Legislature(1993 - 1994)
03/22/1994 03:00 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 506 - STUDENT LOAN PROGRAM REP. CON BUNDE, Co-Chair of the House HESS Committee, presented HB 506. Rep. Bunde stated that HB 506 was requested by the Postsecondary Education Commission to allow the program to run in a more business like fashion. REP. BUNDE outlined the important changes to the program and asked Mr. McCormick of the Postsecondary Education Commission to elaborate. Number 080 JOE McCORMICK, Executive Director, Postsecondary Education Commission, Department of Education, testified in support of HB 506. He stated that HB 506 would accomplish the following: 1) Enhancement of repayment terms by allowing for a variable interest rate and providing a consolidation program. 2) Improved ability to collect loans. 3) Would allow for garnishment of wages when loan is in default. 4) Simplify the loan process. 5) Prevent future delinquencies by disallowing people to reapply for a student loan within five years of bankruptcy or default. Number 175 NANCY BEAR USERA, Commissioner, Department of Administration, testified in opposition to certain provisions of HB 506. Ms. Usera stated there are three areas of the bill that the department objects to: 1) HB 506 gives priority to garnishment of wages for repayment of student loans over and above all other garnishments or attachments with the exception of child support. MS. USERA stated that better tools need to be given to the commission to make better loans, but to supercede private sector obligations is not the way to handle it. 2) The Department of Administration also objects to the provision in HB 506 that would hold up vendor payments to contractors who have otherwise completed the terms of a contract but have a student loan delinquency. MS. USERA noted that the commission already has the ability to garnish wages; this bill would place the student loan program second behind child support payments. Number 275 MS. USERA offered an amendment that would in effect remove the priority of the student loans programs for garnishment second to child support obligations. Secondly, it would remove the requirements that the department would withhold vendor payments. Number 295 REP. MULDER stated that he was opposed to the amendment because it is bad public policy to turn a blind eye to someone who is delinquent on their student loan and then award and pay them through a state contract. Number 310 REP. PORTER agreed with Rep. Mulder, but stated he does support the provision in the bill that would give the student loan corporation priority over and above all other garnishments except child support. Number 315 COMMISSIONER USERA noted that there would be a significant fiscal impact on the Department of Administration if HB 506 passes as is. Number 330 REP. SITTON asked what sort of impact HB 506 would have on the Department of Administration. Number 335 MR. McCORMICK interjected that the commission has approximately 125,000 loan accounts out, and only a small percentage do contractual work for the state of Alaska. Of those, only a fraction may be in default. Number 342 COMMISSIONER USERA replied that the department would have to scan 125,000 files prior to making a disbursement to a vendor. Number 375 REP. SITTON asked what the average number of vendors was in a typical month. Number 385 COMMISSIONER USERA responded there are 52,000 vendors that the Department of Administration process's checks for. Number 395 REP. MULDER discussed the ways in which the Department of Administration could meld 150,000 student loan applicants with 52,000 vendors. Number 406 MR. McCORMICK responded that he didn't believe the issue to be an administrative one, but more of a public policy question of whether or not to pay vendors if they are behind in their student loan payments. MR. McCORMICK stated he felt it was important to send a message to applicants that the state of Alaska sincerely expects them to repay the loans they have with the state. Number 435 REP. PORTER stated the technology is such that running the delinquency list against the vendor list once a month wouldn't involve much. COMMISSIONER USERA stated that there would be a hefty administrative cost to accomplish this function and it is not as simple as it sounds. REP. WILLIAMS asked how the student loan program is funded. COMMISSIONER USERA replied that the loans are funded through bonds. Number 460 CHAIRMAN HUDSON clarified for the committee what he thought the issues were in this debate. Number 480 COMMISSIONER USERA reiterated that adding the function of scanning the student loan rolls to match delinquent applicants to vendor payments adds a tremendous burden to the Division of Finance. She added that if there was some RSA funds suggested to cover this added burden she would certainly reconsider. Number 490 MR. McCORMICK responded by saying that he would entertain a reasonable charge back type of arrangement. Number 510 REP. GREEN asked if there was a higher delinquency rate for those students who attended school outside the state and may have stayed outside. Also, can you garnish outside the state? Number 525 MR. McCORMICK responded that we can garnish outside the state, but you have to look at the costs involved to see whether or not its worth it. Number 542 PAIGE ADAMS, Coalition of Student Leaders, testified via teleconference in support of HB 506. Number 549 TRACI COHEN, Student Network, Kenai Peninsula College, testified via teleconference in support of HB 506. Ms. Cohen felt it was important that the message get out to people that if you do not pay your student loan your wages will be garnished. Number 573 HELEN PHINNEY testified via offnet in support of HB 506. She stated she could not overstate the importance of the student loan program and the importance of using all the available resources to make sure these loans are paid back. Number 588 BRIAN BREBAKER, University of Fairbanks, Coalition of Student Leaders, stated his support of HB 506 via offnet. He added that the coalition would like to see a cap on the interest rate for the loans. TAPE 94-27, SIDE B Number 001 NICKO BRANCHEK stated he is a recipient of a student loan and supports HB 506. He added that he is supportive of the idea of a cap on the interest rates on student loans. Number 020 BING SANTAMOUR testified via teleconference in support of HB 506. Ms. Santamour stated she also supports the cap on interest rates. Number 082 STEVE LEVINSON, Alaska State Chamber and Bethel Chamber of Commerce, testified via teleconference in support of HB 506. Both chambers have adopted resolutions in support of reform of the program. The State Chamber opposes a cap on interest rates because the costs of the bonds could go well beyond the cap and make the program not cost efficient. Number 115 TRACI COHEN added to her previous testimony by saying that she perceives the permanent fund to be a privilege and the students who are in default on loans don't deserve it. Number 130 REP. MULDER asked if the interest rate cap was ever considered in the discussions on HB 506. Number 135 MR. McCORMICK stated that it was considered, but interest rates can skyrocket and if there was a cap the loan program could become unsound if they skyrocket too high. Number 160 CHAIRMAN HUDSON announced that the committee would hold HB 506 over until the next meeting and asked Commissioner Usera to prepare the amendments she testified to.
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