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 506, 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."