Legislature approves MOHELA expansion
May 2, 2008
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The Missouri House and Senate have both approved a plan to allow the state’s student loan agency to originate federally guaranteed Stafford loans, which supporters hope will rejuvenate the agency’s profits.
Last year, the state approved a plan to sell assets from the Missouri Higher Education Loan Authority to fund capital improvements across the state. Some of the profits from that sale would go toward the Ellis Fischel Cancer Center, part of University Hospital and Clinics.
But MOHELA had reported its first loss in its history earlier this year, and its governing board voted to put off a payment to the state to fund the projects.
Sen. Rob Mayer, R-Dexter, sponsored the bill. He said the bill, which took three years of negotiation between MOHELA and the Missouri Bankers Association, would help the agency turn around its profits.
“This will be a positive measure,” Mayer said. “As the economy improves, so will MOHELA’s financial state.”
Mayer said MOHELA’s financial troubles reflect those felt throughout the student loan industry.
He said the credit market and federal changes to student loan rules and regulations had caused private student loan firms’ profits to slow as well.
“It’s nothing that’s unique to MOHELA itself,” he said.
MOHELA reported a slight profit in March, and MOHELA Business Development Director Will Shaffner said the agency expects a break-even year.
Shaffner said the bill is a first step in adapting the agency’s business strategy to the market.
“We have to make sure we manage our costs effectively,” he said. “We’re having to look at everything we do.”
Rep. Rachel Storch, D-St. Louis, said she supported the bill, but believes it shouldn’t have been necessary.
“I felt that we now need a bill to salvage MOHELA,” she said.
She said that the legislature should not have passed the bill authorizing the sale of assets from MOHELA to pay for higher education projects.
“Certainly, if MOHELA had the $350 million in assets it was forced to sell, it would have an easier time navigating this,” she said.
MOHELA has already suspended consolidation loans, Shaffner said, which weren’t bringing the agency any profit. The agency also reduced a program that subsidized some fees associated with student loans, lowering the total cost to students. The agency still pays those fees for in-state students, but not for students who aren’t attending a Missouri school.
Most MU student loans are signed through the Federal Direct Lending Program, in which the U.S. Department of Education, rather than an agency or bank, acts as the lender.
The new loan programs will allow MOHELA to “round out” its product offerings, Shaffner said. He said that with the addition of Stafford loans, MOHELA can originate loans from all four programs.
Originating loans allows the agency to bypass premiums they would otherwise have to pay to the bank that originated the loan. Shaffner said this would help allow MOHELA to continue offering the same rates.
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