Legislature(1993 - 1994)
03/07/1994 03:00 PM House HES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 506 - STUDENT LOAN PROGRAM Number 348 JOE MCCORMICK, Executive Director, Alaska Commission on Postsecondary Education (ACPE), introduced himself and began his testimony on HB 506. CHAIR TOOHEY indicated that she was turning the gavel over to Rep. Bunde. Rep. Bunde presided over the remainder of the meeting. CHAIR BUNDE explained that there were two proposed amendments and indicated that amendment A.2 (8-LS1752/A.2), submitted by Rep. Brice, would be referred to as Amendment 1. He then asked Mr. McCormick how the amendment related to his suggested amendments. Number 400 MR. MCCORMICK stated that the amendment would pertain to the variable interest rate that the ACPE has recommended. He said, in good conscience, he could not support the amendment with a 15% cap. He maintained that to put a cap on the variable rate would defeat the purpose of having a variable rate. REP. BRICE made a motion to move Amendment 1. REP. TOOHEY objected. CHAIR BUNDE maintained that if a student wants to take advantage of low rates they "have to gamble on the high rates." He said he did not support the amendment. REP. BRICE agreed with Chair Bunde and indicated that was the reason he suggested a cap at such a high rate. He felt a cap at 15% would reach a certain level of compromise. He said his concern was if rates go above 20% that students would not be able to afford to go to school. Number 470 REP. VEZEY stated that the interest rate on a loan is not variable over the life of that loan, and the person knows that rate to be set for the life of the loan. He said if the cap is at 15% and the prime rate is 20%, the funds for the student loan program will be depleted quite rapidly. CHAIR BUNDE said the loan program would be shut down at that point. He further stated, "Each year is a new loan. Each year could be a different interest rate." REP. BRICE said, "Which is the precise reasoning for having a cap at 15%." He said the cap would prevent a person from being locked in at 20%. He acknowledged the provisions for refinancing but indicated that it's in the state's best interest not to have the rate "blossom." He felt anything over 15% would be a disincentive for students. Number 538 REP. TOOHEY asked Mr. McCormick if there would be any time in his career when he would advise an 18 year old, unemployed student to take a loan at 20%. MR. MCCORMICK said there has never been a time, to date, that he has done that. He explained that if a student is highly motivated in pursuing an education, the rate of interest is not a consideration. Number 545 REP. TOOHEY asked if Mr. McCormick would ever stop a student from taking a loan out at 20%. MR. MCCORMICK replied that he would caution the student as to the income to debt ratio that would be incurred, but he would not prevent the student from making that decision. He further indicated that it is the student's choice as a consumer. Number 579 CHAIR BUNDE pointed out that if the cost of money is higher than the interest that the students pay, the student loan program will be phased out. He asked for further discussion on the amendment. REP. KOTT asked if there was a section on the permanent fund dividend form that would allow the student to pay for education "at today's rates." CHAIR BUNDE said it was his understanding that the section is designed for parents and further explained that it takes quite some time to build up funds. He then called for a vote to adopt Amendment 1. Representatives B. Davis, Nicholia, and Brice voted Yea, and Representatives Bunde G. Davis, Vezey, Kott, and Toohey voted Nay. Chair Bunde announced that Amendment 1 failed. He brought Amendment 2 (8-LS1752/A.1) to the table. MR. MCCORMICK stated that the amendment would require a change to the promissory note and said administratively the change is not necessary. He said that persons within the Division of Finance who were present would testify and offer language that would change Sections 9 and 10. He said he would support those changes as a friendly amendment to the bill as to allow for the kind of leverage needed prior to the disbursements of warrants. He said, "If I read this right, that says... the disbursement is due under terms of a written contract with that person... which would mean I would have to print in my promissory note that I had the authority to do this. I just don't feel that's necessary." He further stated that it is the psychology of the provision that is the focus. He said students will stop and think about putting a higher priority on their student loan payment. He stated that he is opposed to the amendment. CHAIR BUNDE asked if there was anyone present to speak in favor of the amendment. He then indicated that the amendment came from the ACPE. MR. MCCORMICK said he offered a friendly amendment to amend Section 9, which would authorize the Department