Legislature(2021 - 2022)SENATE FINANCE 532
03/23/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB81 | |
| SB94 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 94 | TELECONFERENCED | |
| += | SB 45 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 81 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
March 23, 2022
9:04 a.m.
9:04:41 AM
CALL TO ORDER
Co-Chair Bishop called the Senate Finance Committee meeting
to order at 9:04 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Natasha von Imhof
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Sana Efird, Executive Director, Alaska Commission on
Postsecondary Education, Department of Education and Early
Development.
PRESENT VIA TELECONFERENCE
Lee Donner, Senior Managing Director, Hilltop Securities,
Texas; Josh Bicchinella, Chair, Alaska Commission on Post-
Secondary Education, Wasilla.
SUMMARY
SB 81 VILLAGE PUBLIC SAFETY OFFICER GRANTS
CSSB 81(CRA) was REPORTED out of committee with
six "do pass" recommendations and one "no
recommendation" recommendation and with two
previously published fiscal notes: FN 3(DPS) and
FN 4(DPS).
SB 94 EDUCATION & SUPPLEMENTAL LOAN PROGRAMS
SB 94 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 81
"An Act requiring background investigations of village
public safety officer applicants by the Department of
Public Safety; relating to the village public safety
officer program; and providing for an effective date."
9:05:08 AM
Co-Chair Bishop relayed that it was the third hearing for
SB 81. The committee had heard public testimony on February
28, 2022. The committees intention was to consider an
amendment, cover fiscal notes, and look to the will of the
committee.
Olson MOVED to WITHDRAW Amendment 1, 32-LS0362\I.17
(Radford, 3/21/22). There being NO OBJECTION, it was so
ordered. [Secretary's note: A MOTION to ADOPT Amendment 1,
and an OBJECTION to the motion to ADOPT Amendment 1 was
made on March 21, 2022.]
Senator Wielechowski discussed FN 3, OMB Component 3200, a
zero fiscal note from the Department of Public Safety
(DPS). The bill authorized fingerprint submission to DPS
for state national criminal background checks. He cited
that DPS anticipated being to absorb the additional duties
with existing staff.
Senator Wielechowski discussed FN 4, OMB Component 3047,
from DPS for the Village Public Safety Officer (VPSO)
Program. The fiscal note cited a cost of $122,200 in FY 23,
and $107,300 in FY 24 going forward, and would fund a long-
term non-permanent position that would be required to
conduct background investigations for an annual cost of
$100,900. The bill also required successful completion of a
psychological examination for a VPSO to carry firearms. The
cost for 50 VPSOs to receive psychological testing in FY 23
was estimated to be $425 per person, or $21,250. Going
forward, there was a cost of $6,375 based on an average of
15 new VPSOs per year.
Senator Olson MOVED to report CSSB 81(CRA) out of Committee
with individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
CSSB 81(CRA) was REPORTED out of committee with six "do
pass" recommendations and one "no recommendation"
recommendation and with two previously published fiscal
notes: FN 3(DPS) and FN 4(DPS).
9:07:47 AM
AT EASE
9:09:42 AM
RECONVENED
SENATE BILL NO. 94
"An Act relating to the education loan program and
Alaska supplemental education loan program; and
providing for an effective date."
9:09:42 AM
Co-Chair Bishop relayed that it was the first hearing of SB
94. The committee would hear a bill introduction and
sectional analysis, take invited and public testimony, and
set the bill aside. He listed individuals available for
questions.
9:10:28 AM
SANA EFIRD, EXECUTIVE DIRECTOR, ALASKA COMMISSION ON
POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION AND EARLY
DEVELOPMENT, thanked the committee. She wanted to give a
brief overview of what the bill did and why the Alaska
Student Loan Corporation (ASLC) and the Alaska Commission
on Postsecondary Education (ACPE) were proposing the
legislation. She discussed a presentation "Alaska
Commission on Postsecondary Education (ACPE) & Alaska
Student Loan Corporation (ASLC)" (copy on file).
