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Student loan program addressed by Proposition 2 in Nov. 6 Constitutional Amendment Election
By Gail Fagan, Public Affairs Representative
381-2741
Posted: 10/24/2007
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Current and future students at The University of Texas-Pan American are among the many persons throughout the state that could be affected by the outcome of the upcoming 2007 Constitutional Amendment Election in Texas on Nov. 6.

Proposition 2 – one of 16 propositions presented to voters on the ballot – is a constitutional amendment allowing the Texas Higher Education Coordinating Board (THECB) to issue bonds for providing low-interest, low-fee student loans to enable more Texas students to have funds to attend college.

The $500 million in general obligation bonds being proposed for issuance under Proposition 2 to finance the loans will be repaid by the students who borrow the money and will have no impact on property taxes, sales taxes or other taxes collected by the state. However, the Texas constitution requires that general obligation bonds be approved by the voters and, since 1965, they have reauthorized the bonding authority for this program six times, the last time in 1999. Without reauthorization all current bond funds will be exhausted by spring 2009.

In 2006, 50 percent of students with financial need and 80 percent of those in moderate to higher-income levels have relied on student loans to finance part of their education costs. Since the loan program began more than $1 billion in low-interest loans have been provided to 290,000 Texans to help pay for college. In the last 10 years, 1,900 students from South Texas (Hidalgo, Starr, Cameron and Willacy counties) have been awarded $20.2 million in student loans provided by the Coordinating Board.

When federal guaranteed loans were established in 1965 under the Higher Education Act, Texas was one of the first states to enter the student loan business choosing to have the THECB administer the Hinson-Hazlewood Student Loan Program and fund the program through general obligation funds rather than taxes. The loans, which are competitive with private lenders that also offer federal guaranteed loans, such as Stafford loans, offer a six percent fixed-rate of interest (as of September 2007) over the life of the loan. Other provisions include a six month grace period before repayment begins, non-capitalized interest, loan service by the THECB under the oversight of the Texas Legislature and a prohibition to the loans being sold to another lender.

At UTPA, the Office of Student Financial Services' statistics indicate the Federal Stafford Loan Program has been increasing at a rate between 15-20 percent a year going from $12,427,480 in 2001 to $31,031,548 in 2007.

This trend on greater reliance on student loans to finance a college education reflects the trend of rising tuition, housing costs and fees at public institutions necessitated by shrinking state appropriations and rising expenses for utilities and health benefits for employees, for example.

According to the League of Women Voters of Texas' Voters Guide to the 2007 Constitutional Amendment Election, proponents of Proposition 2 approval say the THECB's self-supporting loan program provides reliable funds at more favorable rates than most other sources. The availability of affordable loans as possible also ensures more students have access to higher education. A highly educated work force that attracts business and industries with high paying jobs to the state supports Texas goals of remaining nationally competitive economically.

Opponents to the amendment, according to the same Voter's Guide, point out that while the program is self-supporting, the state backs the bonds and would be responsible if interest revenue is not sufficient. The amount of student loan debt may also be considered a danger by those opposing a program that provides an additional avenue for such loans and a potential overload of student debt.

The election will be held Tuesday, Nov. 6 with early voting available Monday, Oct. 22 to Nov. 2. The guide to all the propositions on the ballot put together by the League of Women Voters of Texas can be accessed at http://www.lwvtexas.org.