Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution, except the California Community Colleges, to make available to the public upon request and in a prominent location on its Internet Web site within 12 months of a completed academic year, as defined, specified student loan debt statistics on graduates. The bill would require all public, private, and independent postsecondary institutions to provide students information concerning unused state and federal financial assistance including unused federal student loan moneys available to them before certifying their eligibility for private student loans and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution, except the California Community Colleges, to make available to the public upon request and in a prominent location on its Internet Web site within 12 months of a completed academic year, as defined, specified student loan debt statistics on graduates. The bill would require all public, private, and independent postsecondary institutions to provide students information concerning unused state and federal financial assistance including unused federal student loan moneys available to them before certifying their eligibility for private student loans and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution to make available to the public upon request and in a prominent location on its Internet Web site within 12 months of a completed academic year, as defined, specified student loan debt statistics on graduates, to provide students information concerning unused state and federal financial assistance including unused federal student loan moneys available to them before certifying their eligibility for private student loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution to make available to the public upon request and in a prominent location on its Internet Web site specified student loan debt statistics on graduates, to provide students information concerning unused state and federal financial assistance including unused federal student loan moneys available to them before certifying their eligibility for private student loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution to make available to the public upon request and in a prominent location on its Internet Web site specified student loan debt statistics on graduates, to provide students information concerning unused federal student loan moneys available to them before certifying their eligibility for private student loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution to make available to the public upon request and in a prominent location on its Internet Web site specified student loan debt statistics on graduates, to provide students information concerning unused federal student loan moneys available to them before processing their private loans, certifying their eligibility for private student loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

Existing law requires a public, private, or independent postsecondary educational institution, except the California Community Colleges, to make specified disclosures related to private student loans in financial aid material and private loan applications provided or made available by the institution, to distinguish private loans from federal loans in individual financial aid awards, and, if the institution provides a private loan lender list, to provide general information about the loans available through the lender and disclose the basis for each lenders inclusion on the list.

This bill would require the public, private, or independent institution to make available on its Internet Web site specified student loan debt statistics on graduates, to provide students information concerning unused federal student loan moneys available to them before processing their private loans, and, if the institution does not participate in federal student loan programs, to inform students that they may be eligible for federal student loans at participating institutions and provide them information regarding Cal Grants and federal student aid. The bill would make nonsubstantive and conforming changes.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 721

Author:(Medina)

As Amended Ver:July 8, 2015

Majority vote

Original Committee Reference: HIGHER ED.

SUMMARY: Establishes requirements on institutions related to disclosure of student loan data and disclosure of information to students seeking private loans. Specifically, this bill:

1. Requires public, private or independent colleges, except California Community Colleges (CCC), to provide average graduate loan debt information publically, on the institution's Internet Web site.

2. Requires public, private and independent institutions, prior to certifying a private student loan, to provide the student information concerning all state and federal financial aid, including federal student loan moneys, available to that student.

3. Requires an institution that does not participate in federal student loan programs to inform the student of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid Web sites.

The Senate amendments require institutions to make average graduate loan debt information available within 12 months of a completed academic year, and clarify that average graduate loan debt information shall be provided for each type of credential offered by the institution.

EXISTING LAW requires public, private and independent postsecondary educational institutions, except the CCC, to state in printed and online financial aid materials and with private loan applications specified information related to federal student loans and private loans.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: Average graduate loan debt data. This bill would require public, private, independent postsecondary education institutions, except CCCs, to disclose average debt of graduates by degree level. California's public and most nonprofit, private four-year institutions disclose this data currently to one or more of several organizations (United States News & World Report, Peterson's and College Board) that conducts annual surveys of colleges that include questions about student loan debt. To make the annual surveys easier for colleges, the organizations use questions from a shared survey instrument called the Common Data Set (CDS). The Institute for College Access and Success (TICAS), in creating the annual Project on Student Debt, licenses and uses the data from one of the surveying organizations. According to TICAS, one limitation of the CDS is that very few for-profit colleges report debt data through CDS and national data show that borrowing levels at for-profit colleges are, on average, higher than borrowing at other types of colleges. The data disclosure requirements of this bill are based on the CDS.

