Utah’s exit from the student loan processing business would mean the creation of an estimated $260 million to $300 million state endowment that would fund college scholarships and other programs, under legislation approved Wednesday by the Senate Education Committee.
The law project, SB172, sponsored by Sen. Evan Vickers, R-Cedar City, would create a permanent endowment that would be managed by the state treasurer. Interest income would be used to fund scholarships and other Utah higher education system initiatives, which would require approval from the Utah Legislature each year.
Last fall, the Council on Higher Education of Utah authorized the sale of the portfolio of the federal family education loan program administered by the Utah Higher Education Assistance Authority. The authority is an affiliate of the Utah higher education system.
Financial advisers estimate the net proceeds from the sale of the authority’s $1.2 billion federal student loan portfolio could yield between $260 million and $300 million, the higher education commissioner said. Utah, David Woolstenhulme.
When asked if the fund would be used to construct buildings on college campuses, Woolstenhulme emphatically stated, “It will not fund buildings.”
The intent is to fund initiatives that support Board of Higher Education priorities, which include college access, affordability, completion, and workforce connections, he said. he declares.
Woolstenhulme said one such initiative is the Utah College Body of Counselorswhich helps high school students make a successful transition to college under the guidance of “peer-friendly” college access counselors who work in their high schools.
The Utah Higher Education Assistance Authority has agreed to fund this program for the next three years, but in the future it would be something the Board of Higher Education may consider funding with interest income from the endowment.
The program’s early work has produced positive results as college counselors focus on students who “really, probably wouldn’t be in our system today if it weren’t for the talking college access counselors about scholarships, talk about financial aid, talk about how to fill out an admissions application,” Woolstenhulme said.
The sale of the $1.2 billion student loan portfolio is expected to be completed by the end of February, he said.
The bill also directs the board to prepare recommendations for the abolition of the Utah Higher Education Assistance Authority.
Since its inception in 1977, the authority has issued and provided student loan guarantees of over $6.8 billion. It has acquired more than $10.2 billion in federal Family Education Loan Program loans from other providers.
The authority also provided more than $263.5 million in loan forgiveness and interest rate reduction benefits. It also provided more than $12 million in grants to 13,100 students to pay for their college education.
Federal student loan servicers are the middleman between borrowers and the federal government that loaned them money for college. Servicers collect student loan bills and verify if they are paid on time. In recent years, an increasing number of private online companies that offer student loans have entered the arena.
“Since 2010, UHEAA has been a service agent for the federal loan program, but recent contracts with the federal government have proven unprofitable. So what we’re proposing in this bill is to dismantle that loan program and take the proceeds that’s left over and create an endowment that can be used for a scholarship program,” Vickers said. .
The bill, unanimously approved by the committee, is sent to the Utah Senate for further consideration.