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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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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Student Loan Blog : bond sale

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

Governor Launches Website to Help Massachusetts Families Find Student Loans