Other loan reporting requirements. In addition to CDS, there are two other notable formats in which institutions report student loan information. The Integrated Postsecondary Education Data System (IPEDS) is required for all institutions and includes annual, but not cumulative, student loan debt information. Federal "gainful employment" (GE) rules will require most for-profit programs, and certificate programs at non-profit and public institutions, to provide program-level median graduate loan debt data. The GE rules are scheduled to take effect July 1, 2015; pending the outcome of ongoing industry litigation. Some for-profit institutions have expressed concern about the reporting requirements contained in this bill, arguing that these requirements are duplicative/conflicting with GE reporting requirements. According to the author, in order for a student to compare loan debt data across higher education institutions, all institutions must disclose the same data. This bill follows the CDS average graduate loan debt for several reasons, including that this formula is based on the cost of a student to start and complete at the institution (whereas GE median graduate debt figures may be affected by outliers of students who transfer in a significant number of educational credits) and that most California institutions are already voluntarily reporting this data, thereby reducing the cost of compliance with the requirements of this bill.

Private loans vs. federal loans. Generally, private loans are recommended as a last resort for students, once all federal loans have been exhausted. Data shows, however, that many students who obtain private loans have unused federal loan moneys available. According to TICAS, in 2011-12, 47% of private loan borrowers borrowed less than they could have under the federal Stafford loan program. This bill would require institutions to notify students, prior to certifying a private student loan, of the student's eligibility for federal student loan moneys, and, if the institution does not participate in federal loans, to notify students that the student may be eligible for federal loans at a participating institution. The institution would be required to provide the student with information regarding the Cal Grants and Federal Student Aid Web sites.

Analysis Prepared by: Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0001270

 THIRD READING  

Bill No: AB 721

Author: Medina (D)

Amended: 7/8/15 in Senate

Vote: 21

SENATE EDUCATION COMMITTEE: 7-0, 7/1/15

AYES: Liu, Runner, Leyva, Mendoza, Monning, Pan, Vidak

NO VOTE RECORDED: Block, Hancock

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 78-0, 6/2/15 - See last page for vote

SUBJECT: Student financial aid: private student loans

SOURCE: Author

DIGEST: This bill requires public, private or independent postsecondary education institutions and requests the California Community Colleges (CCC) to disclose data on student loan debt and to disclose specified information to students seeking private student loans.

ANALYSIS: Existing law requires a public, private or independent postsecondary educational institution, except the CCC, to make specified disclosures related to private student loans in financial material and applications provided or made available by the institution for the purposes of distinguishing private loans from federal loans in individual financial aid awards. (Education Code § 69800)

This bill:

1. Requires public, private or independent postsecondary educational institutions and requests the CCC to make available to the public upon request and in a prominent location on its Web site within 12 months of a completed academic year the following information concerning graduates and student loan debt:

1. The number of students who started as first-time postsecondary students who started and received a certificate, associates’ degree, or bachelor’s degree during most recently completed federal award year of July 1 to June 30.

2. For each type of credential in a) above, the number and percentage of students in a) who borrowed while enrolled through any student loan program and total principal borrowed in each of those loan programs.

3. For each type of credential in a) above, the number and percentage of students in a) who borrowed while enrolled through any federal student loan program and total principal borrowed in each of the federal student loan programs.

4. The average principal borrowed by the students counted in b) and in c) above by each credential type, as specified.

2. Requires all private, independent, and public institutions, prior to certifying a borrower’s eligibility for a private student loan to inform the student of all unused state and federal financial assistance.

3. Requires an institution that does not participate in federal student loan programs to inform the students of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid Web sites.

Comments

1. Need for the bill. According to the author, students and their families need clear, timely, accurate and comparable information on student financial aid to make the best financial and educational decisions about which postsecondary educational institution to attend. This bill seeks to expand financial aid information available to the student and their families by requiring the postsecondary education institution to annually report on cumulative student loan debt and inform students of their unused state and federal student loan options.

