April 4, 2009
GOVERNOR PATERSON ANNOUNCES ENACTMENT OF NYHELPs STUDENT LOAN PROGRAM
Unique Loan Model Fills a College Financing Gap During Challenging Times
Governor David A. Paterson today announced that the New York Higher Education Loan Program (NYHELPs) has been enacted as part of the 2009-10 New York State budget. NYHELPs will help fill the gap between college costs and financial aid by giving New York students and families access to low-cost education loans not currently available in the private loan market. A minimum of $350 million in loans will be provided annually to approximately 45,000 resident students enrolled in degree-granting programs at a college or university in New York State.
“New York remains the national leader in helping students pay for college. NYHELPs complements our State’s generous array of scholarships, grants and loan forgiveness programs – all of which help students achieve their dream of attending college,” said Governor Paterson. “Families who are struggling to find affordable ways to pay for college and need alternative loans to fill the gap between aid and cost of attendance now have one more resource available to them. NYHELPs will keep the doors to college open for many New Yorkers.”
“NYHELPs will promote the State’s future economic vitality by helping to develop a skilled workforce,” Governor Paterson continued. “Through NYHELPs, New York State’s diverse public and independent higher education institutions remain accessible to our students and a strong foundation is built for establishing their careers here after college.”
Proposed by Governor Paterson in his Executive Budget and supported by the State Senate and Assembly, this unique student loan program creates a new paradigm with a public/private partnership in which the State, the banking community and colleges work together to ease the financial burden on students and families.
The New York Higher Education Services Corporation (HESC), the State’s student financial aid agency that administers the Tuition Assistance Program (TAP), and over 25 other grant, scholarship, and federal student loan programs, will administer NYHELPs. Lenders will make fixed rate student loans supported with up to $350 million in private activity bonds issued by the State of New York Mortgage Authority (SONYMA). The program allows for unlimited participation by lenders making low-cost variable rate loans. The State is providing $50 million in General Fund support in the initial year and $10 million a year thereafter toward default reserve funds which will have the effect of lowering the overall cost to the students through reduced fees. Colleges participate by contributing a nominal fee to the reserve funds based on one percent of their loan volume in the program.
HESC President James C. Ross said: “I commend Governor Paterson for advancing and securing this vital program that reinforces his commitment to higher education. Thanks to Governor Paterson’s leadership, this first new student aid initiative in New York State in 35 years eases the financial burden and makes for a brighter future for students and families in New York State.”
Students could receive an estimated interest rate between 7.5 and 8.5 percent, subject to market conditions, as compared to rates of 12 to 17 percent that students have faced in recent months. In addition to this significant saving on interest, NYHELPs safeguards students from borrowing more than they need by requiring that they first apply for and receive State and federal student aid they are entitled to in order to qualify for a loan. Further borrower protections include preference for students demonstrating financial need and a school certification requirement which ensures that the student has been informed about the best options among all financial aid programs available.
SONYMA President and CEO Priscilla Almodovar said: “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. We look forward to our partnership with HESC.”
A key component of NYHELPs is the requirement that borrowers complete a comprehensive Web-based financial literacy education program before borrowing. This 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. The program will encourage students to establish a budget and savings plan, apply for free aid, and borrow only what they need.
NYHELPs borrowers will apply online through a dynamic interactive Web site, HESC Student Loan Marketplace. Students are informed of the true cost of all loans, ensuring that they apply first for grants and lowest-cost loans and borrow only what they need. Students receive trustworthy information and, with only one credit check, preserve their credit scores. HESC Marketplace is designed as an open network to ensure transparency of lender information.
NYHELPs loans will be available for students in the spring term of the 2009-10 academic year.
