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National agreement on student loans sparks renewed interest in Alaska legislation

Eli Martin
Holders of Alaska student loans currently pay 7.3 percent interest, and certain so-called “borrowers exceptions” can lower that rate to 6.8 percent. HB 17 would reduce loan principal by 2.5 percent a year.
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State Democrats are hoping a proposed bill to ease the burden on Alaska's student debt holders will become law during the next legislative session, at a time when Americans are struggling to meet the ever-rising costs of education.

House Bill 17, introduced in January, seeks to reduce the principal on loans for students who move back to or remain in Alaska after completing their higher education.

With Congress agreeing to compromise on reforming federal student loan interest rates Wednesday in Washington, D.C., student loans are high on the nation’s agenda, and proponents of HB17 hope to benefit from the attention.

Holders of Alaska student loans currently pay 7.3 percent interest, and certain so-called “borrowers exceptions” can lower that rate to 6.8 percent. HB-17 would reduce loan principle by 2.5 percent a year. 

But the reduction would not be universal. It’s available only to debt holders while they’re Alaska residents.

Back to the future?

That would in essence mark a reintroduction of Alaska's higher-education forgiveness program -- albeit a less generous version of it – that existed 1980s. In it, the state tried to give educated and skilled Alaskans an incentive to stay in-state or return to Alaska after completing higher education by reducing their student debt burden.

Rep. Les Gara, D-Anchorage, one of the bill’s architects along with Rep. Geran Tarr, said that the current bill shared these aims. With Alaska constantly importing so many workers, more needs to be done to encourage trained Alaskans to stay in the state, Gara said Thursday.

“(HB17) is good for the economy, good for people who aren’t born with wealth, who are struggling,” he added.

Tarr, who represents House District 17 in Anchorage, also emphasized the importance of making higher education affordable  at a time when tuition costs are rising across the U.S.

“I represent a moderate-to-low-income part of town.... A lot of folks are trying to become the first college graduate in their family,” she said.  

The bill was proposed on Jan. 17 but did not emerge from the education committee of the Republican-controlled House. Its sponsors appear to be trying to breathe new life into the bill while interest is high.

Federal student loans low as 3.86%

Earlier this week, Democrats and Republicans in the US Senate agreed, under pressure from the White House, to a compromise that would fix student loan interest rates at a single annual rate for all undergraduates -- irrespective of economic status -- and tie interest rates to the state of the economy.

For this coming fall, federal student loans will be available to all undergraduates at a rate of 3.86 percent, Reuters reported Thursday. But this could rise as high as 8.25 percent in the future.

In practice, students will likely continue turning to both federal and state sources of money for education.

For the 2013-14 academic year, the University of Alaska Anchorage has estimated that full-time, on-campus undergraduates who are Alaska residents will pay $18,621, including tuition, room and board, and personal spending.

While this pales in comparison to the cost of many Lower 48 colleges, neither federal nor Alaska aid will cover all the bills.

An undergraduate recipient of federal student aid can expect to receive $5,500 to $12,500 per year, depending on their year in college, and financial and dependency status. By contrast, Alaska offers undergraduate applicants an annual limit of $8,500 -- or $6,500 for vocational applicants and $9,500 for graduate students.

Not all agree that HB17 is the right way to make state student loans more accessible.

Diane Barrans, executive director of both the Alaska Commission on Postsecondary Education and the Alaska Student Loan Corporation, said she was in principle in favor of making student debt more affordable.

“I think everybody agrees to the extent that it’s possible to keep rates low, students benefit and the state benefits,” Barrans said.  

But she worried that the approach proposed by HB17 was “administratively complex” for the state and students to prove that they were eligible for a reduction on grounds of residency.

Because of this, she worried that the bill’s changes wouldn’t provide a “compelling motivation for students to do what the sponsor would like to see happen” -- that is, move back to or stay in Alaska.

For these reasons, Barrans said, the commission decided not to endorse the bill.

Rep. Lindsey Holmes, R-Anchorage, also expressed some skepticism about HB-17 proposals.

While Holmes said she felt strongly about reducing the burden on students, she worried that not enough analysis had been done on the impact any loan forgiveness would have on the program’s finances for the bill to be approved.

'Smart students in Alaska leave'

Andrew Lessig, University of Alaska Anchorage student body president, said he was in favor of the legislation and argued that any move to lower student debt was a step forward. He also thought that tying forgiveness to residency made sense for Alaska: “A lot of smart students in Alaska leave and then they do not come back.”

At 7.3 percent, Alaska’s student loans carry interest rates far in excess of other debts.  For instance, used car loans can be found at interest rates as low as under 2.5 percent, Gara said.

“We want to make job training affordable so that we have a trained workforce in Alaska and so that we make education affordable for people,” Gara argued.

The difficulty, it seems, will be getting there.

Contact Eli Martin at eli(at)alaskadispatch.com