2005 California Education Code Sections 69760-69779 Article 13. Federal Family Education Loan Program

69760.  California is hereby authorized to participate in the
Federal Family Education Loan Program for eligible postsecondary
students and their parents, which includes, but is not limited to,
the Federal Stafford Loans, the Federal Unsubsidized Stafford Loans,
the Federal Parent Loans for Undergraduate Students (PLUS), and the
Federal Consolidation Loans.  The programs shall be consistent with
Title IV of the act of Congress entitled the "Higher Education Act of
1965" (P.L. 89-329) and extensions thereof, the Education Amendments
of 1976 (P.L. 94-482), or any similar act of Congress, and the rules
and regulations adopted under those acts.
69761.  (a) The purposes of California's participation in the
Federal Family Education Loan Program are as follows:
   (1) To ensure that, in meeting their educational costs, a source
of loans is available to assist the greatest number of eligible
resident students.
   (2) To ensure that loans are available to eligible resident
students that meet the criterion set forth in paragraph (1), the
commission is authorized to provide a source of loans to eligible
students within and outside California irrespective of their
residence or the location of their educational institution, to assist
them in meeting educational costs at eligible schools of their
choice.
   (3) To accept, receive and administer the funds provided under
Title IV of the "Higher Education Act of 1965," and extensions
thereof, or any similar act of Congress in any jurisdiction permitted
under the Higher Education Act.
   (b) The Legislature finds and declares that subdivision (a), as
amended during the 1999 portion of the 1999-2000 Regular Session,
reflects the intent of the Legislature in enacting Chapter 961 of the
Statutes of 1996, and is therefore declaratory of existing law.
69761.5.  The commission shall serve as a state student loan
guarantee agency, pursuant to P.L. 94-482, and subsequent federal
regulations, including, but not limited to, the following provisions:
   (a) The commission shall be the designated state agency for
receiving any federal  funds for administrative costs and payments of
insurance obligations.
   (b) Educational loans to undergraduate and graduate students, or
to their parent or parents, or to undergraduate and graduate students
and to their parent or parents, shall not exceed the limits provided
in federal law.
   (c) Participating educational institutions shall notify lenders
and the commission of enrollment status changes and current addresses
of participating students.
   (d) No educational institution shall lend to more than 50 percent
of its undergraduate students; this provision may be waived by the
United States Secretary of Education if  the limitation creates a
hardship for present or prospective students.
   (e) A student may receive a loan only if he or she is maintaining
satisfactory progress in a course of study pursuant to practices of
the institution in which the student is enrolled, and provided the
student has not previously defaulted on any student loan.  If a
student has made satisfactory arrangements to repay a default on a
previous student loan, the student may be eligible to receive a loan.
   (f) An insurance premium may be charged student borrowers not to
exceed the maximum rate allowable, pursuant to federal statutes and
regulations.
69761.7.  To promote responsible and timely repayment of  guaranteed
student loans, the commission shall establish a process to ensure
regular, annual credit reporting on the repayment status of borrowers
whose loans are guaranteed by the commission and whose paper has
matured.
69762.  Loans made pursuant to this chapter shall be made without
regard to race, religion, creed or sex.
69763.  (a) (1) The commission shall administer the Federal Family
Education Loan Program as authorized pursuant to this chapter.  The
commission may enter into any contract with the United States
Secretary of Education or any other federal officer or agency under
Title IV of the Higher Education Act of 1965, any extension thereof,
or any similar act of Congress, may cooperate with the government of
the United States, or any agency or agencies thereof, in
administration of the act of Congress and the rules and regulations
adopted thereunder.  The commission shall adopt any rules and
regulations it deems necessary for the proper administration of this
chapter.
   (2) Loans or loan guarantees issued by the commission,
irrespective of the domicile of the eligible student or the location
of the educational institution attended by the eligible student,
prior to the effective date of amendments made to this section during
the 1999 portion of the 1999-2000 Regular Session, have been
determined by the Legislature to be consistent with the purposes of
California's participation in the Federal Family Education Loan
Program, and within the authority of the commission to administer
that program, and consistent with the intent of the Legislature in
enacting Chapter 961 of the Statutes of 1996.
   (b) The rules and regulations adopted by the commission pursuant
to this section shall include a provision authorizing the commission
to impose a civil penalty in an amount not to exceed twenty-five
thousand dollars ($25,000) per violation against any financial or
educational institution that violates any applicable law, rule,
regulation, limitation, consent agreement, or school or lender
agreement, relative to a state financial aid program.  The rules and
regulations adopted pursuant to this section shall provide all of the
following:
   (1) No civil penalty shall be imposed against an institution
without first affording that institution an opportunity to request a
hearing and, if a request for a hearing is made, a hearing shall be
held before a representative of the commission.
