Student Loan Blog : Lexington Herald-Leader

Student Loans Not Forgiven After All, Teachers Find

Student Loan Girl — Mon, 02 Mar 2009 23:41:00 GMT

Thousands of Kentucky teachers could be on the hook for thousands of dollars in student loans that they were told would be forgiven under a state-based, federally funded loan forgiveness program, reports the Lexington Herald-Leader (“Teachers Say Failing Loan Forgiveness Program Will Cost Them Thousands,” March 2, 2009).

Affected teachers took out student loans for college and graduate school as part of the state’s “Best in Class” program, which offered to forgive the loans of educators who agreed to teach in the state’s hard-to-fill education positions, including math, science, and special education.

Under the program, participating teachers could see up to 20 percent of their student loan payments forgiven for each year they taught in their field — a perk that enticed thousands of teachers to enroll in the program, pursue graduate degrees they might otherwise not have obtained, and in some cases, leave lucrative careers in favor of teaching, the Herald-Leader reports.

But now that the loan forgiveness program has run out of funding — due in part to Congress cutting the program’s subsidies from $16 million to $7 million over the last year — these teachers are scrambling to make their student loan payments, which range from $200 to $400 a month for individuals, to more than $800 for couples.

“The loan forgiveness played a large role in me deciding to go into this field,” said Travis Gay, a special education teacher. “I paid for my entire master’s degree out of the program, books and all, and so did my wife.”

“We were told, ‘It’s something you can count on.’ But then it was just gone,” said Gay. He and his wife owe a total of $90,000 in student loans.

To find debt relief from these loans, Gay and other affected teachers have formed a coalition and are turning to the state for help. The coalition is asking Gov. Steve Beshear to allocate a portion of the state’s $3 billion in economic stimulus funds to the failing loan forgiveness program.

State legislators are also considering a proposal to essentially shift funding from another teacher scholarship program, the Kentucky Teacher Scholarship Program, to the Best in Class program.

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Kentucky Set to Buy $50 Million Bond So Students Can Get College Loans

Student Loan Girl — Mon, 18 Aug 2008 22:57:00 GMT

To ensure that Kentucky students get the money they need to pay for school, Kentucky Gov. Steve Beshear has authorized the state to buy a $50 million bond from the state’s student loan agency just before fall classes get underway, reports the Lexington Herald-Leader (“State Using $50 Million Bond to Solve Student Loan Crisis,” Aug. 16, 2008).

Affected by the ongoing credit crunch, the Kentucky Higher Education Student Loan Corp., also known as the Student Loan People, ran out of money last week, but with the “bridge loan,” will be able to begin issuing $35 million in loans to about 16,000 students by Thursday.

Although the recently passed Ensuring Continued Access to Student Loans Act (H.R. 5715) was designed to give the U.S. Department of Education the authority to buy student loans from cash-strapped lenders, the Education Department requires that lenders first obtain short-term “bridge” financing to initially fund new loans. After lenders secure the preliminary financing, the Education Department will buy these college loans, giving lenders the liquidity they need to continue making new loans.

Kentucky is thought to be the first state in the nation to purchase a private placement bond to meet the state’s student-loan needs. Massachusetts has unsuccessfully looked to its public pension funds for relief, while other states have simply shut down their student loan operations, according to an article in the Kentucky Post (“Gov. Orders State Purchase $50M Bond to Ensure Student Loans,” Aug. 15, 2008).

The Student Loan People’s bond sale must be approved by the State Property and Building Commission, an executive branch panel that meets today, and the General Assembly’s Capital Projects and Bond Committee, which will meet Tuesday.

If the bond sale is authorized, the nonprofit state loan agency will have a loan term of 445 days that would be payable on Nov. 15, 2009. The agency will be charged a variable interest rate, currently set at 3.32 percent, which means the agency would pay $1.9 million in interest to the state, on top of the $50 million principal.

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Kentucky Student Loan Provider Is Out of Money

Student Loan Girl — Wed, 13 Aug 2008 21:08:00 GMT

The Kentucky Higher Education Assistance Authority, the state agency that provides college loans to students attending colleges and universities in Kentucky, will “effectively run out of money” Friday while it waits to receive a $50 million loan from the federal government on August 21, reports the Lexington Herald-Leader (“Student Loan Agency to Run Out of Money,” Aug. 13, 2008).

The one-week funding shortage may temporarily inconvenience KHEAA’s student loan borrowers, some of whom will not likely receive their student loans before classes begin as early as August 18 at some schools.

KHEAA, also known as The Student Loan People, has been in communication with the financial aid offices of affected universities, asking them to be patient until the $50 million “bridge loan” from the government arrives. With the loan, the KHEAA will issue $35 million in financial aid to 16,000 students, says James Ackinson, KHEAA’s executive vice president.

“The issue will not delay or prevent any of our students from beginning classes,” says Shelley Park, director of financial aid at Eastern Kentucky University, which begins classes August 25. Students who rely on their student loans to buy textbooks will get school-issued vouchers to cover the cost until they receive their KHEAA-issued student loans and can repay the school.

By Friday, when the KHEAA will temporarily run out of money, the state loan agency will have issued $40 million in loans to 18,000 students since July 1.

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