SENATE BILL NO. 123 "An Act relating to student loan programs, interstate compacts for postsecondary education, and fees for review of postsecondary education institutions; and providing for an effective date." Co-chair Frank WITHDREW amendment #1. No objection being heard amendment #1 was WITHDRAWN. Senator Zharoff offered amendment #2 which deals the full and part-time students. Joe McCormick, Executive Director for the Commission on Postsecondary Education stated his support for amendment #2. He said it provides a graduation, downward, of the annual amounts eligible depending on the length of the program. It tracks very closely the same loan eligibility requirements that are currently available in the student aids programs. Senator Zharoff MOVED to adopt amendment #2. Senator Sharp OBJECTED. Senator Sharp MOVED amendment #3 which reduces the proposed total amount available for a student loan to an individual student over the career course of his education from $79.0 to $60.0. The $60.0 his still higher than under federal law. Mr. McCormick was supportive of the amendment. He stated that the current maximum is $5500 for an undergraduate, and $6500 for a graduate student. Depending on the number of years involved in the undergraduate or graduate study would determine the aggregate. Four years of study at $5500 would equal $22,000. Three years of graduate study at $6500 equals $19,000. This amounts to a 26% increase overall in the allowable amount to be borrowed. There was no objection to the amendment. Amendment #2 and Senator Rieger expressed his concerns with regards to the origination fee at 5%. He offered an amendment to reduce the rate from 5% to 3%. Mr. McCormick stated that the 5% rate was established as a rate that customarily was paid in student loan programs, and their rate went up to 8%. The rate has ranged over time from 3%- 8%. Therefore, 5% was chosen as a mid-point rate. The average student loan is $4700. Co-chair Frank stated that his desire is to have the student loan program be fully self-supporting. Co-chair Halford agreed with the program needing to be fully self- supporting and could not support the amendment. Mr. McCormick stated that the reason the student loan program has not been paying for itself combines many factors. There were many years that contained a forgiveness provision within the law, which did not replenish the loan capital. The loans were forgiven, but the capital was not replenished. The forgiveness is part of the loss. When students die, become totally disabled, and default on the loans, there is no billing of the general fund to replenish the capital. It is truly a loss and the capital of the fund does go down. The other factor involved is that there is no interest on the loan during the time the student is initially in school. Under this provision the student may be charged $240 origination fee, but he will have an interest free loan over the next 12 months which works out to be a $400 savings to the student. When the commission feels that politically they can come to the legislature with the proposal, they will come back and ask for interest to be charged during the in-school period. This represents a period of time for which the state is paying bond holders interest on those bonds for which interest is not being charged on the loan. That is a loosing proposition. Amendment by Senator Rieger FAILED. Senator Zharoff inquired as to the effective date for the students borrowing in the year of 1995. Mr. McCormick responded that current loan limits apply to students applying for, and receiving, loans through June 30, 1995. Students applying for loans to be disbursed on, or after, July 1, 1995 would enjoy the benefits of the increased loan limits. Tuition increase with the University of Alaska is July 1, 1995. He recommended the increase in the loan program to coincide with that date. Senator Rieger offered a conceptual amendment making a change in the title to include Western Interstate Commission on Higher Education. No objection being heard, the conceptual amendment was ADOPTED. End Tape #42, Side 1 Begin Tape #42, Side 2 Senator Phillips MOVED to adopt CSSB 123 with accompanying fiscal notes and with individual recommendations. No objections being heard, CSSB 123 (FIN) was REPORTED OUT of committee with a "do pass" from Co-chairs Halford and Frank, along with Senators Phillips and Sharp. Senators Rieger and Zharoff signed "no recommendation". Two zero fiscal notes from Dept of Education (Student Loans) and (Program Administration).