Ms. Efird looked at slide 2, "ACPE & ASLC Missions":
• The Alaska Commission on Postsecondary Education
supports Alaskans' access to and success in
postsecondary education and career training after
high school.
• The Alaska Student Loan Corporation operates as an
enterprise agency of the State of Alaska, funding
and facilitating the Alaska Student Loan Program and
the related work of the Alaska Commission on
Postsecondary Education.
Ms. Efird spoke to slide 3, "SB 94":
"An Act relating to the education loan program and
Alaska supplemental education loan program; and
providing for an effective date.
• Expands Eligibility for Alaska Refinance Loans
Currently eligible: Alaska residents only
Proposed: previous borrower, cosigner, or
beneficiary of an Alaska loan
Proposed: graduates of Alaska high schools and
postsecondary institutions
• Removes specific loan limits from statute for in-
school loans and gives authority to ASLC Board to
set limits
• Adds clarifying language that ACPE can offer future
student loan borrowers a loan program with the
option for immediate repayment
Senator Olson asked if there were problems with the loan
program that necessitated the legislation.
Ms. Efird explained that the upcoming slides would show why
the bill was needed and what the bill would do.
9:14:06 AM
Ms. Efird referenced slide 4, "Why is SB 94 necessary?":
Achieve two goals:
• Respond to the needs and requests of borrowers and
postsecondary institutions
• Maintain financial stability of the Alaska Student
Loan Corporation for future financial education
needs of Alaskans
Senator von Imhof looked at the first bullet and asked if
students were going to banks and being turned down, and
what involvement commercial banks had in student loans.
Ms. Efird showed slide 7, "ASLC Loan Portfolio Runoff,"
which showed a graph that illustrated the financial
stability of the state's loan portfolio. She pointed out
that the slide showed the financial underpinning of the
bill, which was to try and ensure the financial stability
of the corporation. She recounted that over a number of
years since 2010, the loan portfolio had experienced a
runoff. She affirmed that students and families in Alaska
were borrowing from private lenders and other lenders for
education needs and paying higher interest costs.
Senator von Imhof thought the state was competing with the
private banking industry. She used an example of the state
providing car loans at a lower rate. She referenced the
next slide, and thought private loans generally cost more,
had lower approval rates, and were less transparent. She
did not think the information meant the state should be
competing because it could offer lower rates. She pondered
whether the situation was fair.
Ms. Efird recounted that the legislature established the
corporation for the mission and purpose of providing
education loans for students to attend postsecondary
education. She noted that she was working to sustain the
mission of the corporation and the commission.
Senator von Imhof understood that students could go to a
bank, ask to be declined, and get a decline letter in order
to take it to the state and get approval for a state loan
at a rate that was 2 percent lower.
Co-Chair Bishop thought the matter could go both ways.
9:18:13 AM
Senator Wielechowski asked Ms. Efird to address the chart
on slide 7. He asked about a loan portfolio runoff.
Ms. Efird explained that the graph showed that since 2008,
the corporation had $700 million in loans, and as of June
2019, the corporation had $213 million in loans.
Ms. Efird advanced slide 8, "Current Strategic Challenge":
Since 2010, federal and state program challenges
drastically curtailed loan originations, severely
reducing economies of scale and impacting ASLC long-
term viability:
• Elimination of Federal Family Education Loan Program
(FFELP) in 2010
• Mortgage crisis impact on investor confidence in
student loan debt required more rigorous
underwriting standards
• Decline in college enrollment rates
• Federal preferred lender prohibition legislation
• Growing culture of fear that student loans are
inherently bad
And more recently:
• COVID Pandemic
• Continued decline in enrollment rates
• Federal Student Loan forgiveness national
conversation
Ms. Efird explained that the portfolio runoff related to
the revenue and financial bottom line for the corporation
to sustain the finances to provide additional loans. She
expanded that student financial aid offices were not
permitted to suggest preferred lenders to students, and
could not share that the state had a loan program that
benefitted students. She cited research that if a student
had a full financial package to attend a postsecondary
program, the student was more likely to complete the
program and enter the workforce.
