New York Gov. David Paterson yesterday proposed selling tax-exempt bonds to finance a low-interest student loan program.
The governor's proposal drew on recommendations in a report released last month by the New York State Commission on Higher Education. The report said New York is the only large urban state in the nation and only state in the Northeast that does not offer low-cost loans to resident college students.
"As credit markets tighten and fewer financial institutions participate in student lending, students and their families are faced with the prospect of paying higher and higher interest rates," Paterson said in a press release.
Paterson said he would introduce legislation for the program in next year's budget. The program would be "cost neutral" to the state because the costs of debt service and administration would be borne by the borrowers, he said.
While short on details, the governor's proposal is similar to a bill that passed the state Senate last month. That bill, which was sponsored by Sen. Kenneth LaValle, R-Port Jefferson, would create the "I Live New York" program to provide loan funds through the sale of $750 million of tax-exempt bonds.
Although the bill did not specify an issuer for the bonds, LaValle proposed the Dormitory Authority of the State of New York in a press release.
"It's certainly a concept that we support as evidenced the by the fact that we did pass similar legislation," said Scott Reif, spokesman for the Senate majority leader. "We think it's a worthy program."
The governor's office had not yet determined how much bonding it thought was necessary for the program nor which issuer would sell the bonds, Paterson spokeswoman Marissa Shorenstein said.
She said the bonds might be structured differently under the governor's proposal than in the Senate version, but did not elaborate. Also to be determined was whether or not the loans would be direct from the state or through a private bank, she said.
DASNY spokesman Marc Violette said that is was premature for the authority to weigh in on the matter before a law had been passed.
The Senate's bill was a "one house" bill, meaning it did not have a sponsor in the Assembly. A spokesman for Assembly Speaker Sheldon Silver, D-Manhattan, said the assembly was still reviewing the commission's report.
