BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1210 (Lara) - California DREAM Loan Pogram
Amended: April 22, 2014 Policy Vote: Education 5-0
Urgency: No Mandate: No
Hearing Date: May 12, 2014 Consultant: Jacqueline
Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1210 establishes the California DREAM Loan
Program (CDLP) for purposes of extending loans to students who
meet the requirements established by AB 540 and have financial
need, and authorizes any campus of the University of California
(UC) and the California State University (CSU) to participate,
as specified.
Fiscal Impact: The cost of the CDLP will depend on the number of
participating CSU and UC campuses, and the number of
participating students on each campus. The state's direct
contribution level is linked to that of the campuses; the more
campuses and students who participate, the higher the direct
state contribution amount.
State share: Costs will vary by year but, based on needs
projections, are likely to be approximately $4 million for
the first year (General Fund). Costs will likely rise as the
program becomes more widespread and popular.
CSU/UC share: Costs will vary by year, and by whether or
not campuses participate. Based on the universe of potential
borrowers, first year costs will likely be approximately $1
million total. See staff comments.
Administration: The UC and CSU will be allowed to retain 5%
of the CDLP costs for administration and both institutions
believe that amount will be sufficient to cover their
administrative costs.
California Student Aid Commission (CSAC): Potentially
significant ongoing costs to certify student eligibility to
participate in the loan program.
Background: Existing law allows (beginning January 1, 2013) AB
540 students to be eligible to apply for, and participate in,
any student financial aid program administered by the State of
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California to the full extent permitted by federal law. The CSAC
is required to establish procedures and forms that enable AB 540
students to apply for, and participate to the full extent
permitted by federal law. Existing law prohibits AB 540 students
from being eligible for Competitive Cal Grant A and B awards
unless specified conditions are met. (Education Code � 69508.5)
Existing law provides that a student attending the CSU, the
California Community Colleges (CCC), or the UC who is exempt
from paying nonresident tuition under the provisions of AB 540
is eligible to receive a scholarship derived from nonstate funds
received, for the purpose of scholarships, by the segment at
which he or she is a student. (EC � 66021.7)
Existing law further requires the Trustees of the CSU and the
Board of Governors of the CCC, and requests the UC Regents, to
establish procedures and forms that enable AB 540 students to
apply for, and participate in, all student aid programs
administered by these segments to the full extent permitted by
federal law. (EC � 66021.6)
Proposed Law: This bill establishes the CDLP, a voluntary
campus-based student loan program to provide loans to UC and CSU
students, who meet specified requirements, beginning in the
2015-16 academic year.
This bill establishes eligibility and participation requirements
for student participation in the CDLP, and establishes a
CSAC-administered certification process for determining that the
requirements are met. This bill also establishes the
administrative responsibilities of a UC or CSU campus that
chooses to participate in the loan program.
The CDLP caps the annual amount of a loan at $4,000 and the
aggregate amount from the program at a single institution at
$20,000, and sets the interest rate at the then-current interest
rate for undergraduate loans under the William D. Ford Federal
Direct Loan Program, and makes other changes modeled after that
program.
With regard to CDLP funding, this bill:
a) Declares the Legislature's intent that Budget Act
funding for the purposes of the loan program be
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appropriated annually to participating institutions.
b) Requires that the Budget Act allocate funding based upon
the number of eligible students attending the institution
who applied for student financial aid the prior academic
year.
c) Requires each participating institution to deposit
appropriated funds into a revolving fund established by
each institution for the purposes of awarding loans and
receiving loan repayments.
d) Requires a participating institution to match funds
provided by the state by annually contributing
discretionary funds equal to at least 25% of all funds
available for loan distribution for that academic year.
e) Prohibits the receipt of state funds by an institution
if it results in the institution's contribution to the fund
being less than 25% of the total funds available.
f) Requires that the UC and CSU annually report the dollar
amount of each loan awarded and the number of students
awarded a loan.
g) Entitles each participating institution to an annual
administrative cost allowance equal to 5% of the
institution's total loan funds awarded each year, as
specified.
Staff Comments: This bill would establish a revolving loan fund
to provide student loans to undocumented students, patterned
after the Federal Direct Loan Program. The loan program would be
voluntarily implemented by campuses of the UC and CSU, and
participating campuses could choose to stop offering it at any
time. The bill specifies, however, legislative intent to
appropriate the state's projected share (which is 75% of the
grant costs) for each year, in the annual Budget Act.
In order to participate, UC and CSU campuses would pay 25% of
the grant costs from "discretionary funds", and draw down the
other 75% from the state General Fund. This bill does not define
campus discretionary funds; there is nothing in this bill or
existing statute that would prevent participating campuses from
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using a portion of their state funding for their DREAM loan
program contribution and, in effect, making 100% of the loan
program supported by General Fund dollars.
The cost projections in the Fiscal Impact are based on 1,300
students borrowing the maximum $4,000 each. The UC and CSU have
both indicated that their undocumented students generally have
financial need in excess of $5,000 per year. Increases in
program participation by campuses and eligible students will
likely increase the need for more up-front funding. If the loans
are successfully repaid to the revolving loan fund with
interest, the program may eventually become cost-neutral, or
even result in a net increase in revenue, to the extent that
interest paid on the loans exceeds administrative costs and loan
defaults.
The UC and CSU are likely to be able to cover their
administrative costs within the bill's 5% cost allowance; it is
likely that the workload increase for participating campuses
would be minor, since they already have financial aid offices
with staff who handle a broad array of financial aid processes
and issues. The CSAC, however, could incur new costs to modify
the Dream Act application, process student DREAM loan
applications, and certify their program eligibility (which is
required prior to a campus issuing the loan).