of Administration to withhold warrants from contractors. He was unsure if the amendment would accomplish that. He indicated that page 6, line 30, was under Section 10. Number 716 CHAIR BUNDE asked Lynne Smith where the amendment originated from. LYNNE SMITH, Committee Aid, House HESS Committee, explained that the amendment came from Dianne Behrends from the ACPE. CHAIR BUNDE stated that he withdrew his motion to adopt the amendment. He said if the amendment is needed, it could be addressed in a future committee. He then asked for further questions or testimony. Number 741 PAIGE ADAMS, Vice-President, University of Alaska Southeast Student Council, Sitka, testified in Juneau in support of HB 506. She stated that she did not think the role of the ACPE to be one of a financial advisor to students. She felt that students are old enough to figure that out for themselves. She asserted that if the interest rate was to remain at 8%, the availability of loans would decrease for future students. She said, personally, she did not want to pay higher interest rates, but she felt that any loan is better than no loan. Number 780 REP. BRICE, as the only legislator on the committee with an outstanding loan, related how the interest rates just continue to stack up. He said he hoped Ms. Adams will have a job a year after she graduates to make loan payments. MS. ADAMS said that her permanent fund dividend is paying for her schooling. She said after four hours of debate, the council decided that going with a variable rate would ensure the program's future. Number 815 REP. TOOHEY said Ms. Adam's attitude was very responsible. CHAIR BUNDE asked Don Wanie to testify. Number 818 DON WANIE, Director, Division of Finance, Department of Administration (DOA), testified on HB 506. He stated that the division runs the state's payroll and accounting systems. He further stated that the division would be paying employees who may have wage assignments and vendors who may have garnishments. He said the legislation would affect both areas. He indicated that Section 6, subsection C, may affect garnishments that the division already has in place. He said the student loan garnishment would take precedence, and the division would have to suspend the other garnishment. He questioned the wisdom of the requirement. MR. WANIE addressed Sections 9 and 10. TAPE 94-39, SIDE A Number 000 MR. WANIE stated that Section 10 would cause circumstances whereby the division could receive a notification by way of a computer file from ACPE saying that certain people are in default on their student loans. He said the division would then do a computer match against the vendor file and subsequently deny payments to vendors. He said the division has not in the past held payments to vendors without some type of court document. Although he did note that the Department of Law indicated that it would be permissible. He felt there was more than one way to address the problem and referred to the document he passed out titled "Comments on HB 506." (See Attachment 1) MR. WANIE said that, as written, the bill charges the DOA with the responsibility of performing the computer file matches and subsequent research to make absolutely certain that payments are withheld from the correct person. He said the ACPE would develop a subsection that would pass files to the division, which would have a subsection that would look into vendor files. On a day to day basis payments to vendors would be scrutinized to avoid payments being made to vendors who are delinquent in their loan payments. He said the responsibility would then lie with the DOA to catch those people. MR. WANIE suggested that language be included in Title 14 that would have the same effect as current language, but it would place responsibility for research and identification with the ACPE. The ACPE would then notify the DOA of the specific persons from whom payments should be withheld. He said the DOA currently has a mechanism in place, both in the payroll and vendor payment system, whereby if the DOA receives a court order that requests payments be held from a particular employee or vendor the payments are, indeed, withheld. He suggested that the language in Section 10 be placed in Title 14 and that the ACPE do the necessary researching and documentation before the DOA processes them through their existing mechanism. MR. WANIE stated that under language already in Title 9, the ACPE can get a court order to direct withholding of payments from a vendor. He reiterated that there is already a mechanism in place that would allow the ACPE to obtain a court order. Number 190 REP. OLBERG asked Mr. Wanie to define the term vendor. MR. WANIE referred to the list from the Suggested Amendments to HB 506 that was handed out at the previous meeting. He said the ACPE suggested amending Section 9 so that only disbursement of payments for goods and services provided by an individual contractor