9:22:09 AM
Senator Olson asked to go back to slide 3. He asked about
the second bullet and whether non-resident borrowers could
request an additional loan.
Ms. Efird wanted to clarify that the slide addressed two
different loans. The first bullets on the slide related to
the Alaska Refinance Loans. In 2016, the legislature
authorized a refinance program for Alaskan residents that
had a student loan with the corporation or other education
loans. The corporation was asking to expand the pool for
refinancing loans to include non-residents. The refinance
loan had a lower interest rate because of the higher credit
criteria required for the loans.
Senator Olson asked about chances for default and what kind
of reparations could be made in the case of default.
Ms. Efird stated that the refinance loan program had been
in existence since 2016, and it had a zero-default rate.
She reiterated that there were high credit standards and
requirements for the program, and it was one of the only
loan programs increasing for the corporation and providing
financial stability and revenues.
9:26:02 AM
Senator Wilson asked if a non-resident could be eligible
for the loans.
Ms. Efird stated that the legislation proposed to expand
the pool for refinance loans for someone that was no longer
a resident but had a nexus and a connection either through
a current Alaska student loan or having graduated from an
Alaskan high school or postsecondary institution.
Co-Chair Bishop thought the bill proposed to expand the
refinance loan pool and continue the zero-default rate.
Ms. Efird suggested that expanding the pool of refinance
loans helped the bottom line for the corporation, which
supported having the financial stability to provide in-
school students for Alaska residents only.
Senator Wielechowski asked Ms. Efird to provide data on
default rates for the students she was looking to expand
eligibility for. He thought Alaskans wanted to encourage
people to stay in the state. He wanted to see hard data
that showed the proposed change would benefit the state.
Ms. Efird stated that the default information that ACPE had
on the refinance loan program showed a zero rate of
default. She could not predict a future default rate but
reiterated there was high credit criteria for the refinance
program.
Senator Wielechowski was interested in seeing the overall
default rates and some projections on how it might change
if out-of-state students were allowed to refinance.
Ms. Efird agreed to provide the information. She added that
she had data for default rates for in-school student loans,
which she could also provide.
Ms. Efird turned to slide 5, "What Borrowers & Institutions
Tell Us":
• Current Alaska student loan limits have not kept
up with tuition inflation and no longer meet
financial need
• Federal loans are not always less expensive than
Alaska loans and also do not meet financial need
• Private loans generally cost more, have lower
approval rates, and are less transparent
• Alaska loan programs fill the cost gap with low-
cost, high-quality loans
Ms. Efird relayed that ACPE had ASLC had heard from both
students and financial aid officers within the state. She
cited that the agency knew that students were taking out
student loans via other avenues and were paying higher
interest rates.
9:30:18 AM
Ms. Efird considered slide 6, "Supporting Financial
Access:
47% Percent of College Graduates with Debt
(AVG Debt Amount = $26,356 | Class of 2020)
ACPE LOAN PROGRAM HIGHLIGHTS
Created by Alaskans, for Alaskans
Alaska students pay $6,400 - $20,100 LESS over the
life of their loan by borrowing from ACPE
ACPE average loan rates are LOWER than average
national private fixed-rate loan
Ms. Efird added that student loan debt was at the forefront
of ACPEs and ASLCs consideration. She emphasized that
student loans must be done in a responsible manner. She
reiterated that research showed that students that had a
full financial package to cover the cost of attendance were
more likely to complete their program and successfully
repay loans.
Ms. Efird displayed slide 7, "ASLC Loan Portfolio Runoff,"
which showed a line graph.
Senator von Imhof thought Ms. Efird was doing a good job
representing her program and clarified that her comment was
philosophical. She pondered whether the state should be in
the business of competing with the private sector. She
questioned what the benefit would be if the state offered
the same rates as a commercial bank in Alaska. She
understood the benefits of the program. She questioned why
the state would not take over the lending functions across
the state, and qualified that her comment was tongue in
cheek. She cited that there were seven banks in the state
that were trying to make a living and employed people. She
considered that the state was taking business from the
banks, used the Alaska Industrial Development and Export
Authority (AIDEA) as an example, and did not think it was
right.
