You asked several questions regarding the Connecticut Student Loan Foundation (CSLF) and the Connecticut Higher Education Supplemental Loan Authority (CHESLA). You specifically want to know (1) how their missions have changed since their creation, (2) their revenues and expenses, and (3) how their lending authority has increased over time.

SUMMARY

Both the CSLF and CHESLA operate student loan programs. The CSLF was created in 1965 to serve as the state's designated student loan guaranty agency for the Federal Family Education Loan Program. Since its creation, the foundation has expanded its mission to serve not only as a guaranty agency, but also a loan servicer, lender, and secondary market.

CHESLA was created in 1982 to serve as an alternative supplemental student loan program. While CHESLA was originally authorized to make loans to the state's higher education institutions, in 1985 it began making direct loans to students from, or attending college in, the state.

CSLF is currently authorized to issue taxable bonds. It is not explicitly limited in the amount it can issue. CHESLA is authorized to issue tax-exempt bonds, subject to the private activity bond cap, and requires authorization from the Bond Commission and the Office of Policy and Management.

CSLF

Mission

The Legislature created the CSLF in 1965 to serve as the state's designated student loan guarantor for the Federal Family Education Loan Program (FFELP). FFELP loans are made by banks, credit unions, and other authorized private lending institutions. The loans are insured through the CSLF, which is one of several such state guaranty agencies. If a borrower defaults on the loan, the foundation as the guaranty agency reimburses the lender for the unpaid principal and interest and is eventually reimbursed by the federal government. The CSLF continues to try to collect the defaulted loan and is allowed to retain up to 23% of any recovered amounts.

In 1981, the CSLF created a division called Connecticut Assistance for Loan Servicing (CALS) to service loans for a fee. Its services include such things as collecting federal interest subsidies and principal and interest from borrowers, performing student status checks, and preparing required forms and correspondence. CALS serviced loans issued by approximately 30 different lenders, and it also had a contract to service direct loans made by CHESLA. The CSLF is no longer acting as a loan servicer.

PA 94-245 authorized the CSLF to (1) issue taxable bonds to fund FFELP loans and (2) acquire loans and act as a secondary bond market. Through a CSLF subsidiary, called Susie Mae, the foundation makes FFLEP loans directly to students and parents and purchases existing portfolios from lenders.

Revenues and Expenses

Table 1 shows the CSLF's summary of revenues and expenses for 2004 and 2005. 2006 figures are not yet available.

Table 1: CSLF's Summary of Revenues and Expenses

Lending Authority

CSLF is currently authorized to issue taxable bonds. It is not explicitly limited in the amount it can issue. At present, the foundation's outstanding principal balance due to bondholders is $ 769 million.

CHESLA

Mission

CHESLA was created in 1982 (PA 82-313) in order to provide additional resources for families to meet college costs in a time when federal college aid was being reduced. The authority was originally authorized to issue tax-exempt bonds to make variable interest rate loans to the state's higher education institutions. The institutions were, in turn, to use the money to make loans to parents and students at below-market rates. There was one $ 15. 5 million bond issue for this program, and only three colleges participated: Connecticut College, Yale University, and Wesleyan University.

In 1985, CHESLA began making direct loans to students and their parents. Prior law allowed CHESLA to make loans on behalf of the colleges to students attending Connecticut colleges, or their parents. PA 87-295 authorized CHESLA to extend eligibility to Connecticut students attending college in other states, or their parents. It has operated with this mission ever since. CHESLA issues fixed rate bonds and makes fixed rate loans. The interest rate for borrowers is set at a rate sufficient to pay off bondholders and reimburse CHESLA's costs. CHESLA's loans were previously administered by the CSLF's CALS division, but since 2005 they have been administered by Firstmark Services, LLC in Minnesota.

Revenues and Expenses

Table 2 shows CHESLA's revenues and expenses for 2004 through 2006.

Table 2: CHESLA's Summary of Revenues and Expenses

Lending Authority

CHESLA is authorized to issue tax-exempt bonds, subject to the private activity bond cap, and requires authorization from the Bond Commission and the Office of Policy and Management. Table 3 includes the amounts of CHESLA's bond issues, from 1983 to 2006.

Table 3: CHESLA Bond Issuance

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