institution as set forth
in this article.

(j) “Satisfactory academic progress” means those criteria
required by applicable federal standards published in Title 34 of
the Code of Federal Regulations. A participating institution may
adopt regulations defining “satisfactory academic progress” in a
manner that duplicates those federal standards.

70033.  

(a) Commencing with the 2015-16 academic year, a
student attending a participating institution may receive a loan
under the begin delete SEAL program end delete begin insert DREAM Program end insert if the student satisfies
all of the following requirements:

(1) The student is exempt from paying nonresident tuition under
Section 68130.5, or meets equivalent requirements adopted by the
Regents of the University of California.

(2) The student applies for financial aid using the application
established by the begin delete California end delete Student Aid Commission pursuant
to subdivision (b) of Section 69508.5, known as the Dream Act
Application.

(3) The student is enrolled at least half time in good standing
in an instructional program at a participating institution.

(4) The student is determined by the participating institution to
have financial need.

(5) The student maintains satisfactory academic progress at the
participating institution.

(6) The student is not incarcerated.

(7) The student is not in default on any federal student loan,
state student loan, or student loan issued by the California State
University or the University of California.

(8) The student is enrolled in a program eligible for participation
in the Cal Grant Program.

(b) (1) The Student Aid Commission or the participating
institution shall require the student to affirm in writing that he or
she satisfies the requirements of paragraph (7) of subdivision (a).

(2) A student seeking an award shall authorize the Student Aid
Commission to access any information pertinent to certify that the
student meets the requirements of subdivision (a).

(c) The Student Aid Commission, in collaboration with the
participating institution, shall certify that the student satisfies all
of the requirements specified in subdivision (a) before the
participating institution may issue an award to the student pursuant
to this article.

(d) The Legislature finds and declares that this article is a state
law within the meaning of Section 1621(d) of Title 8 of the United
States Code.

70034.  

(a) The amount of the begin delete SEAL end delete begin insert DREAM end insert loan offered to
an individual student by a participating institution shall be
determined by the institution, subject to the following provisions:

(1) The loan may not exceed the financial need of the student.

(2) No student may borrow more than four thousand dollars
($4,000) under this program within a single academic year.

(3) No student may borrow more than twenty thousand dollars
($20,000) in the aggregate under the program from any one
participating institution.

(b) The interest rate for loans issued under the program shall
be the same as the then-current interest rate for undergraduate
loans under the William D. Ford Federal Direct Loan Program begin delete ,
plus 2 percentage points end delete .

(c) The standard repayment term for a begin delete SEAL end delete begin insert DREAM end insert loan shall
be 10 years. Repayment shall commence following a six-month
grace period that begins when a student graduates or ceases to
maintain at least half-time enrollment in a begin delete baccalaureate end delete degree
or begin delete undergraduate end delete certificate program.

(d) Interest shall not accrue on a begin delete SEAL end delete begin insert DREAM end insert loan during
periods of at least half-time enrollment in a begin delete baccalaureate end delete degree
or begin delete undergraduate end delete certificate program or during the six-month grace
period specified in subdivision (c).

(e) Eligibility for deferment or forbearance of a begin delete SEAL end delete begin insert DREAM end insert
loan shall be determined by the participating institution in
accordance with the standards set begin delete for end delete begin insert forth end insert in the William D. Ford
Federal Direct Loan Program.

(f) Participating institutions shall use a common promissory
note, approved by the Treasurer, to issue begin delete SEAL end delete begin insert DREAM end insert loans.

70035.  

(a) It is the intent of the Legislature that, each fiscal
year, funds shall be appropriated in the annual Budget Act to
participating institutions for purposes of the begin delete SEAL program. end delete
begin insert DREAM Program. end insert

(b) The annual Budget Act shall allocate funding to participating
institutions based on the number of eligible students attending the
institution who applied for student financial aid pursuant to Section
69508.5 the prior academic year.

(c) Each participating institution shall deposit funds appropriated
pursuant to subdivision (a) in a begin delete SEAL end delete begin insert DREAM end insert revolving fund
established by each institution, subject to subdivision (e). begin delete SEAL end delete
begin insert DREAM end insert loans shall be awarded from, and begin delete SEAL end delete begin insert DREAM end insert loan
repayments shall be deposited into, these revolving funds.

(d) Each participating institution shall annually contribute
discretionary funds into its begin delete SEAL end delete begin insert DREAM end insert revolving fund so that
the institution’s contribution of funds equals or exceeds 25 percent
of all funds in the institution’s begin delete SEAL end delete begin insert DREAM end insert revolving fund at
the start of each academic year before begin delete SEAL end delete begin insert DREAM end insert loans for
that academic year are awarded.

