HB 63: "An Act providing for a reduction in interest on postsecondary education loans for residents."
00 HOUSE BILL NO. 63 01 "An Act providing for a reduction in interest on postsecondary education loans for 02 residents." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 14.43 is amended by adding a new section to read: 05 Sec. 14.43.123. Reduction in loan interest for residents. (a) Notwithstanding 06 a contrary provision of law and except as provided in (g) of this section, the 07 commission shall provide for a reduction of 2.5 percent a year from the established 08 interest rate for a loan issued under AS 14.43.091 - 14.43.160, 14.43.161 - 14.43.168, 09 or 14.43.170 - 14.43.175 at the end of each calendar year if 10 (1) the borrower establishes and maintains residency for one year 11 before obtaining the loan; 12 (2) the borrower maintains residency in the state while repaying the 13 loan at a reduced interest rate; 14 (3) the loan for which the reduction in interest is allowed is not in
01 default; 02 (4) the principal of the loan is not otherwise eligible to be fully repaid 03 or forgiven by the state under another program; and 04 (5) the borrower completed or is making progress toward completing 05 in a timely manner the degree or certificate program for which the loan was issued. 06 (b) A borrower becomes ineligible for a reduction in the interest rate under 07 this section if, at any point, the borrower no longer meets the requirements of (a) of 08 this section, except that, if a borrower becomes ineligible for failure to make progress 09 toward completing in a timely manner the degree or certificate program for which the 10 loan was issued, the borrower may become eligible for a reduction in the interest rate 11 under this section if the borrower completes the degree or certificate program for 12 which the loan was issued and meets the remaining requirements of (a) of this section. 13 (c) A reduction in the interest rate under (a) of this section does not apply to 14 principal and interest paid on the loan before a borrower becomes eligible for the 15 reduction or during any period when the borrower becomes ineligible for the 16 reduction. A reduction in the interest rate under this section is subject to appropriation 17 by the legislature to the commission of the amount necessary to offset the amount of 18 reduced interest provided to borrowers. The commission shall, by regulation, establish 19 an equitable system for reducing or prorating interest rate reductions among borrowers 20 if the amount appropriated is insufficient to offset the full amount of interest rate 21 reductions. 22 (d) A reduction in the interest rate for a loan provided under this section is in 23 addition to any other available reduction of the principal of the loan or interest rate. 24 (e) A borrower who is issued a reduction in the interest rate of a loan under 25 this section in error shall repay the amount of the reduction, plus interest. 26 (f) Notwithstanding a reduction in interest rate available to a borrower under 27 this section, the corporation may maintain a minimum three percent interest rate for 28 loans issued by the corporation if necessary for a purpose that is consistent with the 29 duties of the corporation. 30 (g) By January 1 of each year, the corporation shall determine whether and to 31 what extent a reduction in interest rates under this section would negatively affect the
01 corporation's bond rating and ability to fund future loans. If the corporation determines 02 that a reduction in interest rates under this section would negatively affect the 03 corporation's bond rating or its ability to fund future loans, the commission may not 04 provide a reduction in loan interest rates under (a) - (c) of this section for the affected 05 fiscal years unless an appropriation is made to cover the costs of the reduction. If the 06 appropriation is inadequate to pay reductions in interest rates for all eligible loans, the 07 commission shall prorate all reductions in interest rates provided under this section. 08 (h) Notwithstanding (a)(2) of this section, a borrower who is issued a 09 reduction in the interest rate under this section is eligible to continue receiving the 10 reduction in interest rate, subject to the availability of funds, if the borrower was a 11 resident of the state for not less than five years after completion of the program for 12 which the loan was issued and leaves the state for not more than one year during the 13 period of repayment of the loan. 14 (i) The commission may adopt regulations necessary to implement this 15 section, including regulations for partial reductions in the interest rate during the year 16 when a borrower returns to the state after completing the degree or program under 17 (a)(5) of this section. 18 (j) In this section, "resident" or "residency" means living in the state with the 19 intention of remaining permanently without claiming residency in another state or 20 country. 21 * Sec. 2. AS 14.43.165 is amended by adding a new subsection to read: 22 (d) A borrower under AS 14.43.161 - 14.43.168 may be eligible for a 23 reduction in the interest rate under AS 14.43.123. The commission shall reduce the 24 interest rate of a loan under AS 14.43.161 - 14.43.168 as specified in AS 14.43.123 if 25 the borrower meets the eligibility requirements of that section. 26 * Sec. 3. AS 14.43.171 is amended to read: 27 Sec. 14.43.171. Applicability of other laws. The provisions of 28 AS 14.43.120(b), 14.43.120(d)(4), 14.43.123, 14.43.135, 14.43.140, and 14.43.145 - 29 14.43.160 apply to the loans made under AS 14.43.170 - 14.43.175 as if the loans 30 were made under those applicable provisions.