SENATE BILL NO. 195 "An Act relating to the membership and authority of the Alaska Commission on Postsecondary Education; relating to the Alaska Student Loan Corporation; relating to teacher education loans; relating to interest on and consolidation of postsecondary education loans; relating to Alaska supplemental education loans; relating to AlaskAdvantage grants; relating to the Alaska family education loan program; relating to postsecondary educational institutions; and providing for an effective date." 10:15:42 AM DIANE BARRANS, EXECUTIVE DIRECTOR, ALASKA COMMISSION ON POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, AND EXECUTIVE OFFICER, ALASKA STUDENT LOAN CORPORATION, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, expressed appreciation for the legislation. She opined that it had been two decades since a substantive review of loan limits and the policies that guided the state's financial aid administration. 10:16:21 AM Senator Dunleavy queried that language in the bill that stated that a person representing private higher education had to be non-profit. Ms. Barrans replied that the membership of the commission was comprised of representative from both the for-profit and non-profit sectors. She said that the language allowed the governor the latitude to choose any of the institutions in the sector, rather than being limited to a member of the board of trustees. 10:17:31 AM Senator Dunleavy wondered if there was a seat reserved for for-profit educational entities. Ms. Barrans replied in the affirmative. 10:17:38 AM Senator Dunleavy inquired if there was a practice of loaning more willingly for certain categories of educational entities. Ms. Barrans responded that that there was not an express policy relative to the question. She said that loan limits were divided between collegiate and vocational institutions, without speaking to whether those institutions were non-profit or for-profit. She explained that rating agencies requested a break out of the portfolio of lenders who financed their loans in the financial market in order to determine, by educational sector, what portion of the loans when to one or the other. If a portfolio reflected a high proportion of proprietary lending, it could result in higher overcollateralization requirements because of the historical trend of higher default rates associated with vocational schools, particularly in the for-profit sector. 10:20:45 AM Vice-Chair Fairclough requested that Ms. Barrans discuss the 15 credit per semester requirement in order to access funds. Ms. Barrans said that the reason the 15 credits per term had been proposed, rather than 30 credits per year, was because it was a student's enrollment level on each term that determined the amount of loan that they could receive. She stated that there was flexibility; if a student enrolled and met the full-time requirement of 12 credits for fall, but then increased their credits to 15 for spring, they could qualify for the higher amount for the spring term. She noted that if a student enrolled for full- time of 12 credits, and did not complete the 12 credits in the term, the student could make up the credits during the academic year for the purpose of continuing eligibility for the next year's loan. She stated that the department worked to ensure that students were completing the number of credits that their loan was awarded for without risking over-awarding students, which could be a risk if the loan were awarded at the beginning of the year for a higher amount based on the student's best intentions. 10:22:53 AM Co-Chair Meyer queried the default rate for Alaska student loans. Ms. Barrans replied that the most recent published rate was slightly higher than 6 percent. She said that looking back over the last 10 years, the rate had been as low as 3.8 percent, peaking in 2008 and 2009 at about 7.5 percent, but gradually rising as the economy has recovered. 10:23:28 AM Co-Chair Meyer understood that Alaska's default rate was lower than the national average. Ms. Barrans replied that the default rate for the federal loan program was substantially higher than Alaska. She noted that the federal loans had no credit underwriting criteria; taxpayers underwrite the credit for federal loans. Co-Chair Meyer probed the difference between the two loans. Ms. Barrans responded that if the barrower did not have a credit score of at least 680, they would need a credit worthy co-signer. 10:24:14 AM Co-Chair Meyer discussed the new fiscal note. He understood that with the purchase of new software with $460,000 capital dollars the state would see a savings of $82.8 thousand. Ms. Barrans replied that the savings would be approximately $30,000 per year due to reduced software maintenance. She relayed that the current system was inadequate to support the number of student receiving student loans. 10:25:40 AM Co-Chair Meyer inquired if the expense was reflected in the governor's FY15 capital budget. Ms. Barrans replied that it was not. 10:25:51 AM Vice-Chair Fairclough offered that the investment of capital would save the state money in the long run and provided a smoother streamlined process for the students that were accessing student loans. 10:26:25 AM Co-Chair Kelly MOVED to REPORT CSSB 195(FIN) out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 195(FIN) was REPORTED out of committee with a "do pass" recommendation and with a new fiscal impact note from the Department of Education and Early Development. 10:26:49 AM AT EASE 10:30:05 AM RECONVENED