MONEY TREE: Ky. Bond Purchase Will Provide Bridge for Student Loan Program
FRANKFORT, Ky. (AP) — Kentucky state officials have a way to help thousands of college students banking on a student loan to help finance the fall semester, Gov. Steve Beshear said.
The state is buying a $50 million bond to help the Kentucky Higher Education Student Loan Corporation, also known as The Student Loan People, offer students loans in time for this academic year. The bond will serve as a “short-term bridge” until federal money arrives later, Beshear said.
“This is a very innovative approach, and an innovative solution to a difficult problem,’’ Beshear said. “It’s a solution that many other states have not found.’’
Without the help, the Kentucky loan corporation would have run out of money and ceased making new loans. Now, however, it will continue offering loans to about 110,000 students across the state, CEO Edward Cunningham said.
Cunningham said the corporation had run out of money and was unable to offer students new loans.
States across the country have faced similar problems in the wake of the national mortgage crisis, the collapse of credit markets and the overall sour economy, Cunningham said. Other states have stopped issuing loans or considered tapping their public pension systems for help.
The Massachusetts Educational Financing Authority, for example, has stopped issuing new loans, forcing about 40,000 families it serves to look for private, less favorable, loans elsewhere.
More than 120 lenders nationwide have stopped or suspended their participation in all or part of the federally guaranteed student loan program, Cunningham said.
“It’s a problem to which we did not contribute, but it is a problem to which we are a victim,” Cunningham said. “This $50 million in financing will enable The Student Loan People to meet the needs of all Kentucky students and their families.’’
Jonathan Miller, secretary of the Kentucky Finance and Administration Cabinet, said the state would also be getting a good investment in the deal. Miller said it would provide a better return than some other state investments.
Joe McCormick, executive director of the Kentucky College Access Network, said states need to make college more accessible.
Students at Kentucky’s public universities, which have been grappling with increasing costs and decreasing state funds, are also in line for tuition increases this year. The tuition spikes range from 6 percent to nearly 10 percent depending on the university or college.
“We needed the governor to take decisive action and we appreciate the fact that he’s done that,’’ McCormick said. “We need to improve college access in this state.”