February 20, 2008
CONNECTICUT STUDENT LOAN FOUNDATION 10% LOAN REPAYMENT PROGRAM
By: Rute Pinhel, Research Analyst
You asked for information concerning a state-funded 10% loan repayment program at the Connecticut Student Loan Foundation (CSLF). You wanted to know whether the state made provisions to assist students who were otherwise eligible for the program before it was eliminated.
CSLF 10% LOAN REPAYMENT PROGRAM
CSLF's 10% loan repayment program was eliminated in 1979. Before 1979, the law required CSLF to pay lending institutions the first 10% of student loans made to borrowers who met maximum income criteria and had finished the educational program for which the loans were made. PA 79-416 limited the 10% repayments to Connecticut residents. While PA 79-430 effectively terminated the program, it required CSLF to make payments for loans applied for before July 1, 1979. The act also required CSLF to directly pay the borrower when he or she repaid the entire loan (CGS § 10a-206).
The program was funded by annual appropriations transferred from the Department of Higher Education to CSLF. As of September 30, 2005, the balance of the remaining appropriation for the repayment program was $94,976. CSLF made eight payments in FY 04 totaling $2,354 and 18 payments in FY 05 totaling $7,496. It has not received any new funding for the program since FY 05.
In 2005, the legislature repealed this “obsolete” section of the statutes (PA 05-184). The Auditors of Public Accounts have since raised concerns that while reference to the program was deleted from the statutes, CSLF staff continue to administer the program. The state auditors' report for FY 04 and 05 cites two instances where CSLF processed payments to eligible borrowers (for loans that had been applied for before July 1, 1979) after the program was deleted from the statutes. The report states, “It is unclear whether State funds totaling $94,976 need to be returned to the Department of Higher Education and whether continued payments can be made to borrowers who meet the forgiveness program criteria.”
According to Richard Croce, senior vice president and general counsel for CSLF, at the state auditors' direction, CSLF discontinued its forgiveness payments and sought legal clarification from the Attorney General's Office to determine how it should handle the remaining program funds. Because CSLF is not a state agency, the Attorney General's Office was unable to render an opinion on the matter. CSLF is now awaiting an opinion from the state auditors. Croce stated that CSLF has two payments related to the repayment program pending the auditors' decision.