Lawmakers target Alaska's brain drain

Two bills seek to help state residents pay student loans

Posted: Thursday, January 29, 2009

Like many Alaskans, Beth Kerttula left home to get her higher education. Unlike many Alaskans, she came back.

"Here's why I like student loan forgiveness: It brings kids home," she said. "It brought me home."

Rep. Kerttula, D-Juneau, is one of several legislators who have introduced bills to fight brain drain from Alaska by paying or forgiving up to half of graduates' Alaska Student Loan Corp. loans - depending on how long they stay in Alaska. Another bill in the House would help graduates in key industries. But financial analysts have yet to work out how much these proposals will cost the state.

The state's last forgiveness program didn't pencil out for the loan corporation, according to Diane Barrans, executive director of the Alaska Commission on Postsecondary Education.

It used to be that the Alaska Student Loan Corp., then financed by the state's general fund, would forgive a chunk of its loans to graduates who stayed in Alaska. That provision was written into the contract a student signed when taking on the loan while still in school.

Back then, the corporation had a different approach, Barrans said.

"They did not expect to collect 100 percent on the loans," she said.

And they didn't. The total cost of the forgiveness program to the state was about $60 million, and about 20 percent of those eligible for forgiveness actually claimed those benefits, Barrans said.

Barrans said that with the forgiveness program, people may have had "a sense that it wasn't really an obligation," she said. But the loan corporation was plagued by very high default rates, Barrans said. And the state-funded program was in trouble when oil and gas revenues dropped in 1986.

In 1988, the loan program was restructured. It financed loans by selling bond securities. From then on, it had an obligation to collect 100 percent of the debts. In turn, the corporation got more aggressive about following up on the loans. And the forgiveness program was no more.

Fast-forward to now. The corporation loans out an average of $60 million each year. The default rate has much improved. But it still needs to collect on its debt. So for Kerttula's bill to work, it will probably need state money funded ahead of time.

How much money the program will need is unknown. Determining that number will require estimates on the number of students who would take the state up on its offer. Kerttula said she's open to working with the corporation and revising her bill as necessary.

"I respect how strong that program is, and in the past they've had concerns about advocacy and how they'd pay for it," she said. "What I'm not sure is how we quantify the tremendous impact of having Alaskans stay at home or come back ... This is a great economic boost to Alaskans."

• Contact reporter Kate Golden at 523-2276 or e-mail kate.golden@juneauempire.com.



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