9:33:52 AM
Senator Wielechowski asked how many interest rates compared
to what the state was offering and what the private banking
industry offered.
Ms. Efird did not have data to use as comparison. She noted
that the last slide was a calculation of the average
savings over the life of a loan taken with ACPE. She noted
that the chief finance officer for ASLC was online to
answer questions if needed. She referenced Senator von
Imhof's comments and explained that the state tried to
provide financial literacy trainings for students, so the
students would understand taking out a loan. She emphasized
that ACPE wanted to only fill the gap of needed funding,
and encouraged other options in federal loans,
scholarships, and the Alaska Performance Scholarship (APS).
Ms. Efird noted that for ASLC loans, the corporation worked
with the educational institution to ensure the student was
enrolled. She noted that an ASLC loan would go directly to
the school, while a private loan could go directly to an
individual. She explained that the corporation was trying
to have checks and balances in place to try and ensure that
Alaskans were not overborrowing and were borrowing for a
purpose of completion. She noted that there was also a
yearly attestation that the student was either an Alaska
resident or an out-of-state student with an intention to
return to Alaska and not applying for residency in another
state.
9:37:18 AM
Ms. Efird summarized that with the statutory mission
provided by the legislature, the corporation was trying to
provide student funding in a responsible way to help the
borrowers to completion. Each year, the corporation worked
to ensure the students were still working towards progress
in completion of the program for the next years loan. She
felt the corporation had quite a few checks and balances in
place to promote completion of the students programs and
to help the workforce needs of Alaska. She added that she
wanted to ensure the committee understood that there were
no General Funds in ASLC, and all the funding for the loans
was through investment and revenue returns on the loans and
interest that came back to the corporation.
Senator Wilson asked if the program would also provide loan
consolidation for federal programs.
Ms. Efird answered "yes", and qualified that the
corporation would also educate the student to determine
that the refinancing of the federal loan would not
compromise any forgiveness or federal benefits.
9:39:24 AM
Senator Hoffman thought education was very important and
considered that many Native corporations offered low
interest loans and grants because of wanting its population
to be as educated as possible. He thought the state should
be doing the same, and he supported the state entering into
programs whether subsidized or not.
Senator Hoffman asked if Ms. Efird could provide a
breakdown of the ratio between urban and rural Alaska
participants.
Co-Chair Bishop asked for Ms. Efird to include data with a
breakdown of ethnicities.
Co-Chair Stedman followed up on earlier concerns shared by
members. He thought it would be nice for Ms. Efird to put
together a table with information on loan comparisons to
see what the federal government and state were doing,
including interest rates.
Co-Chair Stedman referenced Senator von Imhof's concern
about being in competition with commercial banks and other
lenders. He relayed that he shared the concerned in many
ways but considered that that there were many young
Alaskans that did not have the resources to get any help
from parents. He thought there needed to be a system where
individuals without resources or help could gain stature
with increased education. He thought the issues needed to
be balanced. He mentioned family members that not had not
had the wherewithal to sign up for a loan. He asked for a
geographical breakdown of the information requested of Ms.
Efird. He asked for more detail on the chart, and to
include financial history.
Co-Chair Bishop thought the charts would be updated the
next time ACPE and ASLC were back to committee.
9:43:36 AM
Ms. Efird went back to slide 8, and offered to provide any
additional clarification on the loan portfolio runoff. She
referenced Co-Chair Stedman's comments about why the loan
portfolio had declined over the previous years. She
mentioned the federal loan program for states, the decline
in enrollment, and preferred lender prohibitions.
Ms. Efird looked at slide 9, "Financial Stability Actions":
• Implemented Lean process improvement program with
cumulative savings of almost $1 million - ongoing
• Operating budget reductions over past five years of
27 percent
• Reduce lease costs
• Implemented a refinance loan program, building a $20
million refinance portfolio
• Moved investment management to Department of Revenue
• Management worked with DOR to review projected cash
flow, determine investment horizon and develop
investment policy based on risk/return goals.
o Management worked with our Financial Advisor
and received their positive feedback on our
plan to switch to DOR and DOR's model.
