CHAIRMAN RIEGER introduced HB 506 (STUDENT LOAN PROGRAM) as the next order of business before the committee. ERIC FORRER, Member of the University of Alaska Board of Regents and Postsecondary Education Commission, explained that HB 506 speaks to the Postsecondary Education Commission's primary responsibility of turning the student loan fund into a revolving fund. This fund is approximately $500 million in state investments which should be self-supporting. He indicated that the commission's goal was vigorous management of this fund. He said that with such high capital, it is easy to lose track of this bad situation. Strict management of this fund is necessary for the long term. Mr. Forrer mentioned that the portion of HB 506 which denies the reissuance of a license by the state to an individual whose student loan was in arrears. He did not believe that discussion was about the correct issue. He felt that it would be more onerous not to require people to be in good standing with their student loan than to require it. That would illustrate the commission's seriousness about rigorous management of the fund. He urged passage of HB 506. CHAIRMAN RIEGER expressed concern with the first section of HB 506 regarding the denial of an occupational license. He did not think that any other lender in Alaska could go to the Department of Commerce and request for denial of an occupational license of a borrower who is in default. He suggested that on page 1, line 12 after "licensee," the following clause be inserted: "and the balance owing on the loan is $100,000." Super agencies with more power than those of the lending community should not be created. He also indicated concerns with the statutory provisions regarding assigning wages for a defaulted loan. Number 363 JOE MCCORMICK explained that the Alaska student loan program is a non-collateralized loan. He pointed out that this section speaks to the renewal of a license not the initial license. The section is more like a concept, a reminder. He noted that reminding an individual that their Alaska student loan is in arrears when they renew their occupational license is common practice in many other states. That would send a message to the borrower that the state of Alaska is serious about the repayment of student loans. SENATOR MILLER inquired as to the ability of pursuing an individual whose loan is in arrears through legal procedures. JOE MCCORMICK said that eventually that could happen. A judgement or garnishment of wages of the borrower could occur. Mr. McCormick reiterated the importance of sending the message to the bond market and the borrower that the state of Alaska does expect a borrower to repay their loan. SENATOR MILLER felt that the majority of non-payers are individuals living outside of the state. JOE MCCORMICK said that was not necessarily the case. The percentage of individuals with occupational licenses who have delinquent loans are less than 10 percent. Mr. McCormick explained that this would not be a mechanism in which to collect money. He added that he was not advocating this provision because he thinks it is going to collect a lot of money for the Alaska Student Loan Program. He is advocating as simply sending a message to the borrower, as well as sending the message to the people that they receive their bonds from, that they really are serious about making this a viable program and having sound financial integrity. Number 418 CHAIRMAN RIEGER asked if the names of the delinquent borrowers are published in the newspapers and JOE MCCORMICK acknowledged that they are published. Also, they have the power to garnish wages, but that power is much more difficult for self-employed individuals. CHAIRMAN RIEGER requested Mr. McCormick's comments on an amendment that he was proposing which provides if the balance owing on a loan is in excess of $100,000, it would trigger the denial of the occupational license. JOE MCCORMICK responded that the important thing is to get the legislation passed, and while he does not particularly favor the amendment, he believes it is important to get it passed in some form. Number 441 SENATOR SHARP commented that he has extreme difficulty with the amendment, and he wants to enhance the lowest cost method possible to collect delinquent student loans. To go through the court system is not cheap. Number 451 CHAIRMAN RIEGER moved the adoption of his proposed amendment. Senators Miller and Rieger voted "Yea" and Senators Sharp, Leman and Duncan voted "Nay." The motion failed. Number 453 SENATOR MILLER moved that CSHB 506(FIN) am be passed out of committee with individual recommendations. Hearing no objection, it was so ordered.