Legislature(1997 - 1998)
04/25/1997 09:06 AM Senate HES
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SB 170 REPAY GRADUATE EDUCATION AID
Number 001
CHAIRMAN WILKEN called the Senate Health, Education & Social
Services Committee (HES) to order at 9:06 a.m. and introduced
SB 170 as the first order of business before the committee.
JOE AMBROSE , Staff to Senator Taylor, read the following Sponsor
Statement into the record:
Senate Bill 170 was introduced at the request of constituents
interested in preserving the WAMI Medical Education Program. This
is a companion measure to House Bill 193 and its introduction is
intended to compliment that effort. These bills would convert the
Alaska program into a loan program. The state of Montana has
already made this conversion.
WAMI has been a program of financial assistance named for the
participating states of Washington, Alaska, Montana, and Idaho. It
is intended to facilitate the education of medical professionals.
Alaska participated to the tune of $1,309,000 in FY97.
WAMI has been criticized because there has been no real incentive
for a student to return to the state upon completion of their
education.
By converting this program to a loan program and including a
provision for loan forgiveness, proponents feel young Alaskans will
be more likely to bring their new skills back to Alaska.
The House sponsor has been working with the Postsecondary Education
Commission and has developed a committee substitute. Senator
Taylor recommends adopting the same language as a substitute for
SB 170.
SENATOR GREEN moved that CSSB 170(HES) be placed before the
committee. Without objection, CSSB 170(HES) was before the
committee.
SENATOR LEMAN inquired as to the impact on the borrower. When does
the pay back schedule for the WAMI loan begin? JOE AMBROSE pointed
out the language on page 2, lines 7-9 "Interest imposed under this
subsection begins to accrue when the person terminates studies
under the graduate education program." Mr. Ambrose believed the
legislation allows for the internship. Mr. Ambrose directed
Senator Leman to page 2, lines 27-29 "A person employed in a
medical residency program is not required to begin repayment to the
state as long as the person remains in the medical residency
program." With regard to the impact on the borrower, Mr. Ambrose
deferred to the Postsecondary Education Commission.
Number 115
LAURA BURLESON , UAF Pre-Med student, supported SB 170. WAMI is
important to Alaskan pre-med students because WAMI gives Alaskans
preference for admission and tuition. WAMI treats Alaskan pre-med
students as residents for admission purposes. Ms. Burleson
informed the committee that a school to which she recently applied
had received over 10,000 applicants for 113 positions while another
school had 8,000 applicants for 32 out of state positions. With
those odds, Alaskan students do not have much of a chance because
Alaska does not have a medical school to provide in state admission
preference. SB 170 is a compromise to the alternative of
eliminating the program. Without WAMI, the challenge of the
numbers of getting into a medical school out of state would be very
difficult. Furthermore, this bill could help WAMI students
applying for the program. In the past the return rate for students
returning to the state is relatively low. The return or repayment
clause in SB 170 would help those students who do intend to return
to the state and practice.
WENDY REDMAN , Vice President of the University of Alaska statewide
system, thanked Representative Bunde and Senator Taylor for their
work on this issue. WAMI is very important to the university. The
University of Alaska-Anchorage offers the first year of the medical
program which provides the basis of a biomedical program. Ms.
Redman was supportive of this legislation if it is a means to
maintain WAMI. Ms. Redman hoped that the Senate action deleting
WAMI will be worked out. Ms. Redman suggested that the pay back
provision for the first year be eliminated. The first year of the
program is offered in Alaska and is important to the university and
the state by drawing medical research here. Ms. Redman recognized
that the WAMI program is an expensive program, but it is
substantially less expensive than having a medical school. The
decision to bring back WAMI students to Alaska is a policy call
which SB 170 addresses. Currently, 48 percent of the WAMI
participants do return to Alaska which is higher than the national
average for other medical schools. The WAMI program is a bargain
for Alaska and Alaskan students. Ms. Redman urged the committee to
continue the WAMI program and consider an amendment that would
provide that the first year of pay back be eliminated.
