Legislature(2001 - 2002)
04/02/2001 02:00 PM Senate HES
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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
SB 155-STUDENT LOANS/COMN. ON POSTSECONDARY ED.
MS. DIANE BARRANS, Director of the Alaska Commission on
Postsecondary Education (ACPE), gave the following explanation of
SB 155. Recognizing that the financial status of ACPE and its
financing partner, the student loan corporation, had been
stabilized 18 months ago, ACPE management was challenged by the
board to identify ways to expand its services and increase the
public benefit of those services for Alaskans. Working with the
Commission's team of managers, the ACPE focused on a strategic
recommendation made by the agency's external audit firm of KPMG
Peat Marwick and developed the Alaska Advantage Program. Over the
last 10 months, it has analyzed customers' needs and expectations.
That has included extensive communication with administrators at
the four institutions who collectively administer financial aid for
approximately 40 percent of ACPE's borrowing customers. With its
outreach effort, ACPE has better identified the needs of its
customers and the ACPE is better informed to serve these customers
now than ever before.
To that end, SB 155 has been introduced by the Governor to
establish the Alaska Advantage Program. The program will return
meaningful benefits and dividends to its stakeholder groups:
students; parents; higher education institutions in Alaska;
legislators; employers; and bond holders. SB 155 sets out a
statutory framework for the ACPE and the corporation to develop and
implement the premiere educational loan program in the United
States by and for Alaskans. The statutory changes made by the bill
will result in lower cost educational loans in Alaska and other
improvements to borrowers' loan terms. The ACPE's success in
marketing such a program will be one means of helping Alaskans
fight the high cost of postsecondary education and hopefully change
their perception that education is unaffordable. SB 155 will allow
the ACPE to facilitate these changes without putting at risk the
financial strength of the corporation. This initiative will
improve and expand services to Alaskans and assist the institutions
in Alaska in attracting and retaining new students.
For borrowers, the Alaska Advantage Program will guarantee the
lowest possible borrowing rates. It will improve aid packaging and
delivery by creating a one-stop shopping format. It ensures
simultaneous grant and loan application. It approves and expands
the borrowers deferment and repayment options and it provides an
opportunity for debt consolidation in Alaska with an Alaska lender.
For institutional partners, through ASL-net, the Commission's
internet portal, Alaska Advantage provides a recruitment and
retention tool through beneficial interest terms. It streamlines
and improves financial aid delivery, easing the administrative
burden. It eliminates unnecessary program differences to simplify
administration of these programs for staff and it will enhance loan
product comparisons by students and their families. It also
provides specific financial awards for borrowers remaining in or
returning to Alaska and it enhances default management support.
For the corporation, the Alaska Advantage Program will reduce the
risk through the federal guarantee, hopefully resulting in an
improved bond rating to AAA and further bond cost reductions. The
federal interest subsidies will improve cash flow and it will
eliminate 98 percent of the loss on the federally underwritten
loans due to borrowers' default, death, disability or bankruptcy.
In time, ACPE expects these changes to allow for additional Alaska
Advantage benefits such as upfront interest reductions, a rate
reduction for borrowers who remain in or return to Alaska,
repayment rewards, bank payment rewards, and other incentives for
good borrower behavior. The results achieved by the ACPE and the
corporation in recent years have meant a significant improvement in
both the program finances and servicing. These results could not
have been achieved without broad support of the Administration, the
Legislature, participating institutions and Alaska students.
SB 155 will enable the ACPE to convert these successes into
positive momentum and raise its services to the next level.
Continued and substantial improvement is only possible through
proposed integration of the programmatic and financial strengths of
federal and state student services. The timeline reflects an
extremely aggressive schedule as ACPE will seek to implement this
servicing model for the 2002-2003 year.
MS. BARRANS asked for expedited consideration and passage of SB
155, which will permit the ACPE to immediately direct 100 percent
of its resources to the planning, marketing and other
implementation activities. Success is feasible if we begin in May
of this year, but the process cannot begin until the statutory
structure is in place.
SENATOR WILKEN asked Ms. Barrans if she could review for the
committee the projected income that ACPE expects to make with the
passage of SB 155. He also asked Ms. Barrans to inform the
committee of the amount of delinquent loans that have been paid
through permanent fund dividend collections.
Number 689
MS. BARRANS directed the committee's attention to the fiscal note,
which shows a positive change in revenues. By 2003, ACPE expects to
have a $4.7 million increase in net income, with that amount
continuing as the program evolves. The fiscal note was estimated
with all things remaining as they are. However, ACPE intends to
take the net gain and roll it back into the loan products
themselves. ACPE would like to offer below-market rate loans.
CHAIRWOMAN GREEN asked if the savings from the projected increase
would apply to borrowers in the future or whether they would have
any retroactive impact.
MS. BARRANS said the savings shown on the fiscal note are specific
to the federally underwritten law. She noted regarding the
permanent fund dividend collections for bad debt, ACPE recovered
$13 million this year and $12 million last year.
Number 846
SENATOR LEMAN pointed out that the fiscal note contains funding for
four new employees. He asked her to address, to the Senate Finance
Committee, whether four new employees are necessary and or whether
contracting out some of that work would be a better approach.
CHAIRWOMAN GREEN announced that she will hold the bill until
Wednesday to provide committee members the opportunity to get any
other questions answered.
MS. BARRANS informed the committee that the fiscal note will be
revised because the numbers used are consistent with the current
default rate; that default rate is expected to decrease with the
new program model.
CHAIRWOMAN GREEN took a brief at-ease and then continued taking
public testimony on SB 155.
MR. RICK WEEMS, University of Alaska Anchorage (UAA) finance
officer, stated support for SB 155 and said that UAA's partnership
with ACPE is providing great services for students.
There being no further testimony or questions on SB 155, the
committee took up SB 91.
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