Legislature(2021 - 2022)BUTROVICH 205
03/05/2021 09:00 AM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| SB94 | |
| SB58 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| *+ | SB 58 | TELECONFERENCED | |
| *+ | SB 94 | TELECONFERENCED | |
SB 94-EDUCATION & SUPPLEMENTAL LOAN PROGRAMS
9:03:12 AM
CHAIR HOLLAND announced the consideration of SENATE BILL NO. 94
"An Act relating to the education loan program and Alaska
supplemental education loan program; and providing for an
effective date."
He stated his intent to have the administration introduce the
bill and then hold it in committee. He asked Sana Efird to
introduce the bill.
9:03:40 AM
SANA EFIRD, Executive Director, Alaska Commission on
Postsecondary Education (ACPE), Executive Officer, Alaska
Student Loan Corporation (ASLC), Juneau, Alaska, began by
presenting the missions of Alaska Commission on Postsecondary
Education (ACPE) and Alaska Student Loan Corporation (ASLC) on
slide 2:
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.
9:06:40 AM
MS. EFIRD said that SB 94 addresses requests from Alaska's
higher education community and student loan borrowers by
expanding eligibility for the Alaska refinance loan program,
removing current loan limits from statute, and clarifying
language to offer a loan program with immediate repayment to new
borrowers. As tuition rates and overall costs to attend
postsecondary education have risen nationally and in Alaska and
with the growing need to establish a well-trained Alaskan
workforce to fuel the state's economy, it is now crucial more
than ever that Alaska's students have access to low cost
education funding that meets their full financial needs to
achieve career training and/or college credentials.
MS. EFIRD said federal loans no longer meet Alaska students'
full financial needs. Those loans are not always less expensive
than Alaska loans. Private loans generally cost more with lower
approval rates. Alaska state loan programs fill the gap with
low-cost, high-quality loans. Current state loan limits, though,
are becoming a barrier to Alaska students who may not be able to
attain funding from private lenders due to strict underwriting
criteria. Private loans are also on average subject to higher
interest rates than those from the ASLC. SB 94 would remove loan
limits from statute and provide the loan corporation with the
authority to set loan limits to meet the changing financial
needs of Alaska students. Furthermore, the other changes in the
bill would expand eligibility for the ASLC refinanced loans and
allow Alaska student loan borrowers the option to apply for a
loan program with immediate repayment. These proposed changes
would provide additional loan financing options with reduced
interest rates and overall lower costs.
9:09:22 AM
MS. EFIRD presented the sectional analysis:
Section 1: Amends AS 14.43.122(b)
• Expands Eligibility for Alaska Refinance Loans
o Currently eligible: Alaska residents only
o Proposed: previous borrower, cosigner, or
beneficiary of an Alaska loan
o Proposed: Alaska high schools and postsecondary
institutions graduates
SENATOR BEGICH asked her to confirm that this isn't offering
loans to anybody other than Alaskan residents. It is for those
who may have been eligible for a loan and have moved out of
state but still have the loan burden to Alaska. He asked what is
driving the change.
MS. EFIRD replied the change is at the request of a number of
student loan borrowers. They still have a nexus to Alaska; this
is the reason for the inclusion of must be an Alaska high school
graduate or graduate of a postsecondary education. It also
includes current student loan borrowers or cosigners who have
had a loan with the state of Alaska and moved out of state. Now
they are asking to come back and refinance those Alaska loans
into the new refinance program, which allows them to consolidate
all their loans to a lower-interest rate loan, so it is a
benefit to those student borrowers.
9:12:32 AM
SENATOR MICCICHE said he does not know what the default rate is,
but he assumes the benefit to the state is reducing the default
rate for those who are no longer in Alaska but would like to
meet their commitments.
MS. EFIRD answered that is part of it. She doesn't have the
current default rate in front of her but can get that. This is
really to respond to the requests from borrowers who say, the
state gave them a loan originally and now the state has another
program with a lower interest rate that they are not eligible
for. It is responding to that need to help those borrowers.
SENATOR HUGHES offered her reading of the bill, which is that a
person would not need to be an official resident. That person
could be a resident of another state but if that person was a
graduate of an Alaskan high school or postsecondary institution
that person would qualify.
