SB 155-STUDENT LOANS/COMN. ON POSTSECONDARY ED.  MS. DIANE BARRANS, Director of the Alaska Commission on Postsecondary Education (ACPE), gave the following explanation of SB 155. Recognizing that the financial status of ACPE and its financing partner, the student loan corporation, had been stabilized 18 months ago, ACPE management was challenged by the board to identify ways to expand its services and increase the public benefit of those services for Alaskans. Working with the Commission's team of managers, the ACPE focused on a strategic recommendation made by the agency's external audit firm of KPMG Peat Marwick and developed the Alaska Advantage Program. Over the last 10 months, it has analyzed customers' needs and expectations. That has included extensive communication with administrators at the four institutions who collectively administer financial aid for approximately 40 percent of ACPE's borrowing customers. With its outreach effort, ACPE has better identified the needs of its customers and the ACPE is better informed to serve these customers now than ever before. To that end, SB 155 has been introduced by the Governor to establish the Alaska Advantage Program. The program will return meaningful benefits and dividends to its stakeholder groups: students; parents; higher education institutions in Alaska; legislators; employers; and bond holders. SB 155 sets out a statutory framework for the ACPE and the corporation to develop and implement the premiere educational loan program in the United States by and for Alaskans. The statutory changes made by the bill will result in lower cost educational loans in Alaska and other improvements to borrowers' loan terms. The ACPE's success in marketing such a program will be one means of helping Alaskans fight the high cost of postsecondary education and hopefully change their perception that education is unaffordable. SB 155 will allow the ACPE to facilitate these changes without putting at risk the financial strength of the corporation. This initiative will improve and expand services to Alaskans and assist the institutions in Alaska in attracting and retaining new students. For borrowers, the Alaska Advantage Program will guarantee the lowest possible borrowing rates. It will improve aid packaging and delivery by creating a one-stop shopping format. It ensures simultaneous grant and loan application. It approves and expands the borrowers deferment and repayment options and it provides an opportunity for debt consolidation in Alaska with an Alaska lender. For institutional partners, through ASL-net, the Commission's internet portal, Alaska Advantage provides a recruitment and retention tool through beneficial interest terms. It streamlines and improves financial aid delivery, easing the administrative burden. It eliminates unnecessary program differences to simplify administration of these programs for staff and it will enhance loan product comparisons by students and their families. It also provides specific financial awards for borrowers remaining in or returning to Alaska and it enhances default management support. For the corporation, the Alaska Advantage Program will reduce the risk through the federal guarantee, hopefully resulting in an improved bond rating to AAA and further bond cost reductions. The federal interest subsidies will improve cash flow and it will eliminate 98 percent of the loss on the federally underwritten loans due to borrowers' default, death, disability or bankruptcy. In time, ACPE expects these changes to allow for additional Alaska Advantage benefits such as upfront interest reductions, a rate reduction for borrowers who remain in or return to Alaska, repayment rewards, bank payment rewards, and other incentives for good borrower behavior. The results achieved by the ACPE and the corporation in recent years have meant a significant improvement in both the program finances and servicing. These results could not have been achieved without broad support of the Administration, the Legislature, participating institutions and Alaska students. SB 155 will enable the ACPE to convert these successes into positive momentum and raise its services to the next level. Continued and substantial improvement is only possible through proposed integration of the programmatic and financial strengths of federal and state student services. The timeline reflects an extremely aggressive schedule as ACPE will seek to implement this servicing model for the 2002-2003 year. MS. BARRANS asked for expedited consideration and passage of SB 155, which will permit the ACPE to immediately direct 100 percent of its resources to the planning, marketing and other implementation activities. Success is feasible if we begin in May of this year, but the process cannot begin until the statutory structure is in place. SENATOR WILKEN asked Ms. Barrans if she could review for the committee the projected income that ACPE expects to make with the passage of SB 155. He also asked Ms. Barrans to inform the committee of the amount of delinquent loans that have been paid through permanent fund dividend collections. Number 689 MS. BARRANS directed the committee's attention to the fiscal note, which shows a positive change in revenues. By 2003, ACPE expects to have a $4.7 million increase in net income, with that amount continuing as the program evolves. The fiscal note was estimated with all things remaining as they are. However, ACPE intends to take the net gain and roll it back into the loan products themselves. ACPE would like to offer below-market rate loans. CHAIRWOMAN GREEN asked if the savings from the projected increase would apply to borrowers in the future or whether they would have any retroactive impact. MS. BARRANS said the savings shown on the fiscal note are specific to the federally underwritten law. She noted regarding the permanent fund dividend collections for bad debt, ACPE recovered $13 million this year and $12 million last year. Number 846 SENATOR LEMAN pointed out that the fiscal note contains funding for four new employees. He asked her to address, to the Senate Finance Committee, whether four new employees are necessary and or whether contracting out some of that work would be a better approach. CHAIRWOMAN GREEN announced that she will hold the bill until Wednesday to provide committee members the opportunity to get any other questions answered. MS. BARRANS informed the committee that the fiscal note will be revised because the numbers used are consistent with the current default rate; that default rate is expected to decrease with the new program model. CHAIRWOMAN GREEN took a brief at-ease and then continued taking public testimony on SB 155. MR. RICK WEEMS, University of Alaska Anchorage (UAA) finance officer, stated support for SB 155 and said that UAA's partnership with ACPE is providing great services for students. There being no further testimony or questions on SB 155, the committee took up SB 91.