04/02/1998 09:05 AM Senate FIN

                                                                               
 SENATE BILL NO. 332                                                           
                                                                               
"An Act relating to the Alaska Student Loan                                    
Corporation."                                                                  
                                                                               
Senator Pearce advised the bill had been heard last week and                   
the amendments in the files were a result of that hearing.                     
She noted that "E" version of the bill had been adopted as a                   
working draft.  The bill was held over so Senator Donley                       
would have time to prepare some amendments.                                    
                                                                               
Senator Donley advised the committee that he would no be                       
offering amendments #1.  He would like to start with                           
amendment #3.  There was no objection.                                         
                                                                               
Senator Donley MOVED amendment #3.  He said this amendment                     
would allow Alaskan students to borrow more money over the                     
current $9500 cap for certain types of graduate schools not                    
offered in Alaska.  With the exception of dental and medical                   
they could borrow up to $15,000/year and dental and medical                    
would be moved up to $25,000/year.                                             
                                                                               
Senator Gary Wilken was invited to join the committee.  He                     
said he admired Senator Donley's work with the WAMI program.                   
He knows how difficult it has been, but much needed.  He                       
said he would support the amendment but not the bill.  He                      
noted the student loan program was still trying to get on                      
its own feet and each year had been lessening their request                    
for more general fund money.  He felt the bill in general                      
would create more losses for the student loan program.  He                     
said they should concentrate more on making the program                        
self-sufficient.                                                               
                                                                               
Senator Parnell asked what the default rate was, but Senator                   
Wilken deferred to Diane Barrans.                                              
                                                                               
Diane Barrans, Executive Director, Post Secondary Education                    
Commission, Department of Education was invited to join the                    
committee.   She said at this time they had not done a data                    
extraction to really examine what this amendment might do                      
for graduate students.  She said overall the default rate                      
was at about nineteen percent.  She said one of the concerns                   
of the commission was that it raised the aggregate cap for                     
not only medical and dental borrowers but also other                           
graduate students.  Looking at the debt load if someone were                   
to borrow at the increased level, beginning immediate                          
repayment, the monthly payment on a twenty-year schedule                       
would be over $900.  If there was economic hardship and it                     
was extended to twenty-five years it would be $850 per                         
month.  She explained the commission would be issuing a                        
mortgage size loan in an unsecured debt capacity.  The risk                    
extended to the commission was significant.                                    
                                                                               
Senator Parnell felt there was a need to look at the real                      
value of the dollars at this point in time.  He did not feel                   
they were asking students to do any more that requested from                   
students ten years ago.                                                        
                                                                               
Senator Torgerson asked in relation to income was it any                       
worse that someone that has borrowed $42,000 and has a $500                    
payment?  Ms. Barrans said she has not really had time to                      
look at the types of graduate degree programs they would be                    
funding at the higher levels.  She said some may be in the                     
myriad of substantial incomes, however, some, such as social                   
work would have very modest incomes.  Senator Torgerson                        
asked if the option were to general fund subsidize the                         
students and not ask them to borrow more money?  Ms. Barrans                   
referred to her memo of 31 March and 1 April and said she                      
explained a need for some general fund capitalization.   She                   
said the commission was loaning approximately $80                              
million/year.  She suggested a general fund source for                         
loans.  Senator Torgerson indicated that he preferred the                      
option of additional money being available to borrow instead                   
of them coming to the Legislature and creating programs such                   
as WAMI.  He asked what other states did for graduate study                    
monies?  Ms. Barrans said Alaska's program was currently the                   
most generous graduate program available.  Again referring                     
to her memos, she said there were other loan programs                          
available, such as Federal and private.                                        
                                                                               
In response to Co-chair Sharp, she noted that because                          
interest does not start on the ASL until time it is being                      
paid back many borrowers opted for this program rather than                    
the Federal program on which interest started at the time of                   
the award.  She further explained that the majority of                         
graduate students attended schools out-of-state.  She said                     
approximately 400 - 600 borrowers would qualify for the new                    
increased limits.                                                              
                                                                               
Senator Adams said he OBJECTED to amendment #3.  He felt it                    
could be repaired by a new bill.                                               
                                                                               
By a roll call vote of 4 yeas (Pearce, Donley, Torgerson,                      
Parnell) and 3 nays (Sharp, Adams, Phillips) amendment #3                      
was ADOPTED.                                                                   
                                                                               
Senator Donley indicated he would not offer amendment #3.                      
                                                                               
Senator Pearce MOVED CSSB 332(FIN) and WITHOUT OBJECTION it                    
was REPORTED OUT with individual recommendations and zero                      
fiscal note from the Department of Education.                                  
                                                                               
The following verbatim transcript of SJR 42 is incorporated                    
into the minutes.                                                              
                                                                               
Co-chair Sharp called SJR 42.