Expand Student Loan Program

Section 1. Legislative findings and intent. The legislature finds that recent changes to federal student lending programs have significantly reduced access to affordable credit for graduate students enrolled in academic and professional programs critical to New York's workforce and economic competitiveness, including graduate and professional degree programs in high need fields critical to New York's workforce such as education, nursing, healthcare, social services, public administration, creative arts, and other licensed professions.

The legislature further finds that the reduction or elimination of federal graduate lending options threatens enrollment, degree completion, and workforce supply in areas of demonstrated state need.

It is therefore the intent of the legislature to establish the New York Reinvests in Student Educational Supports (NY RISES) Program to provide eligible students with access to responsible, affordable educational loans to supplement available federal student aid and help bridge the gap between the cost of attendance and available financial assistance.

§ 2. Part 5 of article 14 of title 1 of the education law is REPEALED and a new part 5 is added to read as follows:

PART V

NEW YORK REINVESTS IN STUDENT EDUCATION SUPPORTS PROGRAM Section 690. Definitions.

691. Powers and duties.

692. Educational loans; special requirements.

693. Repayment of loans.

694. Sale of education loans.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD15994-01-6

694-a. Miscellaneous.

694-b. Reporting.

§ 690. Definitions. As used in this part, the following terms shall have the following meanings unless otherwise specified:

1. "Authority" shall mean the dormitory authority of the state of New York (DASNY).

2. "Education loan" shall mean any loan that is made under this program to finance or refinance higher education expenses at an eligible college.

3. "Eligible borrower" or "borrower" shall mean (a) a student who is a resident of New York state attending or accepted for enrollment at an eligible college and is enrolled at least half time in an eligible program at an eligible college; or (b) the parent, legal guardian, or sponsor, as defined by the corporation in regulation, of a student who is enrolled, or accepted for enrollment at an eligible college, and who obtains an education loan from a lending institution to pay for or finance higher education expenses under this program.

4. "Eligible college" shall mean a post-secondary institution, located within New York state, eligible for funds under Title IV of the Higher Education Act of nineteen hundred sixty-five, as amended, or successor statute offering graduate or professional degree granting or certificate program.

5. "Eligible program" shall mean an accredited graduate or professional degree program offered by a postsecondary institution that is approved by the commissioner and registered by the department pursuant to this chapter and applicable regulations.

6. "Eligible co-signer" shall mean a parent, legal guardian or otherwise credit worthy individual over twenty-one years of age who satisfies applicable credit criteria approved by the authority and is a resident of New York state.

7. "Higher education expenses" shall mean the cost of attendance at an eligible college and shall include tuition and fees, books, room and board, and other educationally related expenses, as determined by the authority.

8. "Holder" shall mean, with respect to an education loan: (a) a lender; (b) a public benefit corporation authorized to finance the purchase or making of education loans pursuant to the public authorities law; or (c) any assignee of such lender or public benefit corporation.

9. "Lending institution" or "lender" shall mean any entity that itself or through an affiliate originates education loans, other than an entity authorized to finance the purchase or making of education loans through the issuance of bonds pursuant to the public authorities law.

10. "Program" shall mean the New York reinvests in student educational supports program established by this part.

11. "Student" shall mean any individual who is enrolled at least halftime, as defined by the commissioner, at a graduate or professional degree granting or certificate program at an eligible college.

§ 691. Powers and duties. In furtherance of the purposes set forth in this part, the authority shall serve as the governing and administering entity of the program, and shall have the following additional powers and duties:

1. To directly administer, or contract with one or more qualified third-party entities, including lending institutions, servicers, program administrators, or other financial entities, to market, originate, disburse, service, collect, administer, guarantee, secure, finance, purchase, or otherwise manage education loans made under this program.

2. To purchase defaulted education loans made under this program.

3. To establish and maintain one or more default reserve funds and accounts within such funds, in accordance with the terms of this program.

4. To develop and administer or contract to administer one or more financial literacy programs.

5. To provide or contract to provide default aversion services.

6. To establish criteria for eligible colleges, lenders, and other entities such as, but not limited to, servicers, and to enter into participation agreements with any such eligible colleges, lenders, and other entities and any entity authorized to finance the purchase or making of education loans through the issuance of bonds pursuant to the public authorities law, and any subsequent purchaser of education loans made under this program.

7. To establish criteria for lender underwriting, education loan purchases, servicing, and default insurance payments.

8. To establish criteria for the distribution of education loans made under this program.

9. To audit lenders, servicers, holders, and eligible colleges for program compliance.

10. To adopt rules and regulations to implement this program.

11. To enter into agreements with public or private entities for the administration, servicing, origination, underwriting, processing, compliance, customer service, or other operational functions necessary to implement the program.

