HOUSE BILL NO. 28 "An Act establishing a student loan repayment pilot program; and providing for an effective date." 3:14:53 PM Co-Chair Foster asked the sponsor to join the committee. REPRESENTATIVE ANDI STORY, SPONSOR, introduced the bill with prepared remarks: Thank you for hearing HB 28, Student Loan Repayment Program. This bill seeks to help address Alaska's outmigration problem and our high employee vacancy rates for teachers and state employees. According to the Depart of Labor data, Alaska has had 12 consecutive years with more residents leaving our great state than arriving. The data says we have about the same number of people leaving the state as before, BUT a significant number of people are not moving into the state as they once did. This is a problem as we are short on having certified teachers (600 teachers short this year). In addition, Alaska continues to have high vacancy rates in state employment. The state employee vacancy rates are hindering citizens from receiving timely essential state services such as public assistance, ferry transportation, professional licensing, retirement benefits, payroll and more. Also, it is important to know that only 35 percent of residents who leave Alaska for postsecondary education outside of our state, return. House Bill 28 seeks to incentivize in - migration through a postsecondary education loan repayment program and urges former Alaskan residents to "Come Back Home." That is what I have nicknamed this bill, "Come Back Home," to fill these essential state employee positions or teacher positions for our children. Why it focuses on prior Alaskan residents is they already have established roots here. They have family and friends, a connection to this place and land, they are more likely to remain after receiving incentives like an employersponsored loan repayment program that this bill establishes. House Bill 28 sets up a pilot loan repayment program for up to 120 individuals that makes a payment to the person's student loan lending institution after they complete a year of work. The payment is $8,000 per year, for three years for a total of $24,000. The Student Loan Debt by State, from the U.S. Department of Education says Alaskans have a total of $32,000 student loan debt on average. This bill reaches out to former residents who have traveled south for their higher education degrees or technical certificates or have completed their degree programs or certifications through the University of Alaska system and have moved and been out of the state for a year or more. I believe this is a positive pilot program to get 120 former Alaskans back living and working in our state. The funding for this pilot program would come from the Alaska Higher Education Investment Fund (AHEIF). Kerry Thomas, Acting Executive Director from the Alaska Commission on Postsecondary Education (ACPE) is here to provide information about the loan repayment program vs. a loan forgiveness program that the state used to have, and to talk about the HEIF. ACPE would oversee this program. Representative Story asked her staff to review the fiscal note [sectional analysis]. CHERIE BOWMAN, STAFF, REPRESENTATIVE ANDI STORY, reviewed the sectional analysis (copy on file): Section 1: Adds a new section to the uncodified law creating a student loan repayment pilot program: a) The program will be developed and administered by the Alaska Commission on Postsecondary Education. Subject to appropriation, the commission may award a grant to a person who: 1) applies not later than October 31, 2025; 2) is a full-time state employee or public school teacher; 3) has a degree or certificate from a higher education institution from outside Alaska; 4) was an Alaska resident for at least a year before attending the out-of-state institution; 5) or has completed a degree or certificate through the University of Alaska system and has resided outside of the state for 12 months or more prior to returning to Alaska to work as a full-time state employee or public school teacher; 6) owes payment on a student loan taken to obtain their degree or certificate. b) The Commission will establish an application process, along with policies to determine the efficiency and success of the program in recruiting and retaining grant recipient employees with the state and school districts. The commission will report to the legislature yearly. c) To participate, applicants may be required to refinance their existing student loans through the commission. d) Grants awarded are only for full-time teachers or state employees, and payable only at the completion of a year of work. e) Participants may receive a grant each year for a maximum of three years in an amount not to exceed $8,000 per year. If the balance of the participant's outstanding loan is less than $24,000, the grant will be equal to one-third of the balance in each year of participation in the program. f) Up to 125 grants will