04/16/1993 04:15 PM Senate HES

 CHAIRMAN RIEGER introduced  SB 143  (STUDENT LOAN INTEREST RATE               
 REDUCTION) as the next order of business.                                     
                                                                               
 CAROL CARROL, staff to Senator Jay Kerttula, prime sponsor of                 
 SB 143,  explained the legislation will reduce the interest                   
 rates on student loans from eight percent to six percent.                     
 The rate of interest on a loan in default would be reduced                    
 from ten percent to eight percent.  She said Senator Kerttula                 
 feels that students of the State of Alaska should be able to                  
 take advantage of the reduction in interest rates that the                    
 nation is presently experiencing.                                             
                                                                               
 Number 480                                                                    
                                                                               
 SENATOR MILLER questioned if this change would create more                    
 problems in the student loan program and, if so, why would we                 
 want to do that.  CAROL CARROL responded that according to the                
 projections of the bond council, when they use a growth rate                  
 of three percent for this loan fund, their assumption is that                 
 it will accelerate the time that the student loan corporation                 
 has to make a decision about whether to limit loans, so there                 
 won't be enough money for every student that applies.  Because                
 the state is no longer putting any money into the fund, that                  
 decision is going to have to be made anyway.  She added that                  
 this would at least give the students the benefits of the                     
 lower interest rates.                                                         
                                                                               
 Number 500                                                                    
                                                                               
 MARY LOU MADDEN, Assistant Director, Postsecondary Commission,                
 Department of Education, stated the commission does not have                  
 a position on SB 143, and they are, in fact, studying the                     
 whole question of the long-term viability of the loan program,                
 particularly in the absence of general fund monies, and their                 
 reliance on the bond markets.                                                 
                                                                               
 Number 510                                                                    
                                                                               
 SENATOR LEMAN wondered if there wasn't a better way to do this                
 instead of setting the interest rate at a fixed rate in                       
 statute.  MARY LOU MADDEN said she thought there were other                   
 alternative ways of assuring that students get a break when                   
 the rate goes down, and, at the same time, assuring that there                
 is money in the future.                                                       
                                                                               
 CHAIRMAN RIEGER said he was willing to let the bill move out                  
 of committee, but he has concern with anything that weakens                   
 the program.  He added that he did not like it when the                       
 program was changed from being funded out of the general fund                 
 to relying on the bond markets.                                               
                                                                               
 SENATOR ELLIS moved that SB 143 be passed out of committee                    
 with individual recommendations.  Hearing no objection, it was                
 so ordered.