2. Existing online tools. Several federal online tools exist to assist prospective college students in making informed decisions about their postsecondary education options. These include the following:

1. The College Scorecards. In February 2013, the U.S. Department of Education’s (USDOE) College Affordability and Transparency Center released an interactive college scorecard, intended to provide information on a college’s affordability and value to enable parents and prospective students to make informed decisions about which college to attend. According to the USDOE, the Scorecard highlights key indicators about the cost and value of institutions across the country to help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals. Each Scorecard includes five key pieces of data about a college: costs, graduation rate, loan default rate, average amount borrowed, and employment. USDOE reports that these data will be updated periodically, and that they plan to publish information on average earnings in the coming year.

2. Net Price Calculators. Federal law requires any college that participates in Title IV financial aid programs to post on-line “net price calculators” to help parents and students determine the potential cost of different colleges before they apply. This calculator allows students to calculate an estimated net price of attendance at an institution (defined as cost of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate seeking undergraduate students. The USDOE College Affordability and Transparency Center provides a link to the net-price calculator for individual colleges nationally.

3. Financial Aid Shopping Sheet. In 2012, the USDOE partnered with the Consumer Financial Protection Bureau to develop the Financial Aid Shopping Sheet to promote transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. The Shopping Sheet is not mandatory, but the federal government did ask institutions to voluntarily adopt the Shopping Sheet beginning with the 2013-14 academic year. To date, about 3,000 institutions nationally have agreed to use the Shopping Sheet template, and many California public, private and independent institutions including all University of California and most California State University campuses are listed among those institutions who have adopted the tool.

4. The College Navigator. The National Center for Higher Education Management Statistics (located within the USDOE and the Institute of Education Sciences) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations. College Navigator provides comprehensive information to compare colleges on criteria that includes costs, majors offered, size of school, campus safety, and graduation rates.

Typically, institutions report student loan information through the Integrated Postsecondary Education Data System, Common Data Set, and/or USDOE and are made available to students and their families via the tools mentioned above. This bill requires institutions to annually report cumulative debt levels at the end of graduation for each credential and loan program rather than reporting figures for annual borrowing.

3. Private student loans. Private loans are not subsidized or guaranteed by the federal government, have higher, variable market-based interest rates and charge guarantee fees, making them more expensive and less favorable for borrowers than federal loan options. This bill seeks to minimize private student loan borrowing by ensuring students and families are informed about their state and federal aid eligibility before an institution can certify students’ request for private loans.

4. Related TICAS (the Institute for College Access and Success) study. According to a recent report, Student Debt and the Class of 2013, issued by TICAS, statewide, 55 percent of college seniors who graduated in 2013 had student loan debt, with an average debt of $20,340 per borrower. Nationally, private loans are most prevalent at for-profit colleges, with 41 percent of their seniors graduating with private loans in 2012. TICAS additionally notes that 47 percent of private loan borrowers borrow less than they could in federal student loans. The report highlighted high debt and low debt states, and California was noted as being among the low debt states. Among its recommendations, TICAS advised the collection of better college level data on student borrowing at the point of completion including private loans for which little data is reported and additionally supported the improvement and promotion of federal tools and processes that provide more and better consumer information throughout the college process. The report specifically noted tools such as the College Scorecard, the Net Price Calculator, and the Shopping Sheet.

Prior Legislation

AB 330 (Chau, 2014) would have required the California Student Aid Commission and Bureau for Private Postsecondary Education to post additional links on their Internet Web sites to provide information such as net cost, financial aid, and student loan debt that can be used by students and families to evaluate their college choices. AB 330 died on the Senate inactive file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/14/15)

California Competes

California Faculty Association

California Federation of Teachers

East Bay Community Law Center

National Association of Social Workers

Public Advocates

The Institute for College Access and Success

OPPOSITION: (Verified 7/14/15)

None received

ASSEMBLY FLOOR: 78-0, 6/2/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Chávez, Grove

Prepared by: Olgalilia Ramirez / ED. / (916) 651-4105

7/14/15 18:31:54

**** END ****

SENATE COMMITTEE ON EDUCATION

Senator Carol Liu, Chair

2015 - 2016 Regular

Bill No: AB 721

Subject: Student financial aid: private student loans

SUMMARY

This bill requires public, private or independent postsecondary education institutions and requests the California Community Colleges (CCC) to disclose data on student loan debt and to disclose specified information to students seeking private student loans.