MS. EFIRD replied yes, a graduate of an Alaskan high school or
postsecondary institution.
SENATOR HUGHES said that she wanted to make that clear because
sometimes students go to school out of state and maintain their
Alaska residency, but this is for those who are not residents.
It is good if they can their repay loans. She noted that the
person would have to be a graduate but people sometimes don't
graduate from high school yet they go on to a postsecondary
institution. Sometimes they do not graduate without a degree but
they may have attended a few years and have a student loan. She
asked if the term "graduated" should be replaced with the term
"attended" high school or postsecondary institution.
MS. EFIRD responded that the administration would entertain that
but she would need to do some research. The reason for saying
graduate is that research and data show that a graduate is more
likely to pay off loans and not go into default.
SENATOR HUGHES said that makes sense.
9:15:52 AM
SENATOR STEVENS said that he would be interested in knowing the
impact that COVID-19 has had on students and the state default
rate. So many people in the state are unemployed and having
financial difficulties. This is a lost year for many students.
He asked if she had any reflections on that.
MS. EFIRD replied that she has had three months in her new role
and has a lot to learn. The committee should have received the
current higher education almanac from ACPE. That has information
about what is known at this point in time about COVID. ACPE is
still unraveling the ramifications of COVID, which are going to
be long term and far reaching. The almanac does have COVID
specific information. There has been a decrease in applications
for postsecondary institutions. Students are postponing their
plans to attend postsecondary programs. ACPE is trying to
encourage Alaskans that now is the time to get on the road to
getting a degree or certificate or training credentials, so they
can get to work and get the economy on track.
SENATOR STEVENS observed this is an anomaly this year and
perhaps next. Eventually things will get back to normal and
young people will want to get a higher education.
9:18:56 AM
SENATOR BEGICH followed up on Senator Hughes's comment saying
that only Alaska residents are eligible for the Alaska student
loans. He asked if that was correct for the original loans.
MS. EFIRD answered that is correct; the program currently is
only open to Alaska residents.
SENATOR BEGICH said that to reinforce what Senator Hughes said
about whether someone is a graduate or not of high school or
postsecondary institution located in the state, someone who
received a loan in the first place was once a resident. He
encouraged her to change that to "have attended" a high school
or postsecondary institution physically located in the state. It
is not changing the fact that someone out of state is not
getting any benefits. He clarified that the only people who
could have gotten these loans were Alaskan residents at the time
they got the loans.
MS. EFIRD replied yes if they have a loan, but this would be
expanded to include those who may not have a loan. The
administration is asking to expand the refinance options to
those who have graduated from an Alaska high school or
postsecondary institution. They may not have current loans. The
administration will expand the pool of eligibility for the
refinance loans.
SENATOR BEGICH stated that is not making out-of-state residents
eligible for a new loan. They would have had to have had a
previous loan. He doesn't want to take the state's resources and
give them through a loan process to out-of-state residents. If
they were once residents, received a loan from the state, and
time has passed, they come to the state and ask for help to
consolidate the loans they legitimately got with the state of
Alaska even though they are no longer Alaska residents--that is
what the administration is trying to.
MS. EFIRD responded yes, the proposed change is to allow
previous borrowers or cosigners who are no longer Alaska
residents to refinance the original loans, but the
administration is asking to allow the refinance program to be
used by others who have a nexus to Alaska through being a high
school or postsecondary institution graduate.
9:22:25 AM
SENATOR BEGICH said that is a concern. He asked if she is saying
if he had once attended and graduated high school in Alaska and
had federal loans or loans from other institutions from out of
state he could come with his loan package and the ACPE will help
him refinance his entire package of loans that he might have
gotten from Idaho or the U.S. government or is the
administration asking for the ability to take multiple years of
students loans that were given in Alaska and refinance them as a
new package. The first thing is unacceptable to him. The second
is extraordinarily acceptable to him.
MS. EFIRD asked Director Kerry Thomas to address this.
