05/04/1994 09:15 AM Senate FIN

  CSHB 506(FIN) am:   An  Act relating  to  student loans;  to                 
                      sanctions  for  defaulting on  a student                 
                      loan,  including  denial   of  a   state                 
                      occupational license; and  providing for                 
                      an effective date.                                       
                                                                               
                      Representative Con Bunde, sponsor  of HB
,   and   Joe   McCormick,  Executive                 
                      Director,    Alaska     Commission    on                 
                      Postsecondary Education (ACPE) testified                 
                      in support  of HB 506.   Senator  Rieger                 
                      voiced his opposition to the denial of a                 
                      state  license to  those  in default  of                 
                      student  loans.   CSHB  506(FIN)  am was                 
                      REPORTED  out of  committee  with a  "do                 
                      pass,"  with a zero  fiscal note for the                 
                      Department  of  Administration,   and  a                 
                      fiscal  note  for   the  Department   of                 
                      Education (ACPE) in  the amount of $99.7                 
                      also showing a revenue of $1,408.3.                      
  CS FOR HOUSE BILL NO. 506(FIN) am:                                           
                                                                               
                                                                               
       An  Act  relating to  student  loans; to  sanctions for                 
       defaulting on  a student  loan, including  denial of  a                 
       state  occupational  license;   and  providing  for  an                 
       effective date.                                                         
                                                                               
  Co-chair Pearce invited Representative Con Bunde, sponsor of                 
  HB  506,  and  Joe  McCormick,  Executive  Director,  Alaska                 
  Commission on  Postsecondary Education  (ACPE), to join  the                 
  members at the table.                                                        
                                                                               
  REPRESENTATIVE CON BUNDE,  sponsor of HB 506,  said the bill                 
  had been requested by Postsecondary Education and would make                 
  the student loan program more  "user friendly" and business-                 
  like.                                                                        
                                                                               
  JOE MCCORMICK highlighted the purposes of HB 506.  First, it                 
  was  written to enhance the integrity  of the Alaska Student                 
  Loan Program in the eyes of the bond holders, bond insurers,                 
  and  financial  markets.   Since  1986, the  legislature had                 
  directed  that  the Alaska  Student  Loan Program  issue tax                 
  exempt bonds in order to continue funding the program.  As a                 
  result, the program  had been examined  and was required  to                 
  come before the legislature with recommendations  that would                 
  improve and strengthen the stability of the program.                         
                                                                               
  Secondly,  it  provided  for   easier  repayment  terms  for                 
  students  by offering  a consolidation program  provision in                 
  the bill.   Also, a variable  interest rate provision  would                 
  allow students the lowest  possible interest rate  depending                 
  on the cost of money at the time of issuance of the bonds.                   
                                                                               
  Third,  provisions had  been  identified to  improve program                 
  administration.  Lastly,  the ability to collect  loans from                 
  borrowers had been improved.  A strong message would be sent                 
  to students  that the  fund was  a revolving  one and  their                 
  repayment  was the most important aspect of the loan because                 
  it provided future opportunities for students to continue to                 
  borrow in the program.                                                       
                                                                               
  Senator  Rieger  asked  if  the  department  would  consider                 
  seizing the  delinquent borrower's  vehicle  since it  would                 
  deny occupational licenses for unpaid  loans.  Mr. McCormick                 
  explained that the occupational license was not a forfeiture                 
  but a  stop-gap measure so  that prior  to an issuance  of a                 
  renewal of  a  license,  a  student  loan  must  be  brought                 
  current.  If  a loan  was in default,  the department  would                 
  like to negotiate with the borrower prior to the issuance of                 
  the  license.  Seizing  vehicles had not  been something the                 
  Commission would like to pursue  or suggest.  Representative                 
  Bunde added that student loans  were made without collateral                 
  and most borrowers had no credit history.                                    
                                                                               
  Senator  Rieger  reiterated  his  discomfort  in  regard  to                 
  holding someone's license if they were  in default.  He felt                 
                                                                               
                                                                               
  that  by taking away someone's  license, the person would be                 
  unable to make a  living and likened it to  debtor's prison.                 
  Representative Bunde responded  that once a debtor  had made                 
  arrangements for repayment they were no longer in default.                   
                                                                               
  Senator Sharp  observed  that  with  the  new  consolidation                 
  provision it would  be easier for  borrowers to repay  their                 
  loans.   Mr.  McCormick  stressed that  this bill  would not                 
  collect a lot of  money for the Alaska Student  Loan program                 
  but the Commission wanted to send a message to the borrowers                 
  and bond holders  in New York that  collection efforts would                 
  be taken seriously.   He felt that  if the State could  loan                 
  money to a  student for  their education it  was only  right                 
  that  the  borrower  remained  current  while  enjoying  the                 
  privilege of practicing law, medicine, etc. in Alaska.                       
                                                                               
  Senator Sharp  MOVED for passage  of CSHB  506(FIN) am  from                 
  committee.   Hearing no objection, the bill was REPORTED out                 
  with a  "do pass", a zero fiscal  note for the Department of                 
  Administration,  and  a fiscal  note  for the  Department of                 
  Education, ACPE  for $99.7  showing $1,408.3  revenue.   Co-                 
  chairs Pearce, Frank,  Senators Sharp, and Kelly  signed "do                 
  pass."  Senator Rieger signed "do not pass."