BACKGROUND

Existing law requires a public, private or independent postsecondary educational institution, except the CCC, to make specified disclosures related to private student loans in financial material and applications provided or made available by the institution for the purposes of distinguishing private loans from federal loans in individual financial aid awards. (Education Code § 69800)

ANALYSIS

This bill:

1. Requires public, private or independent postsecondary educational institutions and requests the CCC to make available to the public upon request and in a prominent location on its website the following information concerning graduates and student loan debt.

1. The number of students who started as first-time postsecondary students who started and received a certificate, associates’ degree, or bachelor’s degree during most recently completed federal award year of July 1 to June 30.

2. For each type of credential in (a), the number and percentage of students in (a) who borrowed while enrolled through any student loan program and total principal borrowed in each of those loan programs.

3. For each type of credential in (a), the number and percentage of students in (a) who borrowed while enrolled through any federal student loan program and total principle borrowed in each of the federal student loan programs.

4. The average principal borrowed by the students counted in (b) and in (c) by each credential type, as specified.

2. Requires all private, independent, and public institutions, prior to certifying a borrower’s eligibility for a private student loan to inform the student of all unused state and federal financial assistance.

3. Requires an institution that does not participate in federal student loan programs to inform the students of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid websites.

STAFF COMMENTS

1. Need for the bill. According to the author, students and their families need clear, timely, accurate and comparable information on student financial aid to make the best financial and educational decisions about which postsecondary educational institution to attend. This bill seeks to expand financial aid information available to the student and their families by requiring the postsecondary education institution to annually report on cumulative student loan debt and inform students of their unused state and federal student loan options.

2. Existing online tools. Several federal online tools exist to assist prospective college students in making informed decisions about their postsecondary education options. These include the following:

1. The College Scorecards. In February 2013, the U.S. Department of Education’s (USDOE) College Affordability and Transparency Center released an interactive college scorecard, intended to provide information on a college’s affordability and value to enable parents and prospective students to make informed decisions about which college to attend. According to the USDOE, the Scorecard highlights key indicators about the cost and value of institutions across the country to help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals. Each Scorecard includes five key pieces of data about a college: costs, graduation rate, loan default rate, average amount borrowed, and employment. USDOE reports that these data will be updated periodically, and that they plan to publish information on average earnings in the coming year.

2. Net Price Calculators. Federal law requires any college that participates in Title IV financial aid programs to post on-line “net price calculators” to help parents and students determine the potential cost of different colleges before they apply. This calculator allows students to calculate an estimated net price of attendance at an institution (defined as cost of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate seeking undergraduate students. The USDOE College Affordability and Transparency Center provides a link to the net-price calculator for individual colleges nationally.

3. Financial Aid Shopping Sheet. In 2012, the USDOE partnered with the Consumer Financial Protection Bureau to develop the Financial Aid Shopping Sheet to promote transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. The Shopping Sheet is not mandatory, but the federal government did ask institutions to voluntarily adopt the Shopping Sheet beginning with the 2013-14 academic year. To date, about 3,000 institutions nationally have agreed to use the Shopping Sheet template, and many California public, private and independent institutions including all University of California (UC) and most California State University (CSU) campuses are listed among those institutions who have adopted the tool.

4. The College Navigator: The National Center for Higher Education Management Statistics (located within the U.S. Department of Education and the Institute of Education Sciences) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations. College Navigator provides comprehensive information to compare colleges on criteria that includes costs, majors offered, size of school, campus safety, and graduation rates.

