BILL ANALYSIS �
SB 1210
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1210 (Lara) - As Amended: June 30, 2014
Policy Committee: Higher
EducationVote:8-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill, starting in 2015-16, establishes the California DREAM
Loan Act-a program to provide educational loans to AB 540
students attending California State University (CSU) and the
University of California (UC) campuses that elect to
participate. Specifically, this bill:
1)Provides that a CSU or UC student is eligible for a loan by
meeting specified criteria, including:
a) Exempt from paying nonresident tuition under AB 540 and
submits a Dream Act application to the California Student
Aid Commission (CSAC).
b) Enrolled at least half-time in good standing and
determined by CSU or UC to have financial need.
c) Not in default of any federal or state student loan or
any loan issued by CSU or UC.
2)Provides that a student's loan shall be determined by the
institution and may not exceed $4,000 in an academic year and
$20,000 in total.
3)Provides that the interest rate shall be the same as for the
federal direct student loan program, and the standard
repayment shall be over 10 years, commencing following a
six-month grace period following graduation or cessation of
enrollment. Eligibility for deferment or forbearance of a loan
shall be determined by the institution.
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4)States legislative intent that funding be appropriated each
fiscal year to participating UC and CSU campuses for the loan
program, and requires the campuses to:
a) Deposit the appropriated funds into a DREAM ACT
revolving fund.
b) Contribute discretionary institutional funds into the
revolving fund so that the sum of the institution's
contribution and loan repayments equals or exceeds the
following:
i) 25% of all funds in the first and second year.
ii) 33% of all funds in the third and fourth year.
iii) 50% of all funds in the fifth year and thereafter.
Requires CSU and UC to annually report specified information
about the loan program to the Legislature.
5)Requires the CSU and UC governing boards to adopt regulations
providing for the withholding of institutional services from
students in default of a DREAM Act loan or loans.
6)Provides CSU and UC with an administrative cost allowance
equal to five percent of the total loan amount to students.
FISCAL EFFECT
Costs to the state and to UC and CSU will depend on the number
of campuses and students participating in the loan program. As
structured, state costs will initially provide a majority of
program funding, then rapidly decline over time. According to
UC, under the program, which is modeled after the Federal
Perkins Loan program, once multiple cohorts of borrowers begin
repayment, the revenue from those repayments should exceed
annual loan volume.
Based on current and projected enrollment of AB 540 students,
and an assumption that half would borrow, UC estimates about
1,500 borrowers in the first year, growing to about 1,800
borrowers by the fourth year and thereafter. Based on the
program's cost-sharing parameters, and not counting loan
repayments, state General Fund costs are estimated at $4.8
million in 2015-16, $5.4 million in 2016-17, $4.8 million in
2017-18 and 2018-19, and $3.6 million in 2019-20. UC's costs
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over these same years would be, $1.6 million, $1.8 million, $2.4
million, $2.4 million, and $3.6 million respectively.
Based on its AB 540 population and program participation
assumptions, CSU estimates $2.7 million in state costs and
$900,000 in the first year and total costs over the first five
years of $12 million (state) and $6 million (CSU).
Administrative costs for UC and CSU will be covered by the 5% of
program revenues allowed in the bill.
COMMENTS
Purpose . According to the author, undocumented students are
exempt from paying nonresident tuition and are entitled to state
and institutional financial aid, but lack access to federal
student loans. As a result, they have a gap in their financial
aid packages of $5,000 to $6,000 at UC and $3,000 at CSU. Unless
students fill this gap by working additional hours, taking steps
to reduce their expenses, or finding outside resources, they
risk having to withdraw from college.
The DREAM loan program would be voluntarily implemented by UC
and CSU campuses. Both the state and the individual campus would
contribute to the loan fund, with the campus matching funds
beginning at 25% and growing to 50% by the 5th year of
participation. According to the author, once multiple cohorts of
borrowers have entered repayment, the annual State and
institutional contributions will decline and the program will
become self-supporting.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081