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By Steve Faris
LITTLE ROCK — The state Board of Finance will lend $80 million to the Arkansas Student Loan Authority to make sure college loans are available next school year.
The loan is a temporary measure to support the agency through the national credit crisis. Student loan authorities in other states also face financial uncertainties because of turmoil in the credit market. The country's largest investment banks have been forced to take enormous losses in their housing portfolios. One factor is that many homeowners are defaulting on subprime loans and other types of loans with adjustable rates, and housing prices have declined in many areas of the country. One consequence of the credit crisis is that some government agencies face difficulties selling bonds, which is a form of borrowing money. Student loan authorities are typical of agencies that sell bonds, and the Arkansas authority has had to suspend a planned bond sale until the financial markets stabilize. To make sure Arkansas students have access to college loans, the Board of Finance agreed to lend $80 million to the Loan Authority. The terms of the loan have not been finalized but it will probably be for a year or 18 months. By the time it is due, the national credit markets should have returned to normal. The Board of Finance is composed of the governor, the state auditor, the state treasurer, the state bank commissioner and the director of the Finance and Administration Department. The Board's actions are rarely noteworthy and consist mainly in placing state funds in bank accounts across Arkansas to earn interest until they are spent on programs and services. Last year Arkansas college students borrowed about $470 million for tuition, books, room and board, fees and other costs of higher education, according to the director of the Student Loan Authority. The Arkansas Student Loan Authority provided about $70 million of those loans last year. The Arkansas authority's March report listed more than 47,000 borrowers in its loan program and their average balance was $12,959. The federal government is taking steps to shore up national college loan programs. That is because private investment banks have credit problems of their own, and have been leaving the student loan market. Workforce Education Job training in Arkansas provides another example of state government's having to respond to negative trends on the national level. The federal government rescinded $4.3 million in workforce education funding that it had previously committed to job training programs in Arkansas. To minimize the impact on Arkansas workers, state leaders have been trying to locate available funding from other sources. If the U.S. economy continues to slow down, state officials will brace for additional budget cuts in federally funded programs. When funding out of Washington is reduced, state legislatures are expected to compensate with an increase in state funding. If state governments don't replace the federal funds, services must be cut. (State Sen. Steve Faris writes a periodic column) |