Typically, intuitions report student loan information through the Integrated Postsecondary Education Data System, Common Data Set, and/or U.S. Department of Education and are made available to students and their families via the tools mentioned above. This bill requires institutions to annually report cumulative debt levels at the end of graduation for each credential and loan program rather than reporting figures for annual borrowing.

3. Private student loans. Private loans are not subsidized or guaranteed by the federal government, have higher, variable market-based interest rates and charge guarantee fees, making them more expensive and less favorable for borrowers than federal loan options. This bill seeks to minimize private student loan borrowing by ensuring students and families are informed about their state and federal aid eligibility before an institution can certify students’ request for private loans.

4. Related TICAS study. According to a recent report, Student Debt and the Class of 2013, issued by the Institute for College Access and Success (TICAS), statewide, 55 percent of college seniors who graduated in 2013 had student loan debt, with an average debt of $20,340 per borrower. Nationally, private loans are most prevalent at for-profit colleges, with 41 percent of their seniors graduating with private loans in 2012. TICAS additionally notes that 47 percent of private loan borrowers borrow less than they could in federal student loans. The report highlighted high debt and low debt states, and California was noted as being among the low debt states. Among its recommendations, TICAS advised the collection of better college level data on student borrowing at the point of completion including private loans for which little data is reported and additionally supported the improvement and promotion of federal tools and processes that provide more and better consumer information throughout the college process. The report specifically noted tools such as the College Scorecard, the Net Price Calculator, and the Shopping Sheet.

5. Prior legislation.

AB 330 (Chau, 2014) would have required the California Student Aid Commission and Bureau for Private Postsecondary Education to post additional links on their Internet Web sites to provide information such as net cost, financial aid, and student loan debt that can be used by students and families to evaluate their college choices. AB 330 died in the Senate inactive file.

SUPPORT

California Competes

California Faculty Association

California Federation of Teachers

East Bay Community Law Center

National Association of Social Workers

Public Advocates

The Institute for College Access and Success

OPPOSITION

None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 721

Author:(Medina)

As Amended Ver:May 28, 2015

Majority vote

SUMMARY: Establishes requirements on institutions related to disclosure of student loan data and disclosure of information to students seeking private loans. Specifically, this bill:

1. Requires public, private or independent colleges, except California Community Colleges (CCC), to provide average graduate loan debt information publically, on the institution's Internet Web site.

2. Requires public, private and independent institutions, prior to processing a private student loan, to provide the student information concerning all unused federal student loan moneys available to that student.

3. Requires an institution that does not participate in federal student loan programs to inform the student of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid websites.

EXISTING LAW requires public, private and independent postsecondary educational institutions, except the CCC, to state in printed and online financial aid materials and with private loan applications specified information related to federal student loans and private loans.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Negligible fiscal impact to the University of California (UC) and the California State University (CSU), as both segments already comply with the reporting requirements of this bill.

2. Minor absorbable costs for CCC districts to provide the required information to students when certifying private student loans; currently 22 CCC districts, involving 29 campuses, certify about 700 students for private loans.

COMMENTS: Average graduate loan debt data. This bill would require public, private, independent postsecondary education institutions, except CCCs, to disclose average debt of graduates by degree level. California's public and most nonprofit, private four-year institutions disclose this data currently to one or more of several organizations (United States News & World Report, Peterson's and College Board) that conducts annual surveys of colleges that include questions about student loan debt. To make the annual surveys easier for colleges, the organizations use questions from a shared survey instrument called the Common Data Set (CDS). The Institute for College Access and Success (TICAS), in creating the annual Project on Student Debt, licenses and uses the data from one of the surveying organizations. According to TICAS, one limitation of the CDS is that very few for-profit colleges report debt data through CDS and national data show that borrowing levels at for-profit colleges are, on average, higher than borrowing at other types of colleges. The data disclosure requirements of this bill are based on the CDS.

