California DREAM Loan Program: limits.

Elhawary frames the California DREAM Loan program as a means to recalibrate student borrowing by expanding graduate access while preserving the program’s link to demonstrated financial need, and by reorganizing the program’s debt limits into a two-tier structure with a combined cap. The core shift is to maintain a $4,000 per-year undergraduate borrowing limit, raise the graduate annual limit to $20,500, and establish separate aggregate caps of $20,000 for undergraduates and $118,500 for graduates, with an overall combined maximum of $138,500 for borrowers who pursue both undergraduate and graduate DREAM loans. The bill also authorizes institutional discretion over the allocation of DREAM funds between instructional and graduate programs, prioritizing loans for instructional programs.

Key mechanisms and details include: the annual caps described above, all tied to the student’s financial need; interest on DREAM loans remaining aligned with the then-current undergraduate Direct Loan rate; a standard 10-year repayment term with a six-month grace period; and ongoing provisions for deferment, forbearance, and discharge in line with federal Direct Loan Program standards. The bill requires institutions to offer income-based repayment options and to establish loan forgiveness options with standards similar to those of the Federal Perkins Loan Program, setting deadlines for these features (IBR adoption by January 1, 2020, forgiveness options by January 1, 2024). It also codifies administrative relief mechanisms during national emergencies, Governor-declared emergencies, and natural disasters (including a 90-day disaster relief window) and standardizes loan documentation through a common promissory note approved by the Treasurer.

From a regulatory and implementation standpoint, participating institutions administer the program within the amended caps, implement IBR procedures and forgiveness options, apply the emergency-relief provisions, and use the Treasurer-approved common promissory note. The changes are designed to align DREAM loan terms with federal policy on interest, repayment, deferment, forbearance, and forgiveness, while maintaining state oversight of loan documentation. The bill signals no explicit new appropriation and requires fiscal oversight from the Legislature’s Fiscal Committee, but it lacks an explicit effective date and contains deadlines for IBR and forgiveness that are dated relative to enactment, creating potential ambiguities about current enforceability and transition.

In the broader policy context, the measure restructures how graduate borrowing is counted against the program’s limits and elevates institutional flexibility in fund allocation while preserving protections tied to financial need. It tightens loan administration through a standardized promissory note and seeks consistency with federal loan programs for repayment relief and forgiveness options, while embedding emergency-relief provisions to shield borrowers during crises. The practical effects will depend on implementing regulations by participating campuses and the Treasurer, as well as how institutions reconcile the two-tier aggregate framework with ongoing reporting and borrower communications.