Chairman Johnson, Chairman Farrell, Chairman LaValle, Chairwoman Glick, and members of the Senate Finance and Assembly Ways and Means committees, I am honored to have the opportunity to address this distinguished group regarding the higher education financial aid programs administered by the New York State Higher Education Services Corporation. (HESC).

It is good to be back with you once again and to report on HESC and the 2008-09 Executive Budget recommendations that address student financial aid in New York State.

HESC is the state’s college student financial aid agency that helps nearly 700,000 students and parents pay for college each year through programs that have received your strong support: the Tuition Assistance Program (TAP), the World Trade Memorial Center Scholarship, the Flight 587 Memorial Scholarship, and New York’s $8 billion College Choice Tuition Savings Program, among others.

I would like to discuss where New York State and HESC are today in terms of our success in expanding opportunities for students.

Your support of an affordable college education continues to make our state a national leader. New York gives more money to students than any other state in the nation. For example, the most recent survey (2005-06 academic year) by the National Association of State Student Grant and Aid Programs (NASSGAP) ranked New York first in nearly every category.

According to the report, New York ranked first in:

  • Total state student aid dollars (grants and scholarships) awarded;
  • Total state student grant dollars awarded;
  • Total state need-based student grant dollars awarded;
  • Total state undergraduate student need-based grant dollars awarded;
  • Total number of student full-time equivalent grant recipients in the state's primary need-based grant program: 332,000;
  • Average state need-based undergraduate grant aid awarded per full-time equivalent (FTE) student: $1,096 (nearly three times the national average); and,
  • The share of the national total need-based undergraduate student grant aid dollars provided by all states: 18 percent (which is noteworthy as New York’s share of all 18-24-year-olds in the nation is only about 6 percent).

Because of New York’s substantial investment in higher education, our state has historically had one of the highest college-going rates of high school seniors in the country and was ranked second among all states in this important measure, according to the most recent data available.

Our programs include state-sponsored scholarships and special awards, federal loans for both parents and students, and early outreach and counseling through a federal Gaining Early Awareness and Readiness for Undergraduate Program (GEAR UP) grant. The aid programs that HESC administers also include the nationally acclaimed New York College Choice Tuition Savings (529) Program -- which we jointly manage with the state comptroller -- and the nation’s largest need-based student grant program, the Tuition Assistance Program (TAP).

Administering 25 student financial aid programs, HESC is the most comprehensive financial aid agency in the nation in terms of the benefits provided to students. Our programs serve New York State residents throughout their lifetimes. Last year, HESC’s direct aid programs reached more than 700,000 students, providing them with $5.5 billion in aid.

The Tuition Assistance Program

TAP – New York’s crown jewel state-sponsored student grant program -- is in its 34th year. New Yorkers have a lot to be proud of with TAP. It has been, and continues to be, the most generous need-based student grant program in the country. It is on the cutting edge of simplifying application and administration through Web-based innovations. Students can complete their TAP application, check the status of their applications, make changes to the information they provided HESC, and receive award notifications, all online.

Over its lifetime, TAP has awarded nearly $16 billion through nearly 10 million full-time equivalent awards. From its start in 1974 with a budget of $79 million and a maximum grant of $1,500, TAP has grown to a maximum award of $5,000 annually.

New York continues to lead the financial aid industry by example.

New York gave 17 percent ($138 million) more in student grants and scholarships in 2005-06 than the next closest state, California. This is a remarkable feat -- considering California enrolls nearly twice as many college students as New York.

The 2008-09 Executive Budget Proposal for TAP

More than $802 million in TAP awards is expected to be distributed by HESC to students in the coming academic year. The state’s funding commitment in the 2008-2009 Executive Budget will maintain New York’s ranking as a national leader in need-based, state-funded grants and scholarships.

Below is a summary of the major provisions of the 2008-2009 Executive Budget:
  • While the state faces a projected $4 billion deficit, I am pleased to report the budget recommends no reductions in student award schedules for the Tuition Assistance Program or state scholarship programs. This is historic since, in years past, whenever the state faced large budget deficits, every administration has recommended cuts in TAP.
  • Includes $2 million to increase college tuition benefits for returning combat veterans. Annual awards will be increased from the current $2,000 maximum to up to SUNY undergraduate full-time tuition.
  • Allows HESC to obtain certain information from the state Department of Taxation and Finance about borrowers in default on government education loans.
  • Recognizes the new federal College Access Challenge Grant program as a potential source of funding for TAP. That two-year program will provide states with matching funds to increase college access for low-income students through need-based student grants and outreach efforts, beginning in the summer of 2008.
  • The budget recommends HESC, in lieu of paying the 1 percent federal student loan default fee on behalf of its borrowers, use those funds to support the TAP program.
  • Provides an estimated $2.6 million in TAP savings by stipulating all students in default on a federal student loan would be ineligible for TAP awards, regardless of the guarantor for the loans. This tightens up eligibility standards and corrects a loophole that permits federal student loan defaulters to be eligible to receive TAP awards only if their student loans are not guaranteed by HESC.

HESC stands ready to implement the TAP program as approved by the Governor and the Legislature.

HESC Accomplishments

We are very proud of the corporation’s accomplishments this past year.

New York’s College Choice Tuition Savings (529) Program continues to grow. This nine-year-old program, which gives residents a tax break for investing in their child’s college fund, has been consistently rated as one of the best in the nation.