Other loan reporting requirements. In addition to CDS, there are two other notable formats in which institutions report student loan information. The Integrated Postsecondary Education Data System (IPEDS) is required for all institutions and includes annual, but not cumulative, student loan debt information. Federal "gainful employment" (GE) rules will require most for-profit programs, and certificate programs at non-profit and public institutions, to provide program-level median graduate loan debt data. The GE rules are scheduled to take effect July 1, 2015; pending the outcome of ongoing industry litigation. Some for-profit institutions have expressed concern about the reporting requirements contained in this bill, arguing that these requirements are duplicative/conflicting with GE reporting requirements. According to the author, in order for a student to compare loan debt data across higher education institutions, all institutions must disclose the same data. This bill follows the CDS average graduate loan debt for several reasons, including that this formula is based on the cost of a student to start and complete at the institution (whereas GE median graduate debt figures may be affected by outliers of students who transfer in a significant number of educational credits) and that most California institutions are already voluntarily reporting this data, thereby reducing the cost of compliance with the requirements of this bill.

Private loans vs. federal loans. Private loans typically have variable interest rates and are not eligible for deferment, income-based repayment, or loan forgiveness that is available with federal loans. Private student loans are also much harder than other forms of consumer debt to discharge in bankruptcy court. Generally, private loans are recommended as a last resort for students. Data shows, however, that many students who obtain private loans have unused federal loan moneys available. According to TICAS, in 2011-12, 47% of private loan borrowers borrowed less than they could have under the federal Stafford loan program. This bill would require institutions to notify students, prior to certifying a private student loan, of the student's eligibility for federal student loan moneys, and, if the institution does not participate in federal loans, to notify students that the student may be eligible for federal loans at a participating institution. The institution would be required to provide the student with information regarding the Cal Grants and Federal Student Aid Web sites.

Analysis Prepared by: Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0000689

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 721

Author:(Medina) – As Amended Ver:April 13, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires postsecondary educational institutions to disclose data on student loan debt and to disclose specified information to students seeking private student loans. Specifically, this bill:

1. Requires all public, private, and independent postsecondary institutions, except the California Community Colleges (CCC), to make available to the public upon request and on their respective websites the following regarding graduates and student loan debt:

   1. Number of students who started as first-time students at the institution and received a certificate or degree during the academic year.

   2. The number and percentage of students in (a) who borrowed while enrolled at the institution through any student loan program and the total principal borrowed.

   3. The number and percentage of students in (a) who borrowed while enrolled at the institution through any federal student loan program and the total principal borrowed.

   4. The average principal borrowed by the students counted in (b) and in (c).

2. Requires all private, independent, and public institutions, including the CCC, prior to certifying a borrower's eligibility for a private student loan, to comply with (1) and to inform the student of all unused federal student loan moneys available to that student.

3. Requires an institution that does not participate in federal student loan programs to (a) inform the student of such and that the student may be eligible for federal loans at a participating institution, and (b) provide the student with information regarding the Cal Grant and Federal Student Aid websites.

FISCAL EFFECT:

1. Negligible fiscal impact to the University of California (UC) and the California State University (CSU), as both segments already comply with the reporting requirements of this bill.

2. As the community colleges currently are not subject to the reporting requirements, state reimbursable costs, assuming an average cost of $3,000 per campus, would be about $336,000 annually (GF-Prop 98).

COMMENTS:

1. Purpose. According to The Institute for College Access and Success (TICAS) report, "Project on Student Debt, Class of 2013", 55% of graduating seniors at California's public and private four-year colleges had student loans. The average student loan debt of these graduates was $20,340. Nationwide, about one-fifth of students' debt was comprised of private loans. According to the author, as a growing number of students borrow to pay for college, it is important to provide students the information necessary to make informed choices about college attendance costs and student lending options.

This bill requires public, private, independent postsecondary education institutions, and CCCs that certify private loans, to disclose average debt of graduates by degree level. California's public and most nonprofit, private four-year institutions disclose this data currently to one or more of several organizations (U.S. News & World Report, Peterson's and College Board) that conduct annual surveys of colleges that include questions about student loan debt.

