Alaska loans money to student loan corporation

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Alaska loans money to student loan corporation
By Rena Delbridge
Originally published Thursday, July 2, 2009 at 12:00 a.m.
Updated Thursday, July 2, 2009 at 8:07 a.m.

FAIRBANKS — A bill allowing the state to loan money to the Alaska Student Loan Corporation will ensure post-secondary education aid.

The loans were at risk after financial markets collapsed, leaving the corporation in need of millions to provide student loans for the 2009-2010 academic year. Without the state help, the corporation would have been able to fund only about $15 million to $20 million of loans compared to a normal amount of about $95 million, corporation executive director Diane Barrans said.

The Legislature passed House Bill 172 in April. Gov. Sarah Palin signed the bill on Tuesday. She introduced the legislation in March, offering a mechanism for the state to help the corporation provide aid.

“This bill ensures Alaska’s students will not be left out in the cold despite the current economic downturn,” Palin said in a released statement. “Without this legislation, no Alaska student loans could be made this fall.”

The bill authorized the state Department of Revenue to loan the corporation money for the next four years, a temporary solution expected to bridge the shortfall and keep students’ educations funded.

The Legislature established the Alaska Student Loan Corporation in 1987 to finance education loans by issuing tax-exempt revenue bonds. The entity was successful until 2007, when the market began to slow, Barrans said. The market is perking up, but the corporation was growing short on time to commit to loans for the 2009-2010 year.

“While we expect to be back into the markets in the next six to nine months, that would not be in sufficient time to prevent a disruption,” she said.

“Several different states’ agencies around the country have had similar assistance from their state governments, but I don’t believe another state did anything quite as encompassing as the approach in Alaska,” Barrans said. “It really does speak to the long tradition of our programs, as well as the focus on making sure post-secondary education is affordable.”

The state program is critical, she added.

“Generally, students have difficulty financing their education solely on the basis of the amounts available through the federal loan program,” she said.

Now, ASLC will focus on potential changes that could come about this fall as the Obama administration tries to eliminate the federally guaranteed loan programs which states administer, in favor of boosting the Pell Grant program. Loans might end up serviced through third parties, instead of by states.

Barrans said it’s difficult to predict how that will affect the ASLC. She said a number of state programs are petitioning Congress to allow continued state-level administration of federal loans in order to ensure a high level of service for students. ASLC loans are available to Alaskans studying in-state or Outside, and to students from other states studying in Alaska.

Saichi T. Oba, associate vice president in the Office of Student and Enrollment Services at University of Alaska, told lawmakers the loans are “crucial to the success of thousands of students of University of Alaska.” She said the corporation annually aids more than 4,700 students at urban and rural campuses, with loans totaling about $40 million.

Jennifer Chambers, Associated Students of the University of Fairbanks Senate Chair, sent lawmakers a letter outlining the increased need and difficulties securing loans. Nationally, lenders have suspended student loan programs, she wrote.

“The same economy that caused the market collapse has also resulted in increases in unemployment, resulting in many students staying in school longer and many adults returning to school for re-training to get better jobs,” she said.

“The bottom line is that these factors result in fewer options for financial aid at the same time as the demand for financial aid is increasing.”