CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

97

CHAPTER 702

Statutes of 2025

[ Approved by Governor October 13, 2025. Filed with Secretary of State October 13, 2025. ]

Introduced by Assembly Member Elhawary

February 14, 2025

An act to amend Section 70034 of the Education Code, relating to student financial aid.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: no

LEGISLATIVE COUNSEL’S DIGEST

Existing law establishes the California DREAM Loan Program, which authorizes a student attending a participating campus of the University of California or California State University to receive a loan, referred to as a DREAM loan, if the student satisfies certain requirements. Existing law prohibits a student from borrowing more than $4,000 within a single academic year and more than $40,000 in the aggregate under the program. Existing law prohibits a student enrolled in an undergraduate program from borrowing more than $20,000 as an undergraduate student and prohibits a student enrolled in a graduate program from borrowing more than $20,000 as a graduate student.

This bill would instead prohibit a student enrolled in an undergraduate program from borrowing more than $4,000 within a single academic year, and a student enrolled in a graduate program from borrowing more than $20,500 within a single academic year. The bill would increase the aggregate limit under the program for a student enrolled in a graduate program to $118,500 as a graduate student, while maintaining the $20,000 aggregate limit under the program for a student enrolled in an undergraduate program, thereby increasing the overall aggregate limit under the program for a student who receives a DREAM loan for both undergraduate and graduate enrollment to $138,500.

The people of the State of California do enact as follows:

SECTION 1.

Section 70034 of the Education Code is amended to read:

70034.

(a) The amount of a DREAM loan offered to an individual student by a participating institution shall be determined by the institution, subject to the following provisions:

(1) The loan may not exceed the financial need of the student.

(2) (A) A student who is enrolled in an undergraduate program may not borrow more than four thousand dollars ($4,000) under this program within a single academic year.

(B) A student who is enrolled in a graduate program may not borrow more than twenty thousand five hundred dollars ($20,500) under this program within a single academic year.

(3) (A) A student who is enrolled in an undergraduate program may not borrow, as an undergraduate student, more than twenty thousand dollars ($20,000) in the aggregate under the program.

(B) A student who is enrolled in a graduate program may not borrow, as a graduate student, more than one hundred eighteen thousand five hundred dollars ($118,500) in the aggregate under the program.

(C) A student may not borrow more than one hundred thirty-eight thousand five hundred dollars ($138,500) in the aggregate under the program, consistent with the limitations specified in subparagraphs (A) and (B).

(4) The proportion of program funding used for instructional programs and for graduate programs shall be determined at the discretion of the participating institution. Priority shall be given to loans for instructional programs.

(b) The interest rate for loans issued under the program shall be the same as the then-current interest rate for undergraduate loans under the William D. Ford Federal Direct Loan Program (20 U.S.C. Sec. 1087a et seq.).

(c) Except as provided in subdivision (d), the standard repayment term for a DREAM loan shall be 10 years. Repayment shall commence following a six-month grace period that begins when a student graduates or ceases to maintain at least half-time enrollment in a degree or certificate program.

(d) On or before January 1, 2020, a participating institution shall adopt procedures allowing a borrower to select an income-based repayment plan for the repayment of a DREAM loan, in accordance with the standards set forth in the William D. Ford Federal Direct Loan Program for income-based repayment plans.

(e) Interest shall not accrue on a DREAM loan during periods of at least half-time enrollment in a degree or certificate program or during the six-month grace period specified in subdivision (c).

(f) Eligibility for deferment, discharge, or forbearance of a DREAM loan shall be determined by the participating institution in accordance with the standards set forth in the William D. Ford Federal Direct Loan Program.

(g) On or before January 1, 2024, a participating institution shall establish loan forgiveness options for borrowers who receive a DREAM loan with similar standards as those set forth in the Federal Perkins Loan Program.

(h) (1) A borrower shall qualify for administrative relief consistent with the standards set forth in the Federal Direct Loan Program during periods of national emergency declared by the President of the United States.

(2) A borrower shall qualify for any state of emergency administrative forbearance on student loans that is provided by the Governor by executive order or the participating institution.

(3) A borrower shall be granted administrative relief for 90 days if the borrower lives or works where a natural disaster has occurred upon notification by the borrower, a member of the borrower’s family, or another reliable source that the borrower has been affected by the natural disaster.

(i) Participating institutions shall use a common promissory note, approved by the Treasurer, to issue DREAM loans.