   (2) No civil penalty shall be imposed against an institution
unless an action against that institution has been initiated pursuant
to Section 30302 or 30304 of Title 5 of the California Code of
Regulations.
   (c) Any moneys derived from the assessment of penalties pursuant
to this section shall be deposited into the Student Loan Operating
Fund.
69763.1.  (a) If a borrower defaults on a guaranteed student loan
and the lender's default claim has been paid, the Student Aid
Commission shall fulfill the collection efforts required by federal
law, which includes initiating a civil suit against the borrower for
repayment of the loan.
   (b) After the period specified in federal law for commencing
action, the amount of the promissory note, plus interest and costs,
may be collected by the filing of a certificate requesting judgment
pursuant to subdivision (c) or by other appropriate civil action.
   (c) If the loan principal, interest, and predefault and collection
costs are not paid when due, and there is evidence that the borrower
does not intend to pay under the terms of the promissory note or
promissory notes, the commission may file in the office of the Clerk
of the Superior Court of Sacramento County, or any other county, a
certificate specifying the amount of the loan principal, interest,
and predefault and collection costs due, the name and last known
address of the individual liable for the amount due, the fact that
the commission has complied with all applicable state and federal
laws in the computation of the amount due, and a request that
judgment be entered against the individual in the amount of the loan
principal, interest, and predefault and collection costs specified in
the certificate.
   (d) Prior to the filing of the certificate, the commission shall,
by mail, notify the individual of the amount that is due and of the
opportunity for a hearing.  If a hearing is requested, 10 days'
notice shall be given of the time and place of the hearing, which
shall be held in Sacramento County or, if properly requested, the
county of residence of the person requesting the hearing.  The
hearing shall be conducted by a referee who shall submit findings and
recommendations to the director of the commission, or an authorized
representative, who shall decide the matter.  The decision shall be
effective upon notice to the interested parties.  The director of the
commission, or the authorized representative, may rescind the
decision and reconsider the matter for good cause shown at any time
within three years after the date the disputed loan first became due,
or within one year from the hearing, whichever is later.  If no
hearing is requested within 15 days after mailing the notice required
by this subdivision, the certificate required by subdivision (b) may
be filed.
69763.2.  (a) The clerk, immediately upon the filing of the
certificate specified in Section 69763.1, shall enter a judgment for
the people of the State of California against the individual in the
amount of the loan principal, interest, and predefault and collection
costs listed on the certificate.  The clerk may file the judgment in
the book entitled "California Student Aid Commission Judgments."
   (b) Execution shall issue upon the judgment specified in
subdivision (a) upon request of the Student Aid Commission in the
same manner as execution may issue upon other judgments as prescribed
in the Code of Civil Procedure.
   (c) At least 10 days before executing any writ to collect, the
commission shall send notice of the intent to execute upon a writ to
the borrower and to any cosigners, by certified mail, to the most
recent addresses maintained in the files of the commission.  Any
person receiving the notice of the intent to execute upon a writ may
request a hearing to contest the existence or the amount of the writ.
  At the request of the individual, the commission shall conduct a
hearing pursuant to Section 69763.1, at which it shall be determined
whether the loan principal, interest, and predefault and collection
costs in the amount claimed by the commission are due and whether the
individual named on the certificate is liable for the amount.  If no
hearing is requested, the execution shall be commenced for the
garnishment of wages, the attachment of property, or other legal
collection action.
69763.3.  At any time before wages are garnished or a lien is placed
on property, a borrower may pay the Student Aid Commission the
amount of the recorded judgment, plus costs.  If that payment is
made, wage garnishment or the attachment of property shall not
commence.  The payment shall not constitute a waiver of the right to
a hearing.
69763.4.  If the Student Aid Commission, or an authorized agent, has
reasonable cause to believe that a lien on property may be
jeopardized within the 10-day notice-of-intent period, the lien may
be filed without prior notice.  The commission shall provide notice
of the attachment of property by lien to the owner and to any other
person known to be claiming an interest in the property, within 48
hours after filing, excluding Saturdays, Sundays, and the holidays
specified in Section 6700 of the Government Code.  Any hearing to
contest the lien shall be requested within 10 days following
transmittal of the notice.