would be withheld. He said the DOA would not want to withhold welfare payments, longevity bonus payments, and other payments that are generated by the state system. He felt that the ACPE was focusing on payments for goods and services provided to the state. Number 233 REP. OLBERG asked if a person could be found under an assumed name. MR. WANIE responded no. He said the DOA can identify those people who provide goods and services to the state if they use a social security number (SSN) rather than an employer identification number. If they use an employer identification number as a sole proprietor, or if they are incorporated and use an identification number, the DOA cannot find them. He said the only matches that can be made are with SSNs. Number 278 CHAIR BUNDE referred to Mr. Wanie's suggestions regarding Sections 9 and 10 and asked Mr. McCormick if he felt Item 2, as indicated in Comments on HB 506, would be a feasible option for the ACPE. MR. MCCORMICK said it would be doable without considerable additional expense. He said a computer tape match system could be developed to match SSNs. He further explained that the previously withdrawn amendment that related to page 6, line 30, would reference the contractor not the borrower. He indicated that he was mistaken in his earlier opposition to that amendment and clarified that he now supported it. Number 360 CHAIR BUNDE asked for further clarification regarding contractor and borrower. MR. MCCORMICK stated that under Section 10, subsection B, the amendment would change the line to read, "The Department of Administration may not disburse money to a person under (a) of this section if..." He said the person would have a contract with the DOA. CHAIR BUNDE stated that Mr. McCormick's response clarified the issue for him. REP. VEZEY asked if the ACPE endorsed the amendment. MR. MCCORMICK said yes. CHAIR BUNDE asked if there was further discussion on Amendment 2. He then asked for any objections. Hearing none, Chair Bunde, stated that Amendment 2 was adopted. Number 416 REP. VEZEY asked that his amendment be discussed at the next meeting of the HESS Committee. CHAIR BUNDE asked Rep. Vezey to hand out his amendment and indicated that he wanted to be sure that Mr. McCormick could review it. REP. VEZEY made a motion to adopt Amendment 3. CHAIR BUNDE asked Rep. Vezey to speak to his amendment. REP. VEZEY stated there are several statutes that require the employer to continue to withhold payments until further order of the court. He indicated that those orders can stand in perpetuity and it is an unreasonable burden on an employer to keep track of an employee's garnishments if the employee has returned to the company after several years. He suggested that after the word court on page 5, line 9, the phrase "or until the employment of the obligee is terminated" should be added. He then said it would be the responsibility of the obligor to notify the employer to resume garnishing the wages of the obligee. Number 483 CHAIR BUNDE asked for further discussion. REP. BRICE related a scenario of an employee who has an outstanding student loan that is in default and quits his job. CHAIR BUNDE interjected and said that Rep. Brice was missing a step and added that the student has a loan in default, has been put into collections, and his wages are being garnished. REP. VEZEY interjected that conflict arises when the employee goes back to work for the employer after five years and the court order is still in effect. He stated that state agencies have "gone after" employers and have made them liable, after the rehire, for all pay periods that they did not garnish wages. REP. BRICE said, "whether or not he's working or not." REP. VEZEY said no, and further stated that the employer has to honor that court order no matter how old it is. They have to keep all their personnel records active to avoid possible penalties. CHAIR BUNDE reiterated the same scenario and further added that the employer is expected to remember that the employee had his wages garnished five years previously. He indicated that Rep. Vezey's amendment would require the ACPE to notify the employer. Number 544 REP. BRICE asked if Mr. McCormick would have access to the Department of Labor. CHAIR BUNDE indicated that Mr. McCormick has access to skip tracers that would track the student for those five years. MR. MCCORMICK said the amendment would shift the responsibility of tracking to the ACPE. He said he did not object to the amendment. CHAIR BUNDE asked if there were any objections to the amendment. Hearing none, Chair Bunde stated that Amendment 3 was adopted. He then indicated that several committee members had another meeting to attend and asked that all interested parties attend the meeting the next day to finish discussing HB 506. Seeing no further business before the committee, CHAIR BUNDE ADJOURNED the meeting at 4:25 p.m.
| Document Name | Date/Time | Subjects |
|---|