12. To phase in specific program requirements through rules and regulations within a reasonable timeframe following the date this part takes effect.

§ 692. Education loans; special requirements. In any year in which fixed rate education loans are to be acquired using the proceeds of bonds issued by the authority or other public benefit corporation authorized to issue bonds for the purposes of this program, preference shall be given to education loans made to eligible borrowers for the benefit of students who demonstrate financial need based on such student's family gross income and to education loans made to eligible borrowers for the benefit of students accepted or enrolled in a graduate or professional degree granting program, pursuant to rules and regulations promulgated by the authority after consultation with the authority or other public benefit corporation authorized to issue bonds for the purposes of this program.

1. Terms and conditions. (a) Eligible borrowers shall apply for education loans under this program on forms prescribed by the authority.

(b) Except as may be provided by regulation, a student for whom an education loan is made shall be required to first apply for and exhaust: (i) their maximum eligibility of loans under the Federal Direct Student Loan Program (FDSLP), excluding PLUS loans; (ii) any other federal student aid, other than HEAL loans and other aid permitted by the authority to be excluded; (iii) any state student aid; and (iv) any other student aid as prescribed by the authority before being eligible for any education loan under this program.

(c) Borrowers shall successfully complete a financial literacy course as prescribed by the authority.

(d) Student borrowers may apply for education loans under this program with an eligible co-signer.

(e) A borrower, or co-signer, who is in default on an education loan made under this program, the William D. Ford Program, or has failed to comply with the terms and conditions of any award under this article and has failed to satisfactorily cure such default or non-compliance as prescribed by applicable law or regulation shall be ineligible to receive a loan under this program, and shall further be ineligible for any other state student aid while in default on an education loan made under this program.

(f) Participating eligible colleges, lending institutions, and other participants in this program shall be required to enter into a participation agreement with the authority and comply with all reporting and processing requirements and procedures as established by the authority. These participation agreements shall contain such other specific terms and conditions of the program as shall be determined by the authority.

2. Citizenship. A borrower shall be: (a) a citizen of the United States; or (b) a noncitizen lawfully admitted for permanent residence in the United States; or (c) an individual of a class of refugees paroled by the attorney general of the United States under their parole authority pertaining to the admission of noncitizens to the United States.

3. Loan limits. Education loans made under this program shall have annual and cumulative loan limits as approved from time to time by the authority, subject to the approval of the authority, or other public benefit corporation authorized to issue bonds under the public authorities law for purposes of this program, with respect to loans that are expected to be financed by such entity.

4. Interest rates. The interest rate of loans made under this program shall be established in a manner that shall be approved at least annually by the authority, subject to the approval of the authority, or other subject to the public benefit corporation authorized to issue bonds under the public authorities law for purposes of this program, with respect to loans that are expected to be financed by such entity.

5. Default fee. A percentage of the education loan shall be paid as a default fee, by or on behalf of the borrower or the lender, in an amount to be established at least annually by the authority subject to the approval of the authority, or other public benefit corporation authorized to issue bonds under the public authorities law for purposes of this program, with respect to loans that are expected to be financed by such entity. The default fee established by the authority, subject to the approval of the authority, or other public benefit corporation authorized to issue bonds under the public authorities law for purposes of this program, with respect to education loans that are expected to be financed by such entity, shall be a percentage of the principal amount of such loans, as determined by the authority, that, together with other amounts on deposit in the applicable default reserve fund, shall not exceed an amount sufficient to ensure that the balance of such funds satisfies the obligations of such default reserve fund and permits such loans to be financed. This fee may be considered part of the cost of attendance for the purpose of calculating the loan amount for this program and shall be transmitted to the authority in accordance with rules or regulations promulgated by the authority. Such funds shall be deposited into one or more reserve funds or reserve accounts established and maintained by the authority pursuant to this part. The authority shall determine the amount necessary to maintain the fiscal integrity of the program and support repayment obligations associated with education loans made under this program. The default fee may be included as part of the cost of attendance for purposes of calculating loan eligibility.

6. Consolidation. Education loans made pursuant to this program may be eligible for consolidation upon the terms and conditions established by the authority. Any person consolidating education loans under this program shall be considered a borrower for purposes of this part.

7. Default reserve funds. (a) The authority may establish and maintain one or more default reserve funds and accounts within such funds, in accordance with the terms of this program.