Legislature(1997 - 1998)
04/02/1998 09:05 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 332 "An Act relating to the Alaska Student Loan Corporation." Senator Pearce advised the bill had been heard last week and the amendments in the files were a result of that hearing. She noted that "E" version of the bill had been adopted as a working draft. The bill was held over so Senator Donley would have time to prepare some amendments. Senator Donley advised the committee that he would no be offering amendments #1. He would like to start with amendment #3. There was no objection. Senator Donley MOVED amendment #3. He said this amendment would allow Alaskan students to borrow more money over the current $9500 cap for certain types of graduate schools not offered in Alaska. With the exception of dental and medical they could borrow up to $15,000/year and dental and medical would be moved up to $25,000/year. Senator Gary Wilken was invited to join the committee. He said he admired Senator Donley's work with the WAMI program. He knows how difficult it has been, but much needed. He said he would support the amendment but not the bill. He noted the student loan program was still trying to get on its own feet and each year had been lessening their request for more general fund money. He felt the bill in general would create more losses for the student loan program. He said they should concentrate more on making the program self-sufficient. Senator Parnell asked what the default rate was, but Senator Wilken deferred to Diane Barrans. Diane Barrans, Executive Director, Post Secondary Education Commission, Department of Education was invited to join the committee. She said at this time they had not done a data extraction to really examine what this amendment might do for graduate students. She said overall the default rate was at about nineteen percent. She said one of the concerns of the commission was that it raised the aggregate cap for not only medical and dental borrowers but also other graduate students. Looking at the debt load if someone were to borrow at the increased level, beginning immediate repayment, the monthly payment on a twenty-year schedule would be over $900. If there was economic hardship and it was extended to twenty-five years it would be $850 per month. She explained the commission would be issuing a mortgage size loan in an unsecured debt capacity. The risk extended to the commission was significant. Senator Parnell felt there was a need to look at the real value of the dollars at this point in time. He did not feel they were asking students to do any more that requested from students ten years ago. Senator Torgerson asked in relation to income was it any worse that someone that has borrowed $42,000 and has a $500 payment? Ms. Barrans said she has not really had time to look at the types of graduate degree programs they would be funding at the higher levels. She said some may be in the myriad of substantial incomes, however, some, such as social work would have very modest incomes. Senator Torgerson asked if the option were to general fund subsidize the students and not ask them to borrow more money? Ms. Barrans referred to her memo of 31 March and 1 April and said she explained a need for some general fund capitalization. She said the commission was loaning approximately $80 million/year. She suggested a general fund source for loans. Senator Torgerson indicated that he preferred the option of additional money being available to borrow instead of them coming to the Legislature and creating programs such as WAMI. He asked what other states did for graduate study monies? Ms. Barrans said Alaska's program was currently the most generous graduate program available. Again referring to her memos, she said there were other loan programs available, such as Federal and private. In response to Co-chair Sharp, she noted that because interest does not start on the ASL until time it is being paid back many borrowers opted for this program rather than the Federal program on which interest started at the time of the award. She further explained that the majority of graduate students attended schools out-of-state. She said approximately 400 - 600 borrowers would qualify for the new increased limits. Senator Adams said he OBJECTED to amendment #3. He felt it could be repaired by a new bill. By a roll call vote of 4 yeas (Pearce, Donley, Torgerson, Parnell) and 3 nays (Sharp, Adams, Phillips) amendment #3 was ADOPTED. Senator Donley indicated he would not offer amendment #3. Senator Pearce MOVED CSSB 332(FIN) and WITHOUT OBJECTION it was REPORTED OUT with individual recommendations and zero fiscal note from the Department of Education. The following verbatim transcript of SJR 42 is incorporated into the minutes. Co-chair Sharp called SJR 42.
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