• Adopted an investment policy based on long-term
investment horizon/risk return goals
Ms. Efird described the proposed legislation as "a piece of
the puzzle," and relayed that the commission and
corporation had been working together over the previous
five years to provide for the financial soundness of the
corporation through multiple other actions. She mentioned
that the operating budget reductions referenced on the
slide had included staffing reductions of almost 50
percent. She cited that the refinance program helped keep
students in ASLCs loan portfolio to shore up the financial
soundness of the corporation.
Ms. Efird listed other efforts such as revising loan
programs with additional credit criteria and redemption of
outstanding bond notes to provide cost reductions related
to administering the bonds. She cited that the corporation
was looking at other internal strategies that would provide
additional education and support for loan borrowers.
9:47:53 AM
Senator von Imhof referenced slide 7, and thought the graph
showed that as of June 2019, the ASLC loan portfolio was
$213 million. She asked how many employees managed the
managed the portfolio at the time.
Ms. Efird did not have the number at hand. She relayed that
currently the commission had a total of 52 Position Control
Numbers (PCNs), and currently had 46 that were filled. She
qualified that not all the positions were associated with
the loan programs. Some of the positions administered other
programs such as financial aid, APS, the Alaska Education
Grant, and the Washington, Wyoming, Alaska, Montana, and
Idaho (WWAMI) Program.
Senator von Imhof shared that prior to serving in the
legislature she worked in the banking industry and had a
portfolio of about $15 million. She estimated that 14
employees could manage $213 million. She understood that
employees were assigned to other programs, but the matter
should be considered. She thought 53 PCNs seemed to be
quite a bit. She contended that the PCNs cost General
Funds.
Ms. Efird stated that the funding for the commission used
no General Funds, and the money came through the ASLC
receipts, which funded the operating budget for the
commission, save for around $500,000 (which was Higher
Edcuation Investment Funds) that supported the
administrative costs for APS, the Alaska Education Grant,
and WWAMI. All the other funding in the budget for
operations and administration was ASLC receipts. She noted
that the $213 million shown on the graph on slide 7 was the
student loan portfolio and did not represent the operating
budget. She believed that the interagency receipts that
came from ASLC to fund programs amounted to around $9
million.
9:51:33 AM
Senator von Imhof mentioned Ms. Efird's reference to a
zero-default rate and asked if any of the loan refinancing
was part of a work-out program to help with the default
rate.
Ms. Efird answered in the negative. She reiterated that the
refinance program had very high eligibility criteria and
required no adverse credit events on an applicant's credit
report. She wanted to do more research on the topic to
provide a complete answer.
Senator von Imhof wanted to see how the refinancing and
defaults were being managed. She commented that the
refinancing customers were A-plus borrowers, which
signified that ASLC was competing with banks. She argued
that if there were no defaults in the program, the
borrowers were top notch and a bank would provide the
borrowers a loan.
Ms. Efird was not saying there was no defaults in the loan
program. The no default rate was for the recent refinance
program that had been in existence since 2016 or 2017. She
affirmed that those in the refinance program were high-
quality borrowers. She understood that when the legislature
set the refinance program, it was to help ensure the
financial soundness of ASLC by attracting high-quality
borrowers to the portfolio to help support the in-school
student loans Alaskans needed to obtain education.
9:54:13 AM
Ms. Efird advanced to slide 11, "Sectional Analysis &
Fiscal Note":
• See Sectional Analysis in information packet
• Zero Fiscal Note:
Positive impact to the financial stability of the
Corporation
Anticipated increase in loan origination volume
would positively impact
ASLC's economies of scale
No projected increases to agency
Co-Chair Bishop thought he had heard that the ASLC was the
last line of defense for borrowers. He thought if borrowers
failed to obtain a loan elsewhere, ALSC could help.