Number 263
SENATOR ELLIS asked if the return rate was expected to
substantially increase with the Sisters of Providence family
practice residency program. Senator Ellis projected that a
substantial increase in the return rate would occur due to the
availability of the residency program within the state. WENDY
REDMAN agreed with Senator Ellis that students tend to become
permanent residents in the community in which the student did
residency. Therefore, the family practice residency in Alaska
would make a big difference.
SENATOR ELLIS inquired as to the average debt load of a student
after seven years of medical training. WENDY REDMAN informed
everyone that the average loan is $45,000 to $80,000 per the
information of the Postsecondary Commission. With SB 170, $56,000
would be added if all four years pay back are included or $44,000
if the first year of pay back is eliminated. That would total
about $100,000 to $130,000 of debt. Ms. Redman pointed out that
these are family practitioners, not cardiac surgeons which could
possibly absorb that debt.
SENATOR ELLIS stated that the higher the debt load, the more likely
someone is to specialize and practice in a major urban center in
order to pay off the debt. The lower the debt load, the more
likely someone would choose to deliver babies in a rural setting.
SENATOR GREEN noted that students could accumulate $50,000 in post
graduate debt before beginning the WAMI program as well as the debt
the WAMI program would incur. When does repayment begin for the
debt incurred in the post graduate education? WENDY REDMAN
explained that the Postsecondary Commission would provide deferment
on the baccalaureate loans while the student is attending medical
school on a loan. Ms. Redman pointed out that the loans are
additive. If a student has a loan from Alaska, the first
baccalaureate loan would be deferred while the student continues
his/her education. At the time the student graduates from medical
school and one year afterwards, the entire loan would begin
repayment.
SENATOR GREEN asked if the student's record was clean with a
deferment; is there a bad debt record being assessed against the
student or the institution?
Number 322
DIANE BARRANS , Executive Director of Postsecondary Education
Commission (PSEC), stated that there are provisions for deferment
that do not damage a student's credit history.
SENATOR LEMAN inquired as to the tax consequences of WAMI; is the
program treated like a scholarship which is nontaxable? DIANE
BARRANS explained that it would be categorized as gift aid. Since
the loan is not associated directly with an individual, there is
simply a contractual fee paid to the University of Washington.
Therefore, the WAMI loan would not relate to an individual's
scholarship or loan limits. SENATOR LEMAN ascertained then that
there is no obligation by the party benefiting to pay the IRS any
portion of that benefit. DIANE BARRANS replied no.
SENATOR LEMAN asked if a loan program with forgiveness was created,
would that be a taxable benefit? DIANE BARRANS understood that in
the past, the tax code made some provisions for those receiving a
benefit related to specific employment or service. In the early
1990s, the IRS did contact PSEC and required the disclosure of
forgiveness benefits upon which people were taxed. However, Ms.
Barrans said that at that time there was no provision in the tax
code for people to receive a benefit simply because the person
resided in a particular area. Ms. Barrans said that it is
difficult to receive tax advice from the IRS, therefore a tax
accountant or tax attorney should be contacted. SENATOR LEMAN did
not want to inadvertently establish a cash drain away from Alaska
or Alaskans to the IRS. Senator Leman expressed the need to make
the tax consequences benefit Alaska or Alaskans who participated.
Number 370
In answer to the first half of Senator Leman's question, DIANE
BARRANS explained that the student with a WAMI loan would be
borrowing the differential between the resident and the non-
resident University of Washington School of Medicine rate of
tuition. Currently, the student pays the resident rate of tuition
which is about $8,000 per year. The student would be borrowing the
additional amount that is charged to residents. Ms. Barrans
pointed out that was calculation 2 in the committee packet.
SENATOR LEMAN determined then that the student is responsible for
the resident tuition rate and may borrow that under other loan
programs, but not specifically under the WAMI loan program. DIANE
BARRANS agreed with that assessment.
CHAIRMAN WILKEN requested that the concerns with SB 170 be
addressed and the Chair held SB 170.
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