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About The Battalion. (College Station, Tex.) 1893-current | View Entire Issue (May 15, 1974)
Page 8 THE BATTALION WEDNESDAY, MAY 15, 1974 Federal regulations to undermine loan programs Needy Texas students may lose Hinson-Hazeltvood funds FROZEN FOOD SPECIALS PIE SHELLS.... Moor-Ring t „ ***% ONION RINGS ...4.79 { The Coordinating Board, Texas financial aid to almost 103,000 needy College and University System is Texas students since it was estab- petitioning Congress to exempt fished by the Legislature in 1965. Texas’ student loan program from The bad debt loss-ratio, since the proposed federal regulations which, beginning of the program, is approx- according to Chairman Harry imately 10 to 12 percent. Stepped- Provence, would “penalize the citi- up collection procedures also add to zens of the state” and place the loan the administrative cost of the prog- program in “serious jeopardy.” ram. The Board also is urging the Office THE CITIZENS OF TEXAS’ of Management and Budget to exc- through Constitutional amendment, lude the student loan bonds from have authorized the Coordinating “the restrictive effects proposed in OMB Circular A-70 (revised)” which threaten the tax-exempt status of such bonds. IF REGULATIONS PROP OSED by the Internal Revenue Ser vice and the Office of Management and Budget are imposed, the ability of the Hinson-Hazlewood College Student Loan Program to continue to make loans to needy Texas stu dents could be undermined, accord ing to Provence. A Coordinating Board resolution being mailed to all members of the Congress urges passage of HR 10246, introduced in the House last September by Texas Congressmen Omar Burleson (D-Anson) and Wil liam Archer (R-Houston). The legis lation proposes to remove obliga tions issued to finance student loans from arbitrage bond classification. Under temporary regulations of. the Internal Revenue Service, stu dent loan bonds could be classified as arbitrage bonds. SUCH CLASSIFICATION would threaten the financial sound ness of Texas’ student loan program, since IRS regulations limit the amount of yield on investment of proceeds of arbitrage bonds to one and one-half percent. The regula tions further disallow consideration of bad debt losses and that cost of administering the program which is appropriated by the Texas Legisla ture in determining the net amount of yield. The provisions could, therefore, force interest rates charged on stu dent loans to such artificially low levels that the program could be come financially unfeasible to main tain, explained Provence. The Hinson-Hazlewood College Student Loan program, adniinis- tered by the Coordinating Board has provided more than $132 million in MIKE MISTOVICH Business Machines Electronic Calculators Victor Adders Royal — S-CM Typewriters Sales - Rental - Service Board to sell up to $285 million in State of Texas bonds to finance the program. The Board has now sold $145.5 million of the bonds and an ticipates the sale of $15 million addi tional bonds in July. Board projec tions indicate that approximately 18,000 Texas students will request loans totaling about $25 million per year for the next several years. Student borrowers now pay 7 per cent simple interest per annum for loans issued through the state prog ram. Repayment of the loan begins nine months after the student leaves college. The Board is encouraging citizen support for HR 10246 and is enlisting assistance from higher education administrators in 18 other states, which either have or are interested in establishing similar state loan programs or secondary markets to purchase bank-made student loans. ALSO THREATENING the fu ture of the Hinson-Hazlewood loan program is the proposed OMB re vised regulation which would pro hibit federal agencies from guaran teeing aid to tax exempt state and local bond programs. The Board adopted a resolution petitioning the OMB and other con cerned agencies “to exclude student loan obligations from the restrictive effects” proposed in OMB Circular A-70 (revised), section 5 (c) of which contracts, or other pledges ofeqii reads: valent support.” “Aid to tax-exempt securities. Since Fall 1971 the Hinson State and local government obliga- Hazlewood College Student Loai tions, the interest income from Program has been a fully insure! which is exempt from Federal taxa- lender in the Federal Insured Stu tion, shall not be guaranteed by dent Loan Program. Under prosi Federal agencies. Nor shall there be sions of that program, the U S.Of indirect guarantee of tax-exempt fice of Education purchases atfacr financing through guarantee of un- value plus any accrued interesttk derlying loan portfolios, debt service notes of any student borrowers moit payments, lease or lease-purchase than 120 days past due. 909 S. Main 822-6000 AJLEEN Oldsmobile Cadillac SALES - SERVICE “Where satisfaction is standard equipment” 2401 Texas Ave. 823-8002 Embrey’s Jewelry We Specialize In A#grie Rings. 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