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7980 Student Aid Commission
Program Descriptions
50 - CALIFORNIA LOAN PROGRAM
The Commission administers the Federal Family Education Loan Program (FFELP) for students on behalf of the United States Department of Education (USED) pursuant to the Higher Education Act of 1965, as amended. Chapter 961 of the Statutes of 1996 authorized the Commission to establish an auxiliary organization, EdFund, as a nonprofit public benefit corporation to provide operational and administrative services for the Commission's participation in the FFELP, effective January 1, 1997. The Federal Student Loan Reserve Fund and Student Loan Operating Fund are continuously appropriated for this purpose.
The FFELP consists of Federal Subsidized Stafford loans, Federal Unsubsidized Stafford loans, Federal Parent Loans for Undergraduate Students (PLUS), Graduate and Professional PLUS, and the Federal Loan Consolidation Program. Loans are made available to students through private lenders, such as banks or credit unions, and the Commission guarantees the loan. If a student or parent defaults, the lender files a claim with the Commission, which pays the lender a portion of the outstanding balance. The USED reimburses the Commission for the default. The cost of default claims, collection expenses, and administration of FFELP are funded by: USED, a federal default fee, collections and fees from defaulted borrowers, and interest on investments.
Chapter 182 of the Statutes of 2007 (SB 89) authorizes the sale, or an alternative financial arrangement to the sale, of the California Student Aid Commission's loan guarantee function and nonprofit auxiliary organization, EdFund, in order to maximize the value of the State's assets related to implementation of the Federal Family Education Loan Program. The law authorizes the Director of Finance to act as an agent for the sale. Net proceeds generated from the sale will be deposited into the state's General Fund. SB 89 amends Education Code Sections 69522, 69526 and 69766 and adds Section 69521-69521.11.
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