Thursday, August 21, 2008
Kentucky Governor Announces Student Loan Provider Now Has Funding.
Governor Steve Beshear today announced that the state has finalized the deal to provide the state’s only public nonprofit student loan provider $50 million with which to make student loans during the 2008-2009 school year.
On August 15, Gov. Beshear announced that the state would purchase a bond from the Kentucky Higher Education Student Loan Corporation (KHESLC) to provide short-term bridge financing for student loans. This week, the deal received final approval from the State Property and Buildings Commission and the Capital Projects and Bond Oversight Committee.
“A college education or technical training can no longer be viewed as a luxury—it is a critical element necessary to ensure economic opportunity for all of our citizens and for our great Commonwealth,” said Governor Beshear. “Because of its importance, we are very pleased to have provided The Student Loan People with an innovative solution that enables it to continue fulfilling its public-purpose mission of making higher education accessible for Kentucky students.”
“The Student Loan People can now originate student loans as normal,” said Edward J. Cunningham, CEO of The Student Loan People. “Participation interests in the loans will be sold to the U.S. Department of Education (USDE) and the proceeds will be recycled into additional loans as often as needed to meet the student loan demand in Kentucky. We are indeed grateful for the assistance we have received from Governor Beshear and others in his administration.”
Since the agency had been unable to provide loan funds since Aug. 14, 2008, Cunningham added that his staff would be closely coordinating student loan disbursements with the agency’s school partners to ensure disruptions are as minimal as possible. “The process should be transparent for most students, and we expect our student loan processes will be back to normal by September,” Cunningham added.
After the national credit crisis threatened the ability for states to offer student loans this fall, Congress passed in May the “Ensuring Continued Access to Student Loans Act of 2008.” As part of the implementation, the USDE determined lenders must obtain short-term bridge financing to initially fund new student loans before the USDE will provide liquidity to lenders for loans. Kentucky is thus far the only state in the nation to purchase a private placement bond to meet the state’s needs.
“In exchange for purchasing the bond, the Commonwealth has not only received a high quality investment security, but one that will pay a very competitive rate of interest,” said Jonathan Miller, Secretary of the Finance and Administration Cabinet. The bond is collateralized by guaranteed and federally re-insured loans, a reserve fund, and the commitment of USDE to purchase the loans. “This is not only an important investment in Kentucky's children, but with an interest rate that will be over one-percent higher than a comparable U.S. Treasury security, it is also a win for the taxpayers of the Commonwealth,” Miller added.
The Student Loan People was created by the state legislature in 1978 to ensure funding would be available to Kentuckians by making, purchasing, and financing student loans. Like other student loan providers, the agency traditionally issued bonds (taxable and tax-exempt) in the form of auction rate securities to finance student loans. For years, this financing vehicle provided lenders with an efficient means of raising capital. However, the credit crisis essentially closed the auction rate securities market, leaving KHESLC and other Federal Family Education Loan providers across the country searching for a new student loan financing method.
On August 15, Gov. Beshear announced that the state would purchase a bond from the Kentucky Higher Education Student Loan Corporation (KHESLC) to provide short-term bridge financing for student loans. This week, the deal received final approval from the State Property and Buildings Commission and the Capital Projects and Bond Oversight Committee.
“A college education or technical training can no longer be viewed as a luxury—it is a critical element necessary to ensure economic opportunity for all of our citizens and for our great Commonwealth,” said Governor Beshear. “Because of its importance, we are very pleased to have provided The Student Loan People with an innovative solution that enables it to continue fulfilling its public-purpose mission of making higher education accessible for Kentucky students.”
“The Student Loan People can now originate student loans as normal,” said Edward J. Cunningham, CEO of The Student Loan People. “Participation interests in the loans will be sold to the U.S. Department of Education (USDE) and the proceeds will be recycled into additional loans as often as needed to meet the student loan demand in Kentucky. We are indeed grateful for the assistance we have received from Governor Beshear and others in his administration.”
Since the agency had been unable to provide loan funds since Aug. 14, 2008, Cunningham added that his staff would be closely coordinating student loan disbursements with the agency’s school partners to ensure disruptions are as minimal as possible. “The process should be transparent for most students, and we expect our student loan processes will be back to normal by September,” Cunningham added.
After the national credit crisis threatened the ability for states to offer student loans this fall, Congress passed in May the “Ensuring Continued Access to Student Loans Act of 2008.” As part of the implementation, the USDE determined lenders must obtain short-term bridge financing to initially fund new student loans before the USDE will provide liquidity to lenders for loans. Kentucky is thus far the only state in the nation to purchase a private placement bond to meet the state’s needs.
“In exchange for purchasing the bond, the Commonwealth has not only received a high quality investment security, but one that will pay a very competitive rate of interest,” said Jonathan Miller, Secretary of the Finance and Administration Cabinet. The bond is collateralized by guaranteed and federally re-insured loans, a reserve fund, and the commitment of USDE to purchase the loans. “This is not only an important investment in Kentucky's children, but with an interest rate that will be over one-percent higher than a comparable U.S. Treasury security, it is also a win for the taxpayers of the Commonwealth,” Miller added.
The Student Loan People was created by the state legislature in 1978 to ensure funding would be available to Kentuckians by making, purchasing, and financing student loans. Like other student loan providers, the agency traditionally issued bonds (taxable and tax-exempt) in the form of auction rate securities to finance student loans. For years, this financing vehicle provided lenders with an efficient means of raising capital. However, the credit crisis essentially closed the auction rate securities market, leaving KHESLC and other Federal Family Education Loan providers across the country searching for a new student loan financing method.
# posted by Joe Kinzer @ 4:31 PM 