Ms. Efird explained that she had been trying to make the
point that a loan should be the very last dollars a student
received to meet unmet financial needs. She reiterated that
the ASLC always encouraged students to look for free money.
She cited that Alaska was number 51 in the country for
completion of the Free Application for Federal Student Aid
(FAFSA), which was an important part of helping students
meet financial education needs. The commission had a
current initiative for FAFSA completion. She thought the
students were leaving federal dollars on the table that
would help students either not need a loan or need a much
smaller loan.
9:56:52 AM
Senator von Imhof thought Ms. Efird had stated that a loan
should be the last money a student should get, regardless
of the origin.
Ms. Efird qualified that the best loan for the student with
the lowest repayment is the best option.
Senator von Imhof agreed with Ms. Efird. She reiterated her
concerns about the state competing with banks. She agreed
that students and families should seek the cheapest money
but questioned whether the state should be the one
providing the cheapest money. She referenced her three
years on the school board. She emphasized that she
supported education, but she also supported the state as a
whole. She thought if the state was to move forward
economically and have new businesses, lending institutions
had to part of it.
Ms. Efird discussed a Sectional Analysis (copy on file):
Section 1: Amends AS 14.43.122(b), Consolidation of
loans, by expanding the population eligible to apply
for Alaska Refinancing Loans to include previous
Alaska borrowers and graduates from Alaska high
schools and postsecondary institutions, as well as
current Alaska residents.
Section 2: Amends AS 14.43.173(a), Loan award
maximums; use of loan award, by eliminating the loan
maximums in statute and providing for the Alaska
Student Loan Corporation (Corporation) to set the
annual loan maximums.
Section 3: Amends AS 14.43.173(b), Loan award
maximums; use of loan award, by eliminating lifetime
loan maximums in statute and providing for the
Corporation to set lifetime loan maximums.
Section 4: Amends AS 14.43.173(d), Loan award
maximums; use of loan award, with a conforming change
to allow the Corporation to set loan limits for both
half-time and full-time loans.
Ms. Efird noted that Section 2 through Section 4 were about
taking the loan limits out of statute and providing the
ASLC Board the ability to set the loan amounts.
10:01:37 AM
Senator Wielechowski went to page 1, line 11 of the bill,
which talked about a previous borrower, co-signer, or
beneficiary. He asked how a beneficiary was different than
a borrower.
Ms. Efird thought the line would apply to family education
loans. A loan could be taken out by a parent.
Co-Chair Bishop asked for Ms. Efird to get back to the
committee with the information regarding Senator
Wielechowski's question.
Senator Wielechowski referenced Section 2 and Section 3,
and loan award maximums. He wondered about the prudence of
opening up the limit to an unlimited amount. He wondered if
increasing the amount would cause there to be fewer
available dollars for other students. He pondered that
increasing award maximums with inflation might be a better
way.
Ms. Efird relayed that the corporation board considered
continuing to have the amounts in statute and increasing
the loan amounts. After discussion, the board had decided
that there would be a public-informed discussion with the
ASLC board to determine the amounts on an annual basis. She
described research on in-state tuition rates and work with
financial aid offices to determine unmet need for students
to make informed decisions on annual loan amounts.
Ms. Efird continued to address Senator Wielechowski's
question. She reminded of the checks and balances that were
in place for loan certification through educational
institutions and other things to keep loan amounts balanced
against the true needs of students.
10:04:50 AM
Senator Hoffman noted that the bill proposed to give
additional responsibilities to the ASLC Board and asked
about its composition on a regional basis. He asked if the
board was ratified by the legislature.
Ms. Efird relayed that the corporation board was set in
statute and was comprised of the commissioners or designees
from the Department of Revenue; the Department of Commerce,
Community and Economic Development; the Department of
Administration; and two members from ACPE. She believed the
two ACPE members were public and were appointed by the
governor. There were five members of the board.
Senator Hoffman asked if any of the five members were
residents of rural Alaska.
Ms. Efird relayed that there was currently a vacant seat.
She believed there was a current commission member sitting
on the corporation board. She offered to get back to the
committee with the information.
