Chairman Kruger, Chairman Farrell, Chairwoman Stavisky, Chairwoman Glick, and members of the Senate Finance and Assembly Ways and Means committees, thank you for the opportunity to speak with you today about the higher education financial aid programs administered by the New York State Higher Education Services Corporation (HESC) and the Governor’s 2010-11 Executive Budget recommendations that address student financial aid in New York State.

I am Elsa Magee, Executive Vice President and Acting President of HESC.

New York State has long been renowned for its support for higher education. New York is ranked among the top two or three states each year for its college-going rates, and our State provides grant and scholarship dollars and tuition reimbursement at levels which rank us number one nationally.

In State Fiscal Year 2008-09, HESC provided $4.6 billion in grants, loans, scholarships and other awards to more than 650,000 students attending college in the State.

The centerpiece of New York’s higher education student financial aid programs continues to be the Tuition Assistance Program, or TAP. The now 35-year-old Program continues to be among the largest and most-generous need-based college grant program in the nation, and remains the only true need-based entitlement grant program, state or federal, in the country.

During the 2008-09 academic year, TAP awarded $813 million to 375,000 students attending more than 260 colleges and universities in the State.

Complementing TAP are 18 other HESC-administered scholarship, loan forgiveness and special award programs. In 2008-09, HESC provided nearly $52 million in other scholarships and awards to more than 46,000 students attending college in the State.

The New York Higher Education Loan Program (NYHELPs)

Thanks to your support, with the April 2009 enactment of the New York Higher Education Loan Program (NYHELPs), New York State students and families can now avail themselves of the first major new financial aid program in 35 years.

NYHELPs is the only fixed-rate private loan broadly available to New York State students and families, and is the only private loan program that educates borrowers before actually making the loan available to them. We know of no other loan program with the comprehensive approach to borrower education that is integral to NYHELPs, and are receiving inquiries from other states with loan programs regarding our financial literacy component of the Program.

Because national studies have found that 25 percent of private loan borrowers do not file the federal student aid application (FAFSA), and two-thirds of private loan borrowers do not use all the low-cost federal loans for which they were eligible, the Program also requires that students complete the FAFSA and apply for and exhaust all other eligible aid before they can be considered for a NYHELPs loan. This ensures that students use all federal and NYS grant and scholarship aid, and federal subsidized and unsubsidized Stafford loans first, thereby reducing their total debt levels.

This year, we are particularly pleased to have completed our soft launch of this new, State-sponsored Program. In 2010-11, students and families will be able to finance up to $95 million in college costs using these low cost loans with fixed interest rates of 7.55 percent, 8.25 percent or 8.75 percent, depending on their selected repayment option – a significant savings from current market rates on private student loans.

As the nation works through what will likely be considered one of the worst financial crisis in our country’s history, innovative programs like NYHELPs are needed to help keep the doors to higher education open to all New Yorkers and maintain a highly educated workforce, which is key to maintaining economic strength in our State.

Federal Family Education Loan Program (FFELP)

As the federally-designated guarantor in New York State for the Federal Family Education Loan Program (FFELP), HESC last year guaranteed nearly 595,000 new low-cost federal student loans worth more than $3.7 billion. This is an increase of 15 percent in new loan volume. Additionally, the agency guaranteed more than 400 consolidation loans worth nearly $24 million, which enabled students to refinance multiple federal student loans into a single loan with lower interest rates and often better overall terms.

During 2008 and 2009, HESC addressed the issue of stability in the federal student loan program and access to student loan funds, and took steps to help borrowers cope with the changes in student loan availability by designating itself as the lender of last resort for New York’s students and families.

With changes being proposed to the federal student loan programs, HESC is working with the Governor’s Office and the U.S. Department of Education to ensure that students in our State continue to receive the best services and uninterrupted access to federal student loans in the years ahead.

Default Prevention Services

A critical component in our administration of the federal student loan program is HESC’s role in helping students stay current with their loans and assisting colleges in helping their students stay current so that they do not default on the repayment of their loans.

These services have remained HESC priorities. In 2008-09, HESC helped more than 430,000 students avoid default on loans worth $3.4 billion through its various default prevention programs.

At HESC, we are continuing to develop new ways to improve access to financial aid and streamline costs so that no student is left unable to afford their college dreams. From making it easier to learn about and apply for State-sponsored grant and scholarship programs on the Web, to informing students about available aid, to implementation of the first new major financial aid program in 35 years, our agency has bolstered its reputation as a leader in providing cutting-edge financial aid products to New York State students and families.

2010-11 Executive Budget Recommendations

I will now turn to the areas affecting New York State’s student financial aid programs in the Governor’s Executive Budget proposal. These proposals reflect the difficult choices facing the State as a result of the unprecedented fiscal crisis.

Governor Paterson has called his 2010-11 Executive Budget a budget of necessity, not of choice. New York is facing a $7.4 billion dollar budget deficit and a long-term structural deficit of $60.8 billion over the next five years.

The Executive Budget recommendations presented for 2010-11 preserve the State’s long-standing tradition of providing access to the neediest of our students.

Education and health care, collectively, make up over 50 percent of our State spending, and it will be difficult to close the deficit without addressing each of these areas. The student financial aid proposals contained in the Executive Budget, consistent with other higher education reforms, allow students to prepare for predictable and modest programmatic changes, while also containing costs. Though they are never welcomed, making modest changes today could serve to protect tomorrow’s students from facing more significant and more painful cuts.

As the State’s administering financial aid agency, HESC stands ready to implement the financial aid programs as approved by the Governor and the Legislature.

Thank you.