Students must rate

The Alaska Commission of Postsecondary
Education introduced a new bill to the State Legislature
on Monday that stands to have a great impact on
student loans.
Drafted by Rep. Paul Seaton (R-Homer), HB 109 will
require students applying for an Alaska Supplemental
Education Loan (ASEL) to have good credit, or apply
with a credit-worthy co-signer.
“This is an important bill,” said N. Hinkley, assistant
director of Student Life and Leadership at UAA. “I
think good credit is somewhere between 660 and 680.
High school students rate way below that, which means
they wouldn’t be able to get a state loan.”
FICO is the most common model for estimating
credit scores. The American average is 720, which
means: Good but needs improvement. According to
FICO, people between the ages of 18-29, the average
credit is 637. The reason for the
lower credit rating is not just due
to unpaid debt, there are other
factors that go into the equation.
“Most high school students
don’t even have a credit card
yet,” Hinkley said. “And that
automatically looks bad on their
credit rating.”
Though FICO the most
commonly used model, it is not
the only, nor is it necessarily how
a student’s credit rating will be
assessed.
“I do not know what the
standard for ‘good credit history’
is precisely, as utilized by the
Student Loan Corporation,”
wrote Rep. Seaton in an e-mail.
“But I believe it is as fl exible as
possible… It cannot be a FICO
score, as the problem for those
students was an absence of credit
history, not good or bad credit.”
The reason HB 109 was drafted
in the fi rst place is because the
economic crisis is fi nally starting
to make an impact on Alaska.
State loans are funded by the
Alaska Student Loan Corporation
(ASLC), which issues bonds on
the capital market, using different
education loans as collateral.
“With revision to the current
credit market, the [ASLC] cannot
sell bonds to fi nance student
loans,” Seaton said, who is the
chairman of the House Education
Committee.
The ‘market’ now requires
proof of good credit. Loans to
students with poor credit or no
credit at all are now considered
“sub-prime loans.”
A student applicant’s “no
credit” history has always been
equal to “good credit” up until
recently. All around the nation
student loan corporations are
beginning to mandate credit
history. The money they have
used to funnel from bonds to
student loans is beginning to dry
up.
“The [ASLC] had enough
reserves to partially fund loans,
but will soon run out,” Seaton
said. “And the legislature would
need to appropriate general fund
money or provide an alternative
source if we wish to grant the
same kinds of loans as in the
past.”
The dissenting voices around
HB 109, are concerned that a
credit check will only make
education more inaccessible to
low-income students.
UAA Dean of Students Bruce
Schultz wrote in an e-mail that
there are some alternatives that
if passed will keep education
obtainable for all students.
“Student borrowers do have
other options for loans through
federal programs as well as
private lenders,” Schultz said.
The recently signed federal
stimulus package – the American
Recovery and Reinvestment Act
– increases the maximum Pell
Grant by $500 over the next two
years, and will add $200 million to
the Federal Work Study program.
Another bill introduced to the
State Legislature this month might
bring further relief for students
in need of economic assistance.
Sponsored by Sen. Johnny Ellis
(D-Anchorage), SB 33 proposes
a needs-based incentive program
that will reduce the costs of
postsecondary education for
students who possess both
academic skills and fi nancial
need. SB 33 was fi rst drafted
and introduced last year, but was
voted down. It has been revised
and is currently going through
various committees.