(e) A participating institution shall not receive any additional
state funds if the receipt of these funds would reduce the percentage
of the begin delete SEAL end delete begin insert DREAM end insert revolving fund derived from the institution’s
contribution of funds to less than 25 percent of all funds in the
institution’s begin delete SEAL end delete begin insert DREAM end insert revolving fund as described in
subdivision (d).

begin delete

(f) In the event that an institution terminates its participation in
the SEAL program, outstanding SEAL loans awarded by the
institution shall be assigned to the state, and the institution shall
return the funds remaining in its SEAL revolving fund except the
discretionary funds provided by the institution pursuant to
subdivision (d).

end delete begin insert

(f) (1) In the event that an institution terminates its participation
in the DREAM Program, the institution shall continue to service
DREAM loans, collect DREAM loan repayments, and perform all
due diligence required by the federal Fair Credit Reporting Act
(15 U.S.C. Sec. 1681 et seq.) until the last students at that
institution issued loans under the DREAM Program prior to the
institution terminating its participation have repaid their loans.

end insert begin insert

(2) An institution described in paragraph (1) that terminates
its participation in the DREAM Program, shall annually repay all
funds provided by the state as the institution collects DREAM loan
repayments.

end insert

(g)  begin insert (1) end insert begin insert   end insert The California State University and the University of
California shall annually report to the Legislature as part of their
respective annual financial aid reports the dollar amount of each
begin delete SEAL end delete begin insert DREAM end insert loan awarded and number of students for whom
a begin delete SEAL end delete begin insert DREAM end insert loan was awarded that academic year.

begin insert

(2) Each institution, including an institution described in
subdivision (f), shall annually report all of the following:

end insert begin insert

(A) The total amount of funding in the institution’s DREAM
revolving fund.

end insert begin insert

(B) The annual amount contributed by the state to the
institution’s DREAM revolving fund.

end insert begin insert

(C) The annual amount contributed by the institution to the
institution’s DREAM revolving fund.

end insert begin insert

(D) The annual administrative costs of the DREAM Program
at the institution.

end insert

70036.  

Each participating institution is responsible for all the
following:

(a) The participating institution shall determine a student’s
eligibility for a begin delete SEAL end delete begin insert DREAM end insert loan.

(b) The participating institution shall award begin delete SEAL end delete begin insert DREAM end insert loan
funds to students.

(c) The participating institution shall provide entrance and exit
loan counseling to borrowers that is generally comparable to that
required by federal student loan programs.

(d) The participating institution shall service begin delete SEAL end delete begin insert DREAM end insert
loans, collect begin delete SEAL end delete begin insert DREAM end insert loan repayments, and perform all of
the due diligence required by the begin insert federal end insert Fair Credit Reporting
Act begin insert (15 U.S.C. Sec. 1681 et seq.) end insert .

(e) The participating institution shall establish mechanisms for
recording the annual amount of the begin delete SEAL end delete begin insert DREAM end insert loan borrowed
by each recipient, and the aggregate amount of begin delete SEAL end delete begin insert DREAM end insert
loans borrowed by each recipient, in order to comply with the
annual and aggregate borrowing limits set forth in Section 70034.

begin insert

begin insert 70037. end insert   

(a) The Trustees of the California State University and
the Regents of the University of California shall adopt regulations
providing for the withholding of institutional services from students
or former students who have been notified in writing at the
student’s or former student’s last known address that he or she is
in default on a loan or loans under the DREAM Program.

(b) (1) The regulations adopted pursuant to subdivision (a)
shall provide that the services withheld may be provided during
a period when the facts are in dispute or when the student or
former student demonstrates to either the Trustees of the California
State University or the Regents of the University of California, as
applicable, that reasonable progress has been made to repay the
loan or that there exists a reasonable justification for the delay as
determined by the institution. The regulations shall specify the
services to be withheld from the student, which may include, but
are not limited to, the following:

(A) The provision of grades.

(B) The provision of transcripts.

(C) The provision of diplomas.

(2) The services withheld pursuant to paragraph (1) shall not
include the withholding of registration privileges.

(c) “Default,” for purposes of this section, means the failure of
a borrower to make an installment payment when due, or to meet
other terms of the promissory note under circumstances where the
institution holding the loan finds it reasonable to conclude that
the borrower no longer intends to honor the obligation to repay,
provided that this failure persists for 180 days for a loan repayable
in monthly installments, or 240 days for a loan repayable in less
frequent installments.

(d) This section shall not impose any requirement upon the
University of California unless the Regents of the University of
California, by resolution, makes this section applicable.

end insert

begin delete 70037. end delete
begin insert 70038. end insert   

(a) Each participating institution is entitled to an
administrative cost allowance for an award year if the institution
elects to advance funds under the begin delete SEAL program end delete begin insert DREAM Program end insert
to students for that award year.

(b) The amount of the administrative cost allowance described
in subdivision (a) shall equal 5 percent of the institution’s total
amount of begin delete SEAL end delete begin insert DREAM end insert loan funds awarded to students for the
award year that the participating institution advances funds to
students under the begin delete SEAL program. end delete begin insert DREAM Program. end insert

(c) Each participating institution may charge its administrative
cost allowance to its begin delete SEAL end delete begin insert DREAM end insert revolving fund.

(d) Each participating institution shall use its administrative
cost allowance to offset the cost of administering the begin delete SEAL
program. end delete begin insert DREAM Program. end insert

(e) Each participating institution is responsible for administrative
costs that exceed its administrative cost allowance.

begin delete 70038. end delete
begin insert 70039. end insert   

If a state court finds that Section 70033, or any similar
provision adopted by the Regents of the University of California,
is unlawful, the court may order, as equitable relief, that the
participating institution subject to the lawsuit terminate all loans
awarded pursuant to that statute or provision deemed unlawful by
a state court, but no money damages, loans, or other retroactive
relief, may be awarded. In an action in which a state court finds
that Section 70033 or any similar provision adopted by the Regents
of the University of California, is unlawful, the California State
University and the University of California shall be immune from
the imposition of any award of money damages, loans, or other
retroactive relief.