Legislature(2001 - 2002)
05/04/2001 07:17 PM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 204
"An Act relating to the Alaska Commission on Postsecondary
Education and the Alaska Student Loan Corporation; relating to
student financial aid programs and the financing of those
programs; establishing the Alaska Advantage Loan Program and
the Alaska Supplemental Education Loan Program; increasing the
bonding authorization of the Alaska Student Loan Corporation;
providing for liens resulting from a default under AS 14.43 or
AS 14.44; relating to the duties of the recorder regarding
those liens; relating to defaults under the Western Regional
Higher Education Compact; relating to the prohibition on
discrimination regarding programs under AS 14.43; relating to
fees for the review of certain postsecondary institutions;
making conforming amendments; and providing for an effective
date."
This was the first hearing for this bill in the Senate Finance
Committee.
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education, Department of Education and Early
Development, testified in Juneau that the bill creates the Alaska
Advantage Student Loan Model. She explained this loan program would
provide benefits to borrowers, institutions and the Alaska Student
Loan Corporation by combining federally guaranteed student loans
with state loans, which would be supplemental to the guaranteed
loans.
Ms. Barrans stated the objective of this model is to allow the
Corporation to finance the loans and the Commission to service
them. Because the federal portion of the Commission's portfolio
would be subsidized and guaranteed by the federal government, she
remarked that the loans could be offered a substantially lower
interest rates then loans traditionally financed by the
Corporation. She elaborated that by authorizing the Commission to
package the loans, borrowers could be offered the "lowest possible
borrowing rates" and the borrowers could receive funding from one
source rather than multiple lenders. She added that borrowers would
also become eligible for consideration for federal grant funds for
the application process.
Ms. Barrans continued noting program changes generated by following
the federal student loan model would expand the repayment and
deferment options available to borrowers. She added this would also
allow borrowers to consolidate all educational debt with a single
Alaskan lender.
Ms. Barrans pointed out benefits to the institutions participating
in the model by providing a retention and recruitment tool through
the improved interest rates, which would ease administration
efforts by streamlining financial aid delivery. She noted these
loans would have comparable terms that would allow financial aid
counselors working with potential borrowers, the ability to compare
loan products. She stated this would also provide "targeted
financial rewards" to borrowers who remain in, or return to,
Alaska. She told of the additional support for institutions to
manage the default rate of these loans.
Ms. Barrans asserted that besides providing these benefits to both
institutions and borrowers, there would also be "clear financial
benefits" to the Corporation. She detailed there would be new
income streams to the Corporation through the interest subsidies on
a certain portion of the federal loans made under this model. She
also told of the special allowance the federal government pays to
lenders in its programs to protect against fluctuations in interest
rates. She continued this would eliminate 98 percent of the losses
due to default, death, disability and bankruptcy on those loans
that were federally guaranteed.
Ms. Barrans remarked that the combination of the financial benefits
would allow the Corporation to enhance its underlying credit rating
from AA to AAA.
Ms. Barrans spoke of secondary objectives of the legislation,
including identification in the findings section of the bill,
relating to the mission of the Commission and the Corporation as a
student-focused delivery system. She noted the Commission's
functions are updated in this legislation as well; by eliminating
provisions no longer applicable because the federal programs have
been discontinued or modified. She continued explaining the
Commission's collection authority would be clarified to provide the
same collection authority for all the financial aid programs it
administers in the event of default. She stated this legislation
also allows the Commission to issue administrative liens in
addition to administrative wage garnishment authority previously
granted.
Ms. Barrans noted this legislation would allow the Corporation to
offer extended maturities on the bonds issued in the event it is
financially advantageous to the Corporation. She said it would
allow the Corporation to increase the amount of bonds issued in a
two-year period of time.
Ms. Barrans concluded that the bill provides that the current
student loan program remains in place for the next year while the
model is prepared for implementation in the fall of 2002.
Co-Chair Donley pointed out the type of funds are not specified in
the fiscal note.
Ms. Barrans indicated a new fiscal note would be prepared
correcting this error and showing the fund source as Alaska Student
Loan Corporation Receipts.
Senator Wilken offered a motion to move HB 204 from Committee with
a forthcoming fiscal note from the Department of Education and
Early Development.
The bill MOVED from Committee without objection.
AT EASE 7:34 PM / 7:46 PM
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