Senator Wilson noted that the previous committee of
referral had added a required report to the legislature,
which he did not necessarily support. He asked if ACPE
delivered an annual report that would accomplish an
evaluation of loan benefits.
Ms. Efird affirmed that ACPE did provide an Almanac of
Higher Education, which would be coming to the legislature
in the following month. She agreed that the loan
information could be incorporated into the almanac, and
that the commission was not opposed to providing a report.
Senator Wilson felt that the legislature had asked for
several reports that went unused. He did not want the
commission to have an onerous burden.
Co-Chair Bishop asked if any of the suggested changes
proposed in the bill were brought forward by students and
borrowers.
Ms. Efird answered "yes," and relayed that the commission
was responding to what it had heard from students and
financial aid offices.
10:08:55 AM
Ms. Efird continued to address the Sectional Analysis:
Section 5:
Amends AS 14.43.175, Repayment of loans, by providing
for the Alaska Commission on Postsecondary Education
to offer future student loan borrowers a loan program
with immediate repayment requirements.
Section 6:
Establishes an effective date of July 1, 2021 (FY2022)
Ms. Efird noted that currently student loans were deferred
when students were in school, and when students graduated
or completed an education program had six months before
beginning a repayment program. The proposed bill section
would offer an option for immediate repayment, which would
save interest costs over the life of the loan, as well as
help a student build credit. She thought the proposed
change would help students get in the habit of making
repayments and make it less likely students would default
on the loan. She added that there were two amendments to
the bill from the Senate Education Committee that would
require a report to be submitted to the legislature.
Co-Chair Stedman had a question about pre-payment. He
understood that it was not possible to block the payment of
loans, and that borrowers could repay loans at any time.
Ms. Efird affirmed that borrowers could choose to make
repayment at any time, and the provision was merely
clarifying language. She continued that the Department of
Law (DOL) had provided language to put the provision in a
promissory note.
Co-Chair Stedman thought that the provision seemed
redundant. He understood that it might have to do with
federal law.
Ms. Efird believed Co-Chair Stedman was correct. She
relayed that the commission had been told by DOL that it
could not include the provision for immediate repayment in
a promissory note for the loan program. The provision was
to provide for the specific option.
10:13:04 AM
Senator Wielechowski asked about the demand for the loans
and if the state had the funding to meet the demand.
Ms. Efird affirmed the commissions projections showed that
the state had funds for the current demand. She noted the
decline in loan origination and an increase an origination
for refinance loans. She reminded that additional loan
origination would increase revenue generated through
interest.
Senator Wielechowski had concerns about Section 3 and the
loan cap, which was currently $56,000 for undergraduate
programs and $60,000 for graduate programs. He mentioned
private schools costing hundreds of thousands of dollars.
He shared his concerns about the state getting in a
position to have to deny opportunity for more kids to go to
schools like the University of Alaska (UA) and increasing
opportunities for people of privilege to go to more
expensive schools. He was concerned about completely
removing the cap. He wondered about the University of
Alaska's position on the bill.
Ms. Efird noted that there was a letter of support from the
University of Alaska in member's packets (copy on file).
She reiterated that the commission had heard from financial
aid offices that there was a need to increase the loan
amounts because the loans were not meeting the gap of funds
needed to complete the full financial package.
Senator Hoffman asked if Ms. Efird had information on loan
approval rates in the current year and past years.
Ms. Efird answered in the affirmative and agreed to provide
the information.
Senator Olson asked about the spread between rural and
urban students approval rates. He recounted that when he
had been in the loan program it was a difficult process.
Ms. Efird agreed to provide the information.
Senator von Imhof asked about a hypothetical student that
requested a $10,000 loan, and wondered if the commission
tracked whether the amount was all the student could
qualify for or if the amount was all that was needed. She
thought the information could be relevant.
Ms. Efird was not certain she had the information and
agreed to get back to the committee.
