Bill 1499

                    Current Status

Bill Number:               1499
Ratification Number:       607
Act Number                 509
Introducing Body:          Senate
Subject:                   Authority's bond debt limit
                           increased

(A509, R607, S1499)

AN ACT TO AMEND SECTION 59-115-80, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING IN PART TO THE REVENUE BOND DEBT LIMITATION OF THE STATE EDUCATION ASSISTANCE AUTHORITY, SO AS TO INCREASE THE LIMIT FROM ONE HUNDRED SEVENTY-FIVE TO THREE HUNDRED MILLION DOLLARS.

Whereas, the General Assembly finds:

(1) In 1971 it established the State Education Assistance Authority as a public instrumentality of the State of South Carolina and empowered it to provide financial assistance to residents of South Carolina through the making or guaranteeing of student loans. The authority is governed by its members who are, by statute, the members of the State Budget and Control Board. The authority acts through its contractual agent, the South Carolina Student Loan Corporation, a private nonprofit corporation.

(2) The authority has designated the corporation to serve as a central statewide lender and to date over one hundred thirty-six thousand loans have been made to more than sixty-seven thousand students.

(3) The administration of this program is totally separate from the loan programs administered by colleges and universities throughout the State whose lending and collection experiences are quite dissimilar. For fiscal year 1989, the authority's default rate was one and seven-tenths percent. Student loans made by the corporation from the revenue bond proceeds of the authority are one hundred percent guaranteed by the authority against the death, disability, or default of the student borrower. This guarantee does not in any way represent a pledge of the state's full faith and credit. The guarantee is limited to monies available in a reserve fund maintained by the authority funded through an insurance premium of three-fourths percent which is deducted from the loan made to each student borrower. On June 30, 1989, there was approximately one and six-tenths million dollars in the reserve fund.

(4) The state's guarantee is further backed by a federal program of reinsurance. The amount of this reinsurance relates to the annual default rate on student loans and ranges from one hundred to eighty percent. Unless the state's default rate exceeds five percent in any given year, all loans are reinsured at one hundred percent. Any defaults in excess of five percent, but less than nine percent, are reinsured at ninety percent; all defaults above nine percent are reinsured at eighty percent.

(5) Since the federal program of reinsurance began in 1978, defaults on all loans made by the corporation have always remained below five percent and thus the State has been reimbursed for one hundred percent of all default payments.

(6) In recent years, in an effort to gain the flexibility of entering the tax exempt market at the most advantageous time, the authority has authorized the corporation to arrange for lines of credit from commercial banks. The authority now seeks to increase its statutory debt limitation to permit the continued financing of this program on the basis described above for the next several years. Now, therefore,

Be it enacted by the General Assembly of the State of South Carolina:

Authority's bond debt limit increased

SECTION 1. The first paragraph of Section 59-115-80 of the 1976 Code is amended to read:

"Subject to the right to enlarge the authorization to issue revenue bonds, the General Assembly authorizes the authority to provide for the issuance, at one time or from time to time, of revenue bonds of the authority in an aggregate principal amount outstanding at any time of not exceeding three hundred million dollars for any of its authorized purposes, including the use of a portion of the proceeds of any issue of bonds for the establishment of a reserve for the payment of principal and interest of the bonds. The reserve may be deposited in the sinking fund. The bonds must be designated, subject to such additions or changes as the authority considers advisable, State Education Assistance Authority Revenue Bonds, Series ,' inserting in the blank space a letter or numerals identifying particular series of bonds."

Time effective

SECTION 2. This act takes effect upon approval by the Governor.

Approved the 30th day of May, 1990.