Higher Education and Employment Advancement Committee
Banks Committee
AN ACT CONCERNING A STUDENT LOAN GUARANTEE PROGRAM RESERVE FUND
SUMMARY: This act requires the Connecticut Health and Education Facilities Authority (CHEFA) to allocate up to $3. 5 million from its reserves to guarantee qualifying student loans issued by credit unions participating in the Credit Union League of Connecticut (CULC) Student Loan Program. CULC administers the program, which offers low interest loans to students having difficulty obtaining financing for higher education due to (1) restrictive underwriting criteria, (2) reduced access to home equity loans, or (3) the decreased market value of homes.
EFFECTIVE DATE: Upon passage
CREDIT UNION LEAGUE STUDENT LOAN PROGRAM
Loan Guarantee
CHEFA must keep the allocated funds in a separate Credit Union League Student Loan Program protection account for as long as they are needed for the program, after which they revert to CHEFA's general reserves. The funds must be used to provide participating credit unions a first loss guarantee of up to 20% of the qualifying student loans' outstanding principal. The amount of an individual loan guarantee cannot exceed 20% of the loan's original principal.
Qualifying Student Loans
The act defines a qualifying student loan as a loan:
1. made to an eligible student;
2. originated by a participating credit union;
3. subject to the participating credit union's student loan underwriting standards;
4. subject to an annual interest rate of up to (a) 5. 75% or (b) 6% for loans that defer interest payments for one year; and
5. disbursed by December 31, 2009, or at a later date if CHEFA's board of directors approves.
To be eligible, a student must be (1) enrolled in an accredited higher education institution in the state or (2) a state resident enrolled in any accredited higher education institution.
BACKGROUND
CULC
CULC is a nonprofit trade association representing and serving 146 credit unions in the state.
CHEFA
CHEFA is a quasi-public agency that issues tax-exempt bonds on behalf of nonprofit colleges and health care institutions to support the construction of facilities such as dormitories, academic buildings, athletic facilities, clinics, hospitals, and laboratories. Its bonds are not financed with state funds.
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