69764.  In the event that the amount of loans applied for under this
article exceeds the amount of the loans that may be guaranteed
pursuant to this article, the commission may establish a system of
priorities for the approval of loans.
69765.  (a) The commission shall guarantee any student loan made
pursuant to this article  in the amount specified in federal statutes
and regulations.
   (b) The commission shall establish the ratio of reserve funds to
loans outstanding.
69766.  (a) The Federal Student Loan Reserve Fund and the Student
Loan Operating Fund are hereby created in the State Treasury.  On
January 1, 2000, the State Guaranteed Loan Reserve Fund shall cease
to exist, and funds deposited, or required to be deposited in that
fund, shall be transferred to the Federal Student Loan Reserve Fund
or to the Student Loan Operating Fund and allocated to those funds in
accordance with the requirements of federal law.
   (b) All money received for the purposes of this article from
federal, state or local governments, including any money deposited in
the State Guaranteed Loan Reserve Fund, or from other private or
public sources, shall be deposited in the Federal Student Loan
Reserve Fund or the Student Loan Operating Fund and allocated to
those funds in accordance with the requirements of federal law.
Funds deposited in the Federal Student Loan Reserve Fund or the
Student Loan Operating Fund are not part of the General Fund, as
defined in Section 16300 of the Government Code.  No moneys from the
General Fund shall be deposited in the Federal Student Loan Reserve
Fund or the Student Loan Operating Fund.
   (c) The contents of the Federal Student Loan Reserve Fund are
federal funds, administered in accordance with federal laws and
regulations.  The contents of the Student Loan Operating Fund are
state funds within the custody and control of the Student Aid
Commission.
   (d) Notwithstanding Section 13340 of the Government Code, all
moneys deposited in the Federal Student Loan Reserve Fund and the
Student Loan Operating Fund are hereby continuously appropriated,
without regard to fiscal years, for purposes of this article.  The
continuous appropriation made by this section shall be available to
assume the obligation under any outstanding budget act appropriation
from the State Guaranteed Loan Reserve Fund as it existed prior to
January 1, 2000.
   (e) The total amount of all outstanding debts, obligations, and
liabilities that may be incurred or created under this article or
under Article 2.5 (commencing with Section 69522), including any
obligation to repay to the United States any funds provided under
Title IV of the "Higher Education Act of 1965," and extensions
thereof or amendments thereto, or any similar act of Congress, is
limited to the amount contained in the Federal Student Loan Reserve
Fund or the Student Loan Operating Fund, and the state shall not be
liable to the United States, or to any other person or entity, beyond
the amount contained in the Federal Student Loan Reserve Fund or the
Student Loan Operating Fund for any debts, obligations, and
liabilities.
69766.1.  (a) Notwithstanding Section 13340 of the Government Code,
in addition to the purposes for which funds are appropriated pursuant
to Section 69766, there is hereby continuously appropriated from the
Federal Student Loan Reserve Fund and the Student Loan Operating
Fund to the commission, the amount of funds necessary to make
payments for the purchase of defaulted loans.
   (b) Notwithstanding Section 13340 of the Government Code, there is
hereby continuously appropriated from the Student Loan Operating
Fund for transfer to the Federal Student Loan Reserve Fund, all
federal reinsurance payments received on defaulted student loans and
deposited in the Student Loan Operating Fund.
   (c) The appropriation authorized by this section shall be
operative only if the annual Budget Act for the fiscal year is not
chaptered on or before July 15, and shall not exceed the amount
deemed by the commission to be required by federal law or regulation.
  The commission shall notify the Joint Legislative Budget Committee
of the amount of any payments issued pursuant to this section.
69767.  The Treasurer shall invest, pursuant to statute, any surplus
money in the Federal Student Loan Reserve Fund and the Student Loan
Operating Fund.  The interest or other accretions as a result of the
investment of this money shall be deposited in the originating fund,
and may be expended for those purposes authorized in this article or
the Higher Education Act of 1965.
69768.  (a) The funds in the Federal Student Loan Reserve Fund and
the Student Loan Operating Fund shall be paid out by the State
Treasurer on warrants drawn by the Controller, or through a transfer
between the Federal Student Loan Reserve Fund and the Student Loan
Operating Fund, and requisitioned by the commission in carrying out
the purposes of this article and the federal act.