10:17:28 AM
AT EASE
10:17:55 AM
RECONVENED
LEE DONNER, SENIOR MANAGING DIRECTOR, HILLTOP SECURITIES,
TEXAS (via teleconference), relayed that he was head of his
firms student loan practice. He explained that his
organization served as financial advisors for the ASLC, and
additionally were financial and municipal advisors for
other not-for-profit student loan corporations around the
country.
Co-Chair Bishop asked if Mr. Donner supported the bill.
Mr. Donner answered affirmatively. He offered to expand on
his support with respect to each of the bill components.
Ms. Efird asked Mr. Donner to provide his testimony.
Mr. Donner spoke to the proposed expansion of eligibility
criteria for the refinance program. He cited ALSCs problem
with the scale of the states loan program post-2010 with
the elimination of the Federal Family Education Loan
Program, which had reduced the volume of loans. The volume
was further reduced by the corporation tightening up
eligibility criteria in order to lower default rates. He
contended that the expansion of eligibility would conform
with federal tax law and all other state agencies and 501
C-3 programs did. He cited that Alaska had the only program
in the country that further shrank the eligible pool, and
expanding the definition would give the ASLC a very slight
increase in loan volume to help offset the declining
portfolio size.
10:22:02 AM
Mr. Donner addressed the proposal to move the setting of
loan limits from statute to the ALSC board. He asserted
that the provision would not eliminate loan limits, but
rather simply changed who set the loan limits. He asserted
that having the loan limits embedded in statute made it
take too long to go through the legislative process to
amend loan limits to respond on-the-ground conditions. He
contended that the corporation board was in a better
position to know whether the loan limits needed
modification. There would still be a governing body setting
the loan limits.
Mr. Donner continued that the only other state to have
embedded loan payments in statute was the State of Texas,
and that was because the student loan program was funded by
General Obligation Bonds issued by the state, while Alaska
funded loans with its existing portfolio. He thought it was
entirely appropriate to set loan limits at the board level,
which was faster, and the board was better informed as to
the needs of the education community.
Mr. Donner addressed the proposed option to begin immediate
payment. He acknowledged that any borrower could repay any
of the corporations loans at any time. The provision would
allow a borrower to elect voluntarily to make a loan that
required payments from the outset, such as 30 days after
origination. He cited that the provision was more than a
clarification and would create an option for borrowers. He
noted that studies showed that loans that had some form of
repayment from the beginning resulted in lower delinquency
rates. He summarized that all three proposed provisions
were net positives for the program, its financial
underpinnings, and the borrowers.
10:25:27 AM
JOSH BICCHINELLA, CHAIR, ALASKA COMMISSION ON POST-
SECONDARY EDUCATION, WASILLA (via teleconference), spoke in
support of the bill. He had served as campus president of
Charter College for the previous five years. He wanted to
share perspectives he had heard in the past five years at
Charter College. He had repeatedly heard that students were
challenged when making the decision to pursue the ASCL loan
or the Alaska Supplemental Educational Loan because of the
statutory limits. He thought much had changed in economic
trends in the previous ten years and mentioned inflation.
He asserted that the current statutes had unintentionally
adverse actions towards students pursing loans. He believed
that the bill would expand access for Alaskans pursuing
education at home and would help achieve the states
educational growth goals. He echoed Mr. Donners comments
about the board being better able to better assess borrower
needs.
10:28:14 AM
Co-Chair Bishop OPENED public testimony.
10:28:39 AM
AT EASE
10:28:55 AM
RECONVENED
Co-Chair Bishop CLOSED public testimony.
Senator Wilson asked about refinance loans and qualifying
for a higher amount loan than was needed for the balance.
Ms. Efird stated that for refinance loans, the amount was
only to cover current loans. The corporation required proof
of the outstanding loan balances needed to be refinanced.
Senator Wielechowski asked if there had been any opposition
to the bill from the Alaska Bankers Association or banker
groups.
Ms. Efird answered in the negative.
Co-Chair Bishop set the bill aside.
SB 94 was HEARD and HELD in committee for further
consideration.
Co-Chair Bishop discussed the agenda for the afternoon
meeting.
ADJOURNMENT
10:31:47 AM
The meeting was adjourned at 10:31 a.m.