PA 15-200—HB 6907
Higher Education and Employment Advancement Committee
AN ACT CONCERNING THE DUTIES AND AUTHORITY OF THE CONNECTICUT HIGHER EDUCATION SUPPLEMENTAL LOAN AUTHORITY
SUMMARY: This act allows the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to issue loans to certain borrowers to refinance certain public or private student loans, including CHESLA loans. It appears to similarly allow Connecticut higher education institutions to issue refinancing loans. The act prohibits refinancing loans from exceeding the outstanding aggregate principal amount of the original loan, less other forms of student assistance. It allows CHESLA to establish guidelines, criteria, and procedures for issuing refinancing loans.
By law, CHESLA may issue tax-exempt bonds backed by the authority's revenues. The act additionally allows CHESLA to issue taxable revenue bonds, including bonds that are eligible for federal tax credits, exemptions, or payments. Before issuing the bonds, CHESLA must find that issuance is necessary, in the public interest, and in furtherance of the authority's powers and purposes. (Under the federal Internal Revenue Code, tax-exempt bonds cannot be used to refinance student loans. )
Under the act, CHESLA must incorporate information about refinancing loans (e. g. , number of applications received, number of students assisted) in its annual report. By law, CHESLA must provide the report to its board of directors, the governor, the auditors of public accounts, and the Education and Finance, Revenue and Bonding committees (CGS § 10a-240).
The act also (1) allows CHESLA to issue education grants, (2) revises the membership criteria of CHESLA's board of directors, and (3) requires the board chairperson to report to the Banking and Higher Education and Employment Advancement committees on the authority's progress toward (a) targeting lending to individuals with a demonstrated financial need and (b) effectively serving the highest number of such individuals.
Finally, the act makes technical and conforming changes (e. g. , by amending the definitions of “borrower” and “education loan”).
EFFECTIVE DATE: July 1, 2015, except that the provision requiring a report to the legislature is effective upon passage.
The act allows CHESLA to issue loans to certain borrowers to refinance student loans (i. e. , “eligible loans”). Under the act, an “eligible loan” is a loan that is in repayment that was made (1) by CHESLA or (2) to a “borrower” by any other private or governmental lender to finance attendance at a higher education institution. A “borrower” is:
1. someone with an outstanding CHESLA loan,
2. an individual who (a) attends a Connecticut higher education institution or resides in the state and (b) received or agreed to pay an “education loan,” or
3. a parent who received or agreed to pay an “education loan” on behalf of a student who attends a Connecticut higher education institution or resides in the state.
An “education loan” is a loan to a (1) student in or from Connecticut, or a parent of the student, to finance attendance at a higher education institution or (2) “borrower” to refinance one or more “eligible loans. ”
By law, higher education institutions in Connecticut may issue “education loans” using proceeds from CHESLA (CGS § 10a-241). Because the act expands the definition of “education loan” to include refinancing loans, it appears to similarly authorize Connecticut higher education institutions to issue refinancing loans.
The act allows CHESLA to issue education grants, which it defines as grants, scholarships, fellowships, or other nonrepayable assistance awarded (1) by CHESLA to a student currently residing in Connecticut to finance his or her attendance at a Connecticut higher education institution or (2) by or on behalf of such an institution to a student from Connecticut from the proceeds of funds provided by CHESLA. The act allows CHESLA to establish guidelines, criteria, and procedures for issuing education grants.
BOARD OF DIRECTORS
By law, CHESLA is governed by a nine-member board of directors. Under prior law, two of the members had to be (1) active or retired trustees, directors, officers, or employees of Connecticut higher education institutions and (2) members of the Connecticut Health and Educational Facilities Authority's (CHEFA) board of directors. The act eliminates the requirement that these CHESLA board members also be members of CHEFA's board. It instead requires that they be Connecticut residents and appointed by the CHEFA board.
Under prior law, these members served on CHESLA's board (1) for as long as they were on the CHEFA board or (2) until a successor was appointed. Under the act, they serve six-year terms. By law, the CHESLA board also consists of (1) two other appointed members, who serve six-year terms, and (2) five ex-officio members.
REPORT TO LEGISLATURE
The act requires the chairperson of CHESLA's board of directors, by February 1, 2016, to report to the Banking and Higher Education and Employment Advancement committees on the authority's progress toward (1) targeting lending to individuals with a demonstrated financial need and (2) effectively serving the highest number of these individuals. The chairperson must appear before the committees to present the report at a time they prescribe.
The report must address CHESLA's progress toward:
1. lowering the interest rate on CHESLA education loans by, among other things, making equity contributions to its bond transactions using available funds from the Connecticut Student Loan Foundation;
2. increasing the maximum allowable debt-to-income ratio accepted by CHESLA for education loans;
3. offering need-based scholarships; and
4. deferring repayment of CHESLA education loans while the borrower (or borrower's child if the borrower is a parent) is enrolled full- or part-time in a graduate program.
OLR Tracking: TA; KS; MS; BS