To make the annual surveys easier for colleges, the organizations use questions from a shared survey instrument called the Common Data Set (CDS). TICAS, in creating the Project on Student Debt, Class of 2013, licenses and uses the data from one of the surveying organizations. According to TICAS, one limitation of the Common Data Set is that very few for-profit colleges report debt data through CDS and national data show that borrowing levels at for-profit colleges are, on average, higher than borrowing at other types of colleges. The data disclosure requirements of this bill are based on the CDS.

2. Private loans vs. federal loans. Private loans typically have variable interest rates and, unlike federal loans, are not eligible for deferment, income-based repayment, or loan forgiveness. Private student loans are also much harder than other forms of consumer debt to discharge in bankruptcy court. Generally, private loans are recommended as a last resort for students. Data shows, however, that many students who obtain private loans have unused federal loan moneys available. This bill requires institutions to notify students, prior to certifying a private student loan, of the student's eligibility for federal student loan moneys, and, if the institution does not participate in federal loans, to notify students that the student may be eligible for federal loans at a participating institution.

3. CCC and federal loans. This bill would require institutions, including CCCs, to comply with private loan disclosure and average graduate debt disclosure prior to certifying a student's eligibility for a private loan. The author notes that a growing number of CCCs (22 as of July 2014) are electing not to participate in federal loan programs, thus more than 250,000 students at these campuses are not provided the opportunity to participate in the generally more consumer friendly federal loan program. Representatives of colleges that have elected not to participate in federal loans cite concerns about cohort default rate sanctions; however, under federal rules, colleges with low loan participation rates can appeal if they fail to meet cohort default rate requirements. According to the author, colleges certifying private loans, particularly CCCs that do not provide their students with the option to participate in federal loan programs, should be required to disclose this important loan information to their students.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: April 7, 2015

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 721

Author:(Medina) – As Introduced Ver:February 25, 2015

SUBJECT: Student financial aid: private student loans

SUMMARY: Establishes requirements on institutions related to disclosure of student loan data and disclosure of information to students seeking private loans. Specifically, this bill:

1. Requires public, private or independent colleges, except California Community Colleges (CCC), to provide average graduate loan debt information, as defined below, to the public on the institution's internet website and to the California Student Aid Commission (CSAC).

1. Requires the institution to report and calculate all of the following:

1. The number of students who started as first-time students at the institution and received a certificate, associate's degree or bachelor's degree during that academic year;

2. The number and percentage of students in (a) who borrowed while enrolled through any student loan program; including federal, state, institutional, and any private loans certified by the institution;

3. The total principal borrowed in the loans in (b); and

4. The number and percentage of the students in (a) who borrowed while enrolled through any federal student loan program.

2. Requires the institution to report the following to CSAC:

1. The percentages calculated pursuant to (ii) and (iv); and,

2. The average cumulative principal borrowed by those students who took out loans, separately for certificate, associate degree, and bachelor degree programs.

3. Provides that "loans" includes cosigned loans that financed a student's own enrollment or attendance, but not parental loans.

2. Requires public, private and independent institutions, prior to processing a private student loan, to comply with (1) and to provide the student information concerning all unused federal student loan moneys available to that student.

3. Requires an institution that does not participate in federal student loan programs to inform the student of such and that the student may be eligible for federal loans at a participating institution. The institution is required to provide the student with information regarding the Cal Grants and Federal Student Aid websites.

EXISTING LAW: Requires public, private and independent postsecondary educational institutions, except the CCC, to state in printed and online financial aid materials and with private loan applications specified information related to federal student loans and private loans.

FISCAL EFFECT: Unknown

COMMENTS: Purpose of this bill. According to The Institute for College Access and Success (TICAS) report, entitled Project on Student Debt, Class of 2013, 55% of graduating seniors at California's public and private four-year colleges had student loans. The average student loan debt of these graduates was $20,340. Nationwide, about one-fifth of students' debt was comprised of private loans. According to the author, as a growing number of students borrow to pay for college, it is important to provide students the information necessary to make informed choices about college attendance costs and student lending options. This bill will require institutions to disclose the average debt of graduates, inform students of available unused federal student loan moneys prior to certifying a private loan, and inform students if the institution does not participate in federal loans.