be awarded each fiscal year. The total dollar amount awarded may not exceed $1,000,000 in a fiscal year. If the amount appropriated in a fiscal year is insufficient to meet the amounts awarded, the commission will reduce the amounts awarded. Section 2: Adds a new section to the uncodified law requiring the commission to submit a report on December 21 of 2025, 2026, and 2027 that describes the effects of the pilot program on recruitment and retention of teachers and state employees. The last report will include an analysis of the overall success rate and effectiveness of the program. Section 3: This bill sunsets on December 31, 2027. Section 4: This Act takes effect immediately. Co-Chair Foster wanted to move to invited testimony. He asked about the fiscal note. Representative Story replied that Kerry Thomas would review the fiscal note. RICARDO WORL, SELF, JUNEAU, introduced himself and read from prepared remarks: I grew up in Juneau, graduated from West Anchorage HS in 1980 and earned my bachelor's degree from a small private school on the east coast in 1984. To cover tuition, room and board payments, my parents had to scrape up the cash every month. I applied for scholarships which were fewer 40 years ago, and ultimately took on student loans like many college students. It wasn't until I graduated that I learned my parents liquidated assets and sold several significant art pieces from our home to ensure we could cover tuition. When I finished college, I had about $30,000 in student loans from the AK Commission on Postsecondary Education (ACPE). Many of my classmates from West HS also took advantage of the State's student loan program. I can confidently say that the forgiveness clause absolutely swayed our decision to move back home. I came back to Alaska to pursue a profession in publishing and ultimately ended up with a career in non-profits, public service and serving our rural communities. In two months I will be attending my 45 year high school reunion in Anchorage where I will catch up with other life-long Alaskans who chose to move back home and who were incentivized by the generous student loan forgiveness program. I moved back home to Juneau 30 years ago and am aware of how significant the State of Alaska has been for employment opportunities in our state. I remain mindful of the challenges our state agencies face in recent years of trying to recruit and fill essential positions in education, public safety and marine transportation. I encourage this committee to support House Bill 28. This is a proven and effective recruitment tool to attract our young people back to Alaska and an incentive for them to seek a career within state government. - Alaska students entering college in recent years were in our schools during a period where they were directly impacted by funding reductions the loss of programs, teachers, and overcrowded classrooms - Now that they are in college they have to hear more bad news as our country's ideology questions the validity of higher education, is holding funding for colleges (and now school districts) hostage if they don't eliminate diversity, equity and inclusion, and the worst is having to see classmates being investigated or taken from the street because of their opinions. All on top of everything costing more. - Just this week, our families are adjusting to economic uncertainty as retirement accounts and investments lose value. Let's give our students a little bit of good news. Let them know we are thinking about their futures and their economic wellbeing. HB 28 and the student loan repayment program is a bright light and a clear message that we want to invest in their future. Mr. Worl thanked the committee and expressed appreciation for their service to the state. 3:27:22 PM Co-Chair Foster asked to hear from ACPE. KERRY THOMAS, ACTING EXECUTIVE DIRECTOR, ALASKA COMMISSION OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, shared that she was present to provide information about the bill and student loan repayment. She read from prepared remarks (copy on file): I'm here to provide information about student loan repayment and House Bill 28, as well as the higher education investment fund as the funding source. Thank you for having me here today. What is student loan repayment? To provide background, student loan repayment is: An employer-sponsored benefit It's an agreement in which employer agrees to pay down an employee's student loan for fulfilling a set of terms established by of the employer. The employer determines the service requirement, frequency and loan repayment amount Any employer, private or public sector, can offer loan repayment. Why is loan repayment better than loan forgiveness? Loan repayment is vastly different from loan forgiveness. Loan forgiveness is when the state or federal government provides a student loan to attend a certain program of study and the student agrees to work in their field