   (b) The commission is hereby authorized to make advance payments
from the Student Loan Operating Fund to the auxiliary organization
for services rendered to the commission under Article 2.5 (commencing
with Section 69522).  The commission is hereby authorized to make
advance payments from the Student Loan Operating Fund to the
auxiliary organization for the purpose of providing funding necessary
for other permitted student financial aid activities approved by the
commission pursuant to a business plan adopted by the auxiliary
organization and approved by the commission, provided the commission
first provides the Director of Finance and the Joint Legislative
Budget Committee with at least 45 days advance notice in writing that
includes the amount proposed to be transferred and a description of
the approved student financial aid activities and related
expenditures to be undertaken.  If the Director of Finance or the
Joint Legislative Budget Committee notifies the commission regarding
issues of concern with the proposed transfer of funds, the commission
shall convene a meeting of appropriate representatives of the
commission, the Department of Finance, and the Legislature to resolve
those issues.   Notwithstanding any other law, advance payments to
the auxiliary organization and any fees charged by the auxiliary
organization for services rendered to the commission pursuant to an
operating agreement may be deposited with a private financial
institution.
69769.  The commission shall establish a Loan Advisory Council.  The
Loan Advisory Council shall be composed of 17 members, appointed by
the commission, composed of representatives of students,
postsecondary educational institutions, eligible lenders, and
participating secondary markets.
69769.3.  (a) The Loan Advisory Council established pursuant to
Section 69769 shall be composed of members appointed from the
following groups:
   (1) Four representatives of the lending community participating in
the Federal Family Education Loan Program.
   (2) One representative each from the University of California, the
California State University, the California Community Colleges, a
private nonprofit postsecondary education institution, and a private
for-profit postsecondary education institution.
   (3) One representative from the California Association of Student
Financial Aid Administrators.
   (4) Five student representatives from the same postsecondary
segments listed in paragraph (2).  In no event shall a student
representative be appointed to serve simultaneously as the
representative of more than one of these five postsecondary groups.
   (5) One representative from a secondary market participating in
the Federal Family Education Loan Program.
   (6) One representative from the California Lenders for Education
Association.
   (b) The representatives appointed by the commission pursuant to
subdivision (a) shall be selected by the commission from lists
provided to its chair by each group described in that subdivision.
69769.4.  In addition to the members appointed to the Loan Advisory
Council pursuant to Section 69769.3, the United States Department of
Education may appoint one nonvoting representative to the council who
shall serve as liaison between that department and the council.
69769.5.  The Loan Advisory Council shall review the activities and
policies of the  Federal Family Education Loan Program and shall
regularly advise the commission of its findings and recommendations.
The Loan Advisory Council may request information and data that it
deems appropriate from the Student Aid Commission with respect to the
Federal Family Education Loan Program or any other loan program
administered by the commission.
69769.7.  (a) The Loan Advisory Council shall annually elect a chair
and a vice chair from its membership.  Representatives who serve on,
or are employed or retained by, the commission, and the nonvoting
representative appointed by the United States Department of
Education, if any, are ineligible for election to these positions.
   (b) The chair of the Loan Advisory Council shall have the
authority, in consultation with the chair of the commission, to
convene meetings of the council.  The chair shall also direct each
council meeting and shall regularly present oral and written reports
to the commission regarding the advice of the council.  The vice
chair of the Loan Advisory Council shall assume these
responsibilities in the absence of the chair.
69771.  This article shall be applicable to the extent that its
provisions do not conflict with Title IV of the Higher Education Act
of 1965, or any extensions thereof, or any similar act of Congress,
and the rules and regulations adopted thereunder.
69772.  The commission  shall annually report on the numbers of
students participating in the program, total loan volume, and the
postsecondary educational institutions in which participating
students are enrolled.
69774.  (a) The commission shall provide, with each application form
for the  Federal Family Education Loan Program a notice to the
student informing him or her that, for purposes of collecting on a
defaulted loan, the commission is entitled to seek employment, wage,
and other information from the Employment Development Department on
any person who defaults on a guaranteed student loan.
   (b) A common application form may be utilized for student loans in
compliance with the program eligibility and financial forms
specified in Section 69534.1.
69775.  The commission shall develop and distribute in cooperation
with postsecondary educational institutions and private lenders,
simple, common consumer information for prospective student
borrowers.
69776.  The commission may contract for all or part of
administrative support services.
69776.5.  The commission may enter into contracts with a public
agency or a private entity to improve the processing and distribution
of guaranteed student loan applications through the use of
electronic networks and unified data bases.
69777.  The commission shall encourage private lenders to increase
participation in the guaranteed student loan program.
69779.  The General Fund shall not be liable for any student loan
made prior to the effective date of the chapter which enacts this
section.