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.
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Quantity Rights Resetved