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Background: The state’s Hinson-Hazelwood College Student Loan Program provides loans for students attending college in Texas. The state sells bonds to finance the program, and pays the debt on the bonds as the students repay their loans. While the bonds are guaranteed by state taxes, the state has never needed to use tax dollars to repay any of the debt. Since 1965, a total of $1.360 billion in bonds have been authorized for the program, the most recent being $400 million authorized by the voters in 1999. All but $175 million in bonds will be used up by spring, 2009. Proposition 2 would allow the state to issue $500 million more in bonds to pay for more student loans.

Proposition 2 would also let the state use “bond enhancement agreements” for bonds issued under this program. Bond enhancement agreements reduce interest payments through common financial planning methods.

For: These bonds are needed to meet the growing demand for student loans. The bonds do not use any tax dollars. By helping to make college more affordable for students in Texas, more students will be prepared for jobs in an expanding Texas economy. The state currently uses bond enhancement agreements for several of its other bond programs, and allowing the use of such agreements by this program would cut interest costs.

Against: This is the most the program has ever asked for, and significantly increases the state’s debt for this program. A substantial downturn in the economy could leave Texas taxpayers responsible for this debt. Private lenders should provide student loans, not the state.

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the Scott Hochberg Campaign
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9/20/07