- Associated Press - Thursday, March 6, 2014

JUNEAU, Alaska (AP) - The Senate State Affairs Committee on Thursday advanced a proposed constitutional amendment that would allow state backing on low-interest loans for students interested in college.

The proposal, sponsored by Sen. Anna Fairclough, R-Eagle River, would allow Alaska’s general obligation debt to be used as a tool in funding education loans.

“Our students are borrowing at a higher rate than they can achieve nationally,” Fairclough said.

Constitutionally, the debt can only be used currently for capital improvements and housing loans for veterans.

Fairclough said the proposed amendment would allow a cost-effective way for financing state education loans by leveraging Alaska’s AAA credit rating.

Diane Barrans, executive director of the Alaska Commission on Postsecondary Education, said if the amendment is approved it will mean a sizable reduction in rates. The current interest rate is 7.3 percent.

Currently, 41 percent of student loan applications are turned down in Alaska.

“We have seen the delinquency rate for these loans to be quite low over the last couple of years,” Barrans said, pointing out that it has ranged from 8 percent at the beginning of the recession to 5 percent currently. “It is starting to decline again.”

Barrans said that if the amendment is approved, the loan program may be widened, allowing more students to apply.

Fairclough told the committee new legislation on the matter would not be needed. Laws are already in place to assist students with loans.

Sen. Bill Wielechowski, D-Anchorage, said he supports the proposal.

“This is becoming a national issue and soon a national crisis. I think we need to drive down the interest rates for students,” Wielechowski said.

Fairclough pointed out that her own children did not receive student loans for college until she and her husband co-signed for them.

Sen. Cathy Giessel, R-Anchorage, said she supported the measure. “It doesn’t get to the real heart of the problem though, which is why postsecondary education is getting more and more expensive.”

The measure moves to the Senate Education Committee.

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