HESC President Praises Governor Paterson's Proposed Student Loan Program

ALBANY, NY (01/07/2009)(readMedia)-- Governor David A. Paterson's leadership in proposing a student loan program for New York students, announced in his 2009 State of the State Message, was praised today by James C. Ross, president of the New York Higher Education Services Corp. (HESC).

The New York Higher Education Loan Program (NYHELPs) will help fill the gap between college costs and State and federal aid by giving students and families access to low-cost education loans not currently available to New Yorkers in the private loan market.

"For more than three decades, New York has been a national leader in helping students pay for college. With this loan program, Governor Paterson embraces that commitment," Ross said.

"As a result of the tightening of the credit markets, families are struggling to obtain private loans and find affordable ways to pay for college. The need for a low-cost loan program is more critical than ever," he added.

"The Governor's innovative initiative underscores his commitment to higher education and complements our State's generous array of scholarships, grants and loan forgiveness programs - all of which help students achieve their dream of attending college," continued Ross.

NYHELPs creates a new paradigm with a public/private partnership that, with a small but vital State investment, leverages lender funds to make both fixed and variable rate student loans. These education loans will be available to New York State residents attending participating colleges in New York State. Students must first exhaust all State and federal student aid for which they are entitled in order to qualify for the college-certified loan.

Under NYHELPs, lenders will make fixed rate student loans, supported using $350 million in private activity bonds issued by the State of New York Mortgage Authority (SONYMA). NYHELPs also allows for unlimited participation by lenders making variable rate loans. Governor Paterson has pledged $50 million in State General Fund support in the initial year and $10 million a year thereafter to be used in a pool which protects against borrower default. Colleges will contribute with a nominal fee based on loan volume participation. This essential support will provide leverage to encourage lenders to make many more dollars available in student borrowing and enable favorable borrower interest rates and fees.

Students could receive an estimated interest rate between 7.5 and 8.5 percent, subject to market conditions at the time of bond issuance. Most private student loans currently offer interest rates ranging from 12 to 17 percent.

"SONYMA welcomes the opportunity to use our debt issuance and finance expertise to structure a student loan program that works for the State of New York and its college students," said Priscilla Almodovar, President and CEO of SONYMA. "We look forward to our partnership with the New York State Higher Education Corporation."

The Program will require that borrowers complete a comprehensive Web-based financial literacy education program. The e-learning component of the loan program will help students make smart borrowing decisions, provide guidance on the pitfalls of credit card debt, and emphasize the student's responsibility for paying back their student loans.

NYHELPs borrowers will apply online through the New York State Higher Education Services Corporation's (HESC) Student Loan Marketplace. Student Loan Marketplace is a dynamic interactive Web site that educates students on best borrowing practices and provides students with access to a simple interface that allows them to compare and contrast loans based on the interest rates they would actually pay, with only one credit check, preserving their credit scores and ensuring they receive trustworthy information. This Web site is designed as an open network to ensure transparency of lender information.

HESC will administer NYHELPs. The State agency that helps people pay for college administers the Tuition Assistance Program (TAP), grants and scholarships, and is the designated guaranty agency for the Federal Family Education Loan Program. HESC also provides students financial literacy information, debt management and default prevention assistance.

HESC provides more than 650,000 New York students attending higher education institutions with grants, scholarships, and loans from the State and federal government. It is estimated that tens of thousands of these students will benefit from NYHELPs.

"Our goal is always to encourage students to establish a budget and savings plan, apply for free aid, and borrow only what they need," HESC President James C. Ross said.

"Governor Paterson's proposal for a student loan program comes at a very important time, and fills the gap that exists for many students between aid and tuition costs," President Ross added. "This will keep the doors to college open for many New Yorkers, easing the financial burden on students and their families."

Loans made under NYHELPs will be available for students in the spring term of the 2009-10 academic year.

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