SENATE BILL REPORT

HB 1485

BYRepresentatives Jacobsen, Dellwo and Heavey

Modifying the interest rates that non-profit corporations may charge on postsecondary education loans.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):March 31, 1989

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; Fleming, McMullen, Moore, Rasmussen, Sellar, Smitherman, West.

Senate Staff:Bev Tweddle (786-7403)

                  March 31, 1989

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, MARCH 31, 1989

BACKGROUND:

The state statute regulates and sets caps on the amount of interest charged to consumers by lenders.  The code also allows but sets limits on the amount of a loan "set up" and/or administrative fee that a lender may charge a consumer.

As the availability of federally guaranteed student loans decreases, students are turning to private sources for student loans.  Federal student loan interest is not governed by this state's usury laws whereas student loans from private sources are.  Because the pay back period for student loans is longer and therefore entails more risk, a guarantor is required.  When a guarantor's fee is added to the applicable interest rate, the combination could exceed the usury rate.

SUMMARY:

A nonprofit corporation may make postsecondary student loans at interest rates which are authorized by state or federal law and applicable to state or federally chartered financial institutions. 

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Edward Lange, Student Loan Finance Association, Davis Wright Jones (pro); Carl Donovan, Student Loan Finance Association (pro)