9:23:56 AM
KERRY THOMAS, Director of Program Operations, Alaska Commission
on Secondary Education, Juneau, Alaska, said the request the
administration is putting forth in legislation is to expand
eligibility for the refinance program as Director Efird
described. One of the primary reasons is to assist the Alaskans
who took out loans and have left the state. It is also to expand
the reach with the loan program to generate income to sustain
Alaska's loan program into the future. It is an economy of scale
issue. As the corporation's loan portfolio gets smaller, there
are certain fixed costs spread across borrowers. It is a way to
increase the size of the loan portfolio and generate income so
the corporation can provide the loan program to Alaskans in the
future.
SENATOR BEGICH said his concern is that the corporation is
saying to people who were once residents of Alaska that whatever
loans they have from Idaho, California, or the federal
government, Alaska will buy and refinance their loans, and they
will have only one payer, Alaska. Alaska is taking on the burden
of their debt. That is what this bill is saying. He asked if
that is correct.
MS. THOMAS replied that that is what the bill is putting
forward.
CHAIR HOLLAND said he wants to know the default rates, but he
can understand where the corporation is going with this as far
as generating profits to keep the program going in the future.
9:27:03 AM
MS. EFIRD continued the sectional:
Sections 2, 3 & 4: Amends AS 14.43.173(a), (c) & (d
• Removes annual loan limits from statute
• Removes lifetime maximums from statute
• Provides for the Corporation to set annual and
lifetime limits for both half-time and full-time loans
MS. EFIRD said that the ASLC would be able to set the annual
loan maximums to be more responsive to the needs of Alaska's
students and Alaska's higher education institutions, especially
as tuition costs change.
SENATOR MICCICHE said that he is concerned himself. Limits are
being removed and the ASLC is being opened up to unlimited out-
of-state exposure. He would like to see a stress test on that.
Obviously, Alaska is a small pool, which is not efficient. This
expands the pool. There must be some benefit that is perhaps not
obvious to the committee, but this is a big change. There is a
reason to include Alaska residents. It is easier to reach out
and touch them than someone who has no interest in coming back
to the state. He is a little worried, but he has a lot of
respect for Ms. Pitney. He is sure that she has a document where
she has stress tested what she is asking to do here, what the
department is asking to do. He would like to see that. Without a
limit, the corporation is potentially taking on hundreds of
thousands of dollars per student. That is millions of dollars of
additional exposure that may or may not have the same
connectivity for collecting those dollars in the future. He said
it would be nice to see the math.
9:30:22 AM
SENATOR BEGICH said he would agree if the issue is to make a
more robust portfolio that provides some level of financial
security. He needs evidence of that. He is not convinced, but he
understands. Like Delaware attracted corporations by changing
its laws, maybe this would make Alaska the student loan Delaware
of America. Then there could be profit, but what is the evidence
to back that up before jumping into a perhaps high-risk strategy
that may not have a benefit for Alaskans at all. It has no
Finance Committee because it is a zero fiscal note. As a
consequence, Senate Education may be the only committee that
gets to have this discussion. The committee needs to know what
the policy is.
CHAIR HOLLAND suggested that Ms. Efird could address that in the
future.
SENATOR HUGHES pointed out that the bill has a referral to
Finance.
MS. EFIRD addressed some of the concerns saying the refinance
loan program has a high criteria for borrowers to meet. With
that and some other provisions in the program, there is a lower
possible default rate. She will be happy to provide some data
about why the corporation feels this would be beneficial to
Alaska student borrowers.
9:33:02 AM
SENATOR STEVENS commented that the organization has fixed costs
that have to be spread across borrowers. He suggested the
solution is to expand the reach and bring in more students, but
what about reducing the fixed costs.
SENATOR HUGHES clarified that there is a higher, stricter
criteria to refinance than for a basic loan.
MS. EFIRD answered that is correct. She will provide information
on the interest rates for all of the loan programs.
SENATOR HUGHES asked her to also provide the criteria for the
different loans.
MS. EFIRD answered yes.
SENATOR MICCICHE shared that he added the Finance referral
because he had difficulty understanding that there would be no
fiscal impact. Before he supports moving the bill out of
committee, he wants a greater understanding of that.
9:35:53 AM
MS. EFIRD continued the sectional.