By year’s end, the program, with both a direct-sold plan and advisor/broker-sold plan, boasted total assets of nearly $8 billion in more than 571,000 accounts. The past 12 months, assets in the program have grown by $1.8 billion, or 28 percent, when you consider contributions and investment performance. At year-end, the average college savings account balance was $13,844. Upromise Rewards has added more than $20 million in contributions to participating accounts since November 2003. Withdrawals used to pay for qualified higher education expenses of student beneficiaries at colleges and universities exceed $1 billion.

Not only does HESC help people pay for college, we help make students aware of college opportunities, and help them prepare for college. Two years ago, HESC was awarded a second six-year federal GEAR UP grant to help at-risk students prepare for college. From the two grants, HESC will have received $52 million in federal funding for this important purpose.

Through the most recent grant, HESC is helping more than 7,000 at-risk middle school students stay in school, take the right courses to attend college, and explore college admissions and financing options. HESC is partnering with all major sectors of higher education, as well as with 11 colleges, universities and school districts, including 59 middle and high schools, in this important educational opportunity project.

HESC: Revenue-Generating and Self-Sufficient

HESC is a unique state agency in that it requires no state administrative funds and earns money which can be used for student aid purposes in the state. The corporation administers and contributes millions of dollars each year to improve educational opportunities for students.

HESC pays the cost of administering the state’s Tuition Assistance Program and several state scholarship programs with the revenue it generates as a federal student loan guaranty agency. That administrative cost was nearly $14.3 million last year. Over the past six years, HESC has paid $237.6 million for TAP and scholarship administration and other state financial aid expenses.

HESC continues to improve its operations to become even more efficient.

We continue to enhance our Web site, making it far more useful for students, families, financial aid professionals and our financial partners. This year, HESC completed the Spanish-language translation of its Web site for New York State students and parents.

New York continues to be, for the sixth consecutive year, the only state to be selected by the U.S. Department of Education to allow students to apply for both federal and state financial aid online in one Web session. As a result, there are fewer TAP application errors and processing is faster. And it’s all done without paper and postage. Last year, 80 percent of all TAP applications were paperless, and 96 percent of all TAP award notifications were made electronically, moving aid to the student faster. This year, we’re running at 84 percent paperless so far.

Our history and numbers on the student loan side of the ledger are equally impressive.

HESC is the second-oldest student loan guaranty agency in the nation, starting in 1958 and pre-dating the federal guaranteed student loan program. HESC is the sixth-largest guarantor of new federal student and parent loans in the nation, and the second-largest in terms of dollars of loans in repayment. We’re always trying to improve our loan business ranking. Last year, we guaranteed nearly $3 billion in new loans and $1.6 billion in consolidation loans. In total, HESC guaranteed nearly $4.6 billion in loans, with gains in every type of loan except consolidation loans, which were down industry-wide because of unfavorable interest rates set in July 2007.

We’re working to keep those loans current. The default rate for HESC-guaranteed loans is a record-low 3.9 percent while the national default rate is 4.6 percent. We avert more than 90 percent of the potential student loan default claims we receive from lenders, helping students avoid the consequences of default.

We help colleges reduce defaults through our intensive Default Manager Program, which trains college staff to counsel students who borrow, and how to highlight and focus on those in need of special attention to avoid default. And we continue to work with the U.S. Department of Education and colleges in the state to identify more ways to prevent defaults.

To help students understand and select the best education loan to meet their needs, HESC is working with the state Education Department to develop regulations to implement the Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007.

As noted in the 2008-09 Executive Budget, HESC will be launching the “New York State Marketplace,” a Web site portal that will foster choice, competition and transparency for private and government student loans by providing families with access to a broad spectrum of lending and guaranty information.

HESC faces competition in providing student loan services to colleges and students in New York. We could generate even more money for the state and bolster college student aid if all New York colleges used HESC’s student loan program services. Although we administered 56.9 percent of all federal student and parent loans in New York in federal fiscal year 2005-06, the remaining loan activity was through out-of-state agencies and the direct loan program run by the federal government.

For example, student loan guaranty agencies from California, Indiana, Massachusetts, Nebraska, Texas, and Wisconsin received more than $1.1 billion (21 percent of New York’s total) in student loan volume from New York colleges in federal fiscal year 2005-06. The federal direct loan program, administered by contractors of the U.S. Department of Education, took another $1.1 billion (21 percent of New York’s total).

Because of its excellent reputation as a progressive federal student loan guaranty agency, HESC is being asked to service colleges in other states and U.S. territories. For example, since March 2006, HESC has guaranteed $156 million of federal student loans for students attending college in Puerto Rico. And, more recently, colleges and student loan lenders serving students in Florida have asked HESC to respond to RFPs for student loan guaranty services. Given the continuing competition from out-of-state guaranty agencies in our home state, HESC needs to continue to explore such opportunities to remain financially self-sufficient.

Conclusion

HESC, and the programs we administer, lead the nation. We work with students to coordinate all facets of financial planning to obtain a higher education. The $8 billion College Choice Tuition Savings (529) Program, the $802 million TAP program, the $46 million in scholarships, the $21 million 6-year GEAR UP outreach program, and nearly $4.6 billion in new and consolidated student loans, all give New Yorkers unsurpassed educational opportunities. You and the Governor, through HESC, make higher education affordable.

HESC is among the best at what we do, and we plan to get even better. We continue to explore other products and services to identify ways to improve the solid foundation of financial aid opportunities available to New Yorkers.

As we enter our 35th year, HESC is proud of its accomplishments and seeking to improve its already-high national standings in the student financial aid industry.

Thank you.