The Rhode Island Student Loan Authority last week became the first student loan issuer to sell debt in 2008, according to data from Thomson Reuters.

The borrowing came as fallout from the subprime mortgage crisis