State Approves $50-Million Bridge Loan, Kentucky Students Will Finally See Their Student Loans

Student Loan Girl — Fri, 05 Sep 2008 00:26:00 GMT

Students attending colleges and universities in Kentucky, many of whom have already begun their fall semester, will soon receive their federal student loans now that the state has finalized its $50 million bridge-loan deal with the state’s nonprofit student loan provider, according to an article in the News-Democrat Leader (“Public, Non-Profit Student Loan Provider to Get Proper Funding,” Sept. 2, 2008).

Under the deal, which was approved last Friday, the state will buy a $50 million bond from Kentucky’s federal student loan agency, the Kentucky Higher Education Student Loan Corp., also known as The Student Loan People.

Kentucky Gov. Steve Beshear proposed the bridge-loan deal in August after the state loan agency announced it had run out of money to issue new student loans. The $50 million loan will provide the student loan lender with the short-term bridge financing it needs to participate in a Department of Education program designed to help struggling lenders.

With the bridge financing in place, The Student Loan People will be able to finish disbursing the remaining $35 million in federal student loans it has originated.

So far, Kentucky is the only state in the nation to buy a private bond from a student loan provider under the Education Department’s loan purchase program, which allows lenders holding federal student loans that they have already originated and dispersed to borrow money from the Education Department. The Student Loan People can use these borrowed funds to begin repaying the $50 million bridge loan from the state.

Edward Cunningham, CEO of The Student Loan People, has assured borrowers that his agency will work closely with the schools it lends to in order to minimize further disruptions in the student loan disbursement process.

“The process should be transparent for most students, Cunningham said, “and we expect our student loan processes will be back to normal by September.”

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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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Student Loan Blog : The Student Loan People

State Approves $50-Million Bridge Loan, Kentucky Students Will Finally See Their Student Loans

Kentucky Student Loan Provider Is Out of Money