Legislature(2001 - 2002)
02/14/2001 08:04 AM House EDU
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 43 - STUDENT LOAN FORGIVENESS CHAIR BUNDE announced the first order of business as HOUSE BILL NO. 43, "An Act relating to reimbursement of certain student loans; and providing for an effective date." Number 0173 KEVIN JARDELL, Staff to Representative Joe Green, Alaska State Legislature, came forward on behalf of Representative Green, sponsor, to present changes in HB 43. He said the basic concept has not changed; there have been some clarifications. He referred to page 1, lines 8-9, which mentions an undergraduate degree. He stated that many of the universities in the state are encouraging people with other degrees to get a master's degree. This makes it clear that the bill applies to all those situations where the person is taking coursework in order to obtain a teaching certificate and endorsement, and in order to teach in a geographically underserved area or subject area where there is a shortage. MR. JARDELL referred to an additional change on page 2, beginning at line 17. This clarifies when someone had to pay and how it would be paid out. He said this wasn't spelled out in the last version. It now is clear that when persons graduate, they are obligated to begin payment on their loans under the terms of their loan agreement with the Alaska Student Loan Corporation (ASLC). Once students are eligible for the program they are hired as a teacher in one of these areas and at that point it would be the balance of their loan that would be subject to the forgiveness. If they did in fact pay for three or four years before they were hired or eligible for the program, they would not be getting a check back in cash. MR. JARDELL posed the question: If people default, are they still eligible at the default rate? On page 1, line 12, the borrower must comply with AS 14.43.120. If the borrower is in default, he/she is not complying with that provision and so would not be eligible for the loan forgiveness program. Number 0373 REPRESENTATIVE GREEN made a motion to adopt the proposed committee substitute (CS) for HB 43, version 22-LSO225\P, Ford, 2/13/01, as a work draft. There being no objection, proposed CSHB 43 was before the committee. CHAIR BUNDE stated he did not see an appropriation and asked Mr. Jardell if the money would come from the student loan money or the GF [general fund]. MR. JARDELL answered that the only way that this program would be funded is through GF. This is made clear on page 2, lines 23-26, which states: "subject to appropriation by the legislature". CHAIR BUNDE stated for the record he wanted to see that that was there. The committee had expressed some concern before about spending the appropriations money. Number 0476 DIANE BARRANS, Executive Director, Alaska Commission on Postsecondary Education (ACPE), Department of Education and Early Development (EED), presented a draft fiscal note. The range of annual cost in year one, which would be year 2003, would be an estimated cost of $85 thousand. By the fifth year of the program the estimated costs would be $424,000. CHAIR BUNDE stated that somebody had brought to his attention that, apparently, the IRS [Internal Revenue Service] considers this forgiveness taxable income. MS. BARRANS answered that canceled debt is considered taxable income; however, there are some provisions provided in tax law. One of those provisions, specific to student loans, is that if the debt is canceled as a result of an agreement to a certain service, then it is excludable. Number 0579 CHAIR BUNDE noted that he has had a number of inquiries from people who are already in the process of repayment of their debt or have paid their debt and would like to fall under these provisions. He asked if the loans are no longer funded out of the general fund, whether that makes each year's loan a separate contract. MS. BARRANS stated that was correct. CHAIR BUNDE stated, "I have used 'astronomical' to describe the cost of this if we were to go back for as long as we have had student loans. Retrospectively, would I be out of the ballpark if using those terms?" MS. BARRANS answered that the cost would be several million dollars per year. The total that the state and the corporation forgave during the years when there was a benefit is to date $74 million. CHAIR BUNDE asked if that portion of the student loan program is smaller than the current portion, the non-forgiveness. MS. BARRANS answered very much so. Number 0703 REPRESENTATIVE PORTER asked if this bill would require that fiscal note and whether it should it be assumed that it would catch up with it. CHAIR BUNDE replied that he is sure that there will be a great interest in further committees of referral on making sure that there is a fiscal note since it does go to the House Finance [Committee]. Number 0736 REPRESENTATIVE GREEN made a motion to move proposed CSHB 43, version 22-LSO225\P, Ford, 2/13/01, from the committee with individual recommendations and fiscal note to be attached. There being no objection, CSHB 43(EDU) moved from the House Special Committee on Education.
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