Average graduate loan debt data. This bill would require public, private, independent postsecondary education institutions, and CCCs that certify private loans, to disclose average debt of graduates by degree level. California's public and most nonprofit, private four-year institutions disclose this data currently to one or more of several organizations (U.S. News & World Report, Peterson's and College Board) that conducts annual surveys of colleges that include questions about student loan debt. To make the annual surveys easier for colleges, the organizations use questions from a shared survey instrument called the Common Data Set (CDS). TICAS, in creating the Project on Student Debt, Class of 2013, licenses and uses the data from one of the surveying organizations. According to TICAS, one limitation of the Common Data Set is that very few for-profit colleges report debt data through CDS and national data show that borrowing levels at for-profit colleges are, on average, higher than borrowing at other types of colleges. The data disclosure requirements of this bill are based on the CDS.

Federal loan debt disclosures. In addition to CDS, there are two other notable formats in which institutions report student loan information. The Integrated Postsecondary Education Data System (IPEDS) is required for all institutions and includes annual, but not cumulative, student loan debt information. Federal "gainful employment" (GE) rules will require most for-profit programs, and certificate programs at non-profit and public institutions, to provide program-level median graduate loan debt data. The GE rules are scheduled to take effect July 1, 2015; pending the outcome of ongoing industry litigation. This bill follows the CDS average graduate loan debt formula; committee staff understands that 84% of students that graduated from a bachelor's degree program in California attended an institution that voluntarily disclosed CDS data.

Private loans vs. federal loans. Private loans typically have variable interest rates and are not eligible for deferment, income-based repayment, or loan forgiveness that is available with federal loans. Private student loans are also much harder than other forms of consumer debt to discharge in bankruptcy court. Generally, private loans are recommended as a last resort for students. Data shows, however, that many students who obtain private loans have unused federal loan moneys available. According to TICAS, in 2011-12, 47% of private loan borrowers borrowed less than they could have under the federal Stafford loan program. This bill would require institutions to notify students, prior to certifying a private student loan, of the student's eligibility for federal student loan moneys, and, if the institution does not participate in federal loans, to notify students that the student may be eligible for federal loans at a participating institution.

The institution would be required to provide the student with information regarding the Cal Grants and Federal Student Aid websites.

CCC and federal loans. This bill would require institutions, including CCCs, to comply with private loan disclosure and average graduate debt disclosure prior to certifying a student's eligibility for a private loan. The author notes that a growing number of CCCs are electing not to participate in federal loan programs. The author notes that as of July 2014, 22 CCCs chose not to participate in federal loans. Meaning more than 250,000 CCC students are not provided the opportunity to participate in the generally more consumer friendly federal loan program. Representatives of colleges that have elected not to participate in federal loans cite concerns about cohort default rate sanctions; however, under federal rules colleges with low loan participation rates can appeal if they fail to meet cohort default rate requirements. It appears that many CCCs electing to not participate in federal loan programs could successfully appeal federal sanctions. According to the author, colleges certifying private loans, particularly CCCs that do not provide their students with the option to participate in federal loan programs, should be required to disclose this important loan information to their students.

Reporting requirements. This bill requires institutions to report to CSAC specified information on average graduate debt; however, CSAC is not required to do anything with the reported data. Also, because the majority of private, for-profit institutions are not qualified to participate in the Cal Grant Program, the rationale for reporting data to CSAC is unclear. The author may wish to remove the requirement to report to CSAC and instead require all data is made available to the public upon request and through prominent placement on the institution's website.

Technical and clarifying amendment. Committee staff suggests amendments to clarify in section 69800.2 that the institution is required to check federal loan eligibility before "certifying a borrower's eligibility for private student loans".

REGISTERED SUPPORT / OPPOSITION:

Support

The Institute for College Access and Success

National Association of Social Workers

Opposition

University of Phoenix

Analysis Prepared by: Laura Metune / HIGHER ED. / (916) 319-3960