of study after graduation in return for the loan being forgiven. In Alaska, the WWAMI program is a well-known loan forgiveness program. Some of the benefits of loan repayment vs. loan forgiveness are: Loan repayment guarantees a return on the state's investment With loan repayment, public funds are going to degree holders contributing to the state's economic and social well being The cost of administering loan repayment programs are significantly lower than loan forgiveness programs o Loan repayment does not involve costly loan servicing, collections or litigation activities when the recipients do not return to Alaska and work or do not repay their loans Why is loan repayment good for employers and employees? Student Loan Repayment Programs are growing as an employer tool to recruit and retain talented workers. Student loan repayment benefits both employers and employees: It reduces employee's financial stress by reducing or eliminating student loan debt while working It helps employers remain competitive in a tight labor market Research shows student loan repayment programs: Enhances recruitment efforts - employers offering student loan repayment benefits are able to hire faster o Employers offering student loan repayment hire 13 percent faster. Retain existing employees longer American Student Assistance found employers offering repayment retain employees 36 percent longer.1 Loan Repayment and HB 28 The benefits of student loan repayment programs are well documented. Many state governments have shifted to offering student loan repayment in place of loan forgiveness programs to attract and retain talent in workforce shortage areas. (Texas, Mississippi, Pennsylvania are a few examples among many others). Alaskan postsecondary graduates carry an average of $35,346 in student loan debt. According to recent surveys, 57 percent of employees say student loans are a major problem. 86 percent of employees say they will commit to work 5 years for a company helping to pay their loans. Funding: Funding for the student loan repayment pilot program created in HB 28 is from the Alaska Higher Education Investment Fund (AHEIF or HEIF) and totals approximately $3M over three years. In regards to the HEIF, The Department of Revenue is the investment manager for the AHEIF. ACPE administers three programs currently funded by the AHEIF: o WWAMI Medical Education Program o Alaska Performance Scholarship (APS) o Alaska Education Grant (AEG) In addition to its role as administrator, ACPE also provides higher education policy information to the State of Alaska. Due to recent changes in the ACPE programs funded by the AHEIF, an additional $1 million draw over the next three years for a total $3 million draw from the AHEIF, will increase the likelihood that fund earnings cannot keep pace with spending from the fund. o WWAMI is directly appropriated from the AHEIF, while the APS and AEG programs are subject to a maximum appropriation rate of 7 percent of the fund's beginning balance for the following fiscal year o Recent program changes impacting AHEIF funding: .notdef The WWAMI program funding increased by 50 percent starting in FY25 to $5.1 million per year to accommodate 30 participants instead of 20. .notdef Legislative changes to the APS program in FY24 resulted in expected APS and AEG program costs of $25.5 million for FY26, which is 20 percent higher than was originally expected. AEG funding is tied to APS funding in statute, therefore expected program costs for FY26 increased. Since the changes to APS recently took place, it is unknown what the long-term impact to spending for this program will be. .notdef Combined, expected expenditures from the AHEIF for WWAMI, APS and AEG have increased by approximately 30 percent between FY24 and FY26. Increasing AHEIF spending by $1 million per year over three years to fund HB 28 would raise projected annual expenditures by 3 percent, further reducing fund value but not significantly altering long-term sustainability. Summary: Student loan repayment programs are increasing in popularity and employers not offering these benefits may struggle to compete in the job market In 2021, 17 percent of employers offered student loan repayment. As of 2023, that number increased to 34 percent of employers. 42-55 percent of high school graduates attending college leave Alaska for postsecondary education and approximately 35 percent return; approximately 1200 to 1500 Alaskans leave each year and only 420 to 525 return. HB 28 provides an incentive to bring these Alaskans back to our state. 3:34:57 PM Co-Chair Foster asked for a review of the fiscal note. Ms. Thomas reviewed the fiscal note control code Ciavl with prepared remarks. Co-Chair Foster thanked Ms. Thomas for her review. HB 28 was HEARD and HELD in committee for further consideration. Co-Chair Foster reviewed the schedule for the following day. He did not anticipate having the 9:00 a.m. meeting.