Section 5: Amends AS 14.43.175
• Adds clarifying language that ACPE can offer future
student loan borrowers a loan program with immediate
repayment
MS. EFIRD said such a loan would reduce costs for student
borrowers because interest would not be deferred and
capitalized. Such a loan would not impact current borrowers.
Immediate repayment has been shown to be an option where in-
school student borrowers would start repaying their loans to get
in the habit of making loan payments, helping them to understand
the obligation for the loan, and over the life of the loan
reduces the amount because the interest is not accruing when
they are in school.
MS. EFIRD said the bill has an effective date of July 1, 2021,
the beginning of FY22.
MS. EFIRD said the ACPE did determine that the bill has a zero
fiscal note. It is not anticipated to increase agency operating
costs. All of loan operating costs are funded from receipts of
the Alaska Student Loan Corporation.
9:38:31 AM
SENATOR HUGHES asked if there are any projections of additional
applications and how much additional debt the corporation would
take on in a year's time.
MS. THOMAS replied that the corporation has not projected that.
It is challenging to project how many former Alaskans or
additional borrowers the corporation would get and what amount
of debt they would have. When the corporation originally rolled
out the refinance program several years ago, the corporation set
an amount in the budget for the first year without knowing what
to anticipate. The corporation does have a history of
controlling for an unexpected large number of applications. To
address the discussion about loan limits, Sections 2-4 don't
relate to the refinance loan program. They relate to in-school
loans, the Alaska supplemental education loan. Those are only
available to Alaskan residents or those attending postsecondary
education in Alaska. The current maximum for those loan programs
is for the annual costs that are unmet after grants,
scholarships, and federal aid, and they are insufficient to meet
a large number of student needs on an annual basis. The request
to increase the maximum is not related to the refinance loan
request. It is strictly for the annual loans made to Alaska
residents or students attending postsecondary institutions in
Alaska.
9:41:31 AM
SENATOR BEGICH said this is a good idea given that the cost of
education continually changes, and it gives power to ACPE to
adjust to those changes that are absolutely out of its control.
The state has arbitrary limits that were set years ago. He
appreciates these three sections.
SENATOR MICCICHE said for the analysis of exposure and benefits
of expanding the program, what happens if this administration
actually does forgive student loans. He asked if that would
dramatically affect their interest income. He asked if that has
that been analyzed. He doesn't need an answer now, and perhaps
no one knows how that would work.
CHAIR HOLLAND asked if anyone had a comment on that. It sounds
like a complicated subject.
MS. EFIRD said that the corporation is in conversations about
how any loan forgiveness options may affect the corporation.
That is on their minds.
9:43:33 AM
SENATOR BEGICH said that in the past forgiveness has been
considered part of income that had to be reported. He read that
a bill being considered would remove that stipulation.
SENATOR HUGHES asked regarding the immediate payback, if there
is any research that shows those students are apt to do better
academically and are more apt to graduate.
MS. EFIRD answered that in conversation with the Education
Finance Council and other professional organizations, she has
heard anecdotal reference to what Senator Hughes is talking
about--that it does create that connection between working for
something that a student is paying for. She is not sure about
any specific data, but she will look for that.
MS. EFIRD thanked the committee for allowing the introduction of
bill and thoughtful consideration. To address Senator Stevens
comment, the ACPE over the past five years has reduced its
operating footprint. It is down almost half of its positions
from a few years ago. Everyone is working diligently on
operating costs, doing due diligence to provide the best service
at the lowest cost for Alaskans.
9:46:26 AM
CHAIR HOLLAND held SB 94 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB58 - Senate Education Hearing Request 1.29.21.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 58 |
| SB94 - Senate Education Hearing Request 03.01.21.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 94 |
| SB 94 Support Letter from UA State Director Hutchison.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 94 |
| SB 94 3.5.21 (S) EDC Presentation.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 94 |
| SB 94 - Charter College - Letter of Support 3.2.21.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 94 |
| SB58 - Correspondence Programs as of 12.2020.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 58 |
| SB58 CorrespondenceADM&CostHistoryFY12-FY22Proj - Legal Size.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 58 |
| SB58 FY2022 Foundation Funding Program.pdf |
SEDC 3/5/2021 9:00:00 AM |
SB 58 |