Student Loan Blog : Deval Patrick

Proposed Bailout for Massachusetts Student Loan Authority Uncertain

Student Loan Girl — Sat, 16 Aug 2008 01:42:00 GMT

A third attempt to generate liquidity for the Massachusetts Educational Financing Authority may be too little too late for some 40,000 Massachusetts college students, reports The Boston Globe (“Student Loan Authority May Not Get State Aid,” Aug. 14, 2008).

In late July, MEFA announced that it wouldn’t have enough money to fund any new private student loans this fall after it was unable to launch a bond offering in time.

With proposals from both the state’s governor and treasurer fizzling out, the student loan agency is attempting to raise about $400 million in funds from large investors through a new bond offering on the public market — a deal that, if completed, wouldn’t be finalized until September.

But bonds issued by student loan lenders are having a hard time finding buyers, as investors remain cautious in the wake of the collapse of the subprime mortgage market and the ongoing resulting credit crunch. According to The Boston Globe, the issue of $350 million in student loan revenue bonds just completed on August 7 by the Higher Education Student Assistance Authority of New Jersey was the first successful student loan bond issue since May.

Several Solutions, Few Viable Options

Soon after MEFA announced that it was suspending its private loan program, Gov. Deval Patrick asked that the Massachusetts state pension fund purchase $50 million of the planned upcoming MEFA bond offering, but the request has been rejected by State Treasurer Timothy Cahill. The pension fund’s executive director has said this direct purchase of MEFA bonds would violate the fund’s investment policies.

Cahill has suggested an alternative solution, in which the state would back the MEFA bond offering, using taxpayer funds as collateral. But this initiative would require approval by the state legislature, which isn’t scheduled to meet until October.

Of the ideas lobbied so far as possible ways to help MEFA regain its financial ability to offer student loans, the proposal with the most potential, put forth by some of the state’s colleges and universities, may not go into effect until next year.

This plan would reinstate a participation fund, phased out several years ago, in which schools set aside up to 6 percent of the loan amounts their students take out through MEFA. These stockpiled funds serve as a type of insurance for bondholders and may provide a draw for otherwise reluctant potential investors.

Though most Massachusetts students have already begun pursuing other financing options, Cyndi Roy, the governor’s deputy press secretary, says that the administration is continuing to work with the state’s loan authority.

“Governor Patrick put a serious, viable proposal on the table,” said Roy, “and he remains actively engaged with MEFA on that and any other solutions that will help 40,000 Massachusetts families send their children to college this year.”

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Governor Asks Pension Board, State’s Colleges to Help Keep Massachusetts Student Loan Provider Afloat

Student Loan Girl — Thu, 07 Aug 2008 20:46:00 GMT

A week after the cash-strapped Massachusetts Educational Financing Authority announced that its 40,000 borrowers would have to find a new private student loan provider, Massachusetts Gov. Deval Patrick has asked the Massachusetts pension fund to invest $50 million in the state loan agency.

Patrick’s proposal would involve the Massachusetts pension fund buying portions of a $425 million bond sale that MEFA is planning for later this month, reports The Boston Globe (“A Late Try to Salvage Student Loans,” Aug. 7, 2008).

The governor also intends to ask Boston College, Harvard, MIT, and the University of Massachusetts, among other schools in the state, to make similar investments in MEFA bonds.

“This is an idea we’re definitely going to explore,” said Robert Connolly, a UMass spokesman. “We do see it as a potential win-win in terms of providing the university with a sound investment while helping families cope with their financial aid challenges.”

But State Treasurer Timothy Cahill, chairman of the state pension board, remained noncommittal in response to the governor’s request, saying only that the board would consider the proposal.

The emergency measure, put forward to the state pension board yesterday, is meant to generate liquidity for MEFA, which left thousands of families scrambling to find a new student loan provider just weeks before fall tuition bills are due and at a time when a number of other student loan lenders, feeling squeezed by the troubled credit markets, are tightening their credit criteria for private student loans. MEFA would use proceeds from the bond sale to finance new student loans.

Although MEFA, until last week, had still been offering fixed-rate private student loans, the agency stopped offering federal student loans in April, citing the troubled economy and fallout from the subprime mortgage crisis. The nonprofit student loan authority provided more than $500 million in college loans to Massachusetts students last year.

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Governor Launches Website to Help Massachusetts Families Find Student Loans

Student Loan Girl — Thu, 07 Aug 2008 11:32:00 GMT

Massachusetts Gov. Deval Patrick has set up a financial assistance website to help the 40,000 families who were previously served by the Massachusetts Educational Financing Authority to find a new student loan provider for the 2008–09 academic year, following MEFA’s announcement on July 28 that it was suspending its private student loan program.

The news that MEFA would no longer be offering private student loans came just weeks before fall tuition payments are due and a mere three months after the state agency suspended its federal student loan program, citing the troubled economy and continuing fallout from the collapse of the subprime mortgage market. MEFA’s announcement last week marks the first time in the lender’s nearly 30-year history that it won’t be able to provide any student loans, federal or private.

The governor’s new student loans website gives borrowers an overview of student loans and the different types of student loans still available, provides links for families to compare the interest rates being offered by certain private student loan lenders, and brings together information on scholarship resources.

“It is critical for our students to be able to pay for the colleges of their choosing,” said Gov. Patrick. “I have directed my team to make available a list of resources to help students and their families locate the information they need to finance education this fall and beyond.”

Late yesterday, Gov. Patrick also made a move aimed at restoring liquidity to MEFA, asking the Massachusetts pension fund to invest $50 million in the state student loan agency by buying MEFA bonds — MEFA would use the proceeds from the bond sale to finance new student loans. The governor intends to approach Boston College, Harvard, MIT, and the University of Massachusetts, among other schools in the state, about making similar investments.

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Massachusetts Shortchanges College Students on Financial Aid

Student Loan Girl — Thu, 17 Jul 2008 23:04:00 GMT

Although Massachusetts is known as a hub for higher education, the state lags behind other states in awarding financial aid to college students, a shortfall that many educators say is limiting access to a college education for low-income and minority families, according to an article in The Boston Globe (“State Lags on Student Grants,” July 13, 2008).

For the upcoming 2008–09 academic year, Massachusetts will only award about $83 million in college grants, an amount that trails the grant budgets of comparable states. Indiana will award $331 million in grant aid to students, while South Carolina, which has about 2 million fewer residents than Massachusetts, has dedicated $273 million.

With little money awarded in state grants, Massachusetts students often need to take out student loans, particularly private student loans — which tend to be more costly than federal college loans — to cover the remainder of their college costs.

“There’s simply not enough money in the system,” said Massachusetts Senator Robert O’Leary, chairman of the Joint Committee on Higher Education. “It just hasn’t kept pace with the growth in costs and the increasing number of students who need financial aid. Every year, we’re losing ground.”

The escalating cost of tuition at public and private colleges and universities makes this funding shortage more acute. Massachusetts state grant aid covers less than 5 percent of college costs compared with the national average of 19 percent. Educators say the problem has been magnified by the state’s reliance on its deep-pocketed private colleges like Harvard and MIT to provide the bulk of financial assistance.

Low-income students who qualify for Massachusetts’ main grant program are awarded an average of $780, an amount that doesn’t even cover the total cost of textbooks, which cost students an average of $900.

Governor Deval Patrick is expected to sign a bill that would increase financial aid by $3 million.

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