HESC to Administer Unique Loan Program that Fills a College Financing Gap During Challenging Times



FOR IMMEDIATE RELEASE: April 3, 2009

James C. Ross, president of the New York Higher Education Services Corporation (HESC), today applauded New York State Governor David A. Paterson’s leadership in the enactment of the New York Higher Education Loan Program (NYHELPs) as part of the 2009-10 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 tuition costs now have one more resource available to them. NYHELPs will keep the doors to college open for many New Yorkers."

HESC President Ross said, "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. HESC is pleased to have worked with the Governor in designing NYHELPs and we look forward to administering it on his behalf. In this difficult year, I commend Governor Paterson for advancing and securing this vital program that reinforces his commitment to higher education."

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. The 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 their families. 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 also 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 one percent to the reserve funds based on their loan volume in the program.

Students could receive an estimated interest rate between 7.5 and 8.5 percent, subject to market conditions, as compared to current rates of 12 to 17 percent for many private student loans. 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 all State and federal student aid they are entitled to in order to qualify for a loan.

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 goal is always to encourage students to establish a budget and savings plan, apply for free aid, and borrow only what they need.

"The State’s investment in NYHELPs lays the foundation for a bright future for New York’s students and families. NYHELPs will expand college financing access for borrowers not eligible in today’s financial marketplace, and offer loans at a competitive rate rather then the high interest rates many students are seeing today," Curt Gaume, President of the New York State Financial Aid Administrators Association (NYSFAA) said.

NYHELPs borrowers will apply online through a dynamic interactive Web site, HESC Student Loan Marketplace. HESC Marketplace educates students on best borrowing practices and allows them to compare and contrast loans based on the interest rates they would actually pay. 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.

About HESC: HESC is the nation’s largest in-state student loan guaranty agency providing more grant and scholarship money to college students than any other state in the nation.

The state agency helped nearly 650,000 students by providing $4.5 billion in grants, scholarships and loan guarantees in 2007-08, including $795 million awarded through the Tuition Assistance Program (TAP) to more than 370,000 students.

HESC administers New York’s 529 College Savings Program, a nationally-acclaimed program which boasts over $8 billion in assets in more than 600,000 accounts.

HESC also provides training and technical services to financial aid administrators, high school counselors, and lenders.

EDITORS - FOR MORE INFORMATION: Contact Kathy Crowder, HESC's Senior Vice President for Communication at (518) 402-1448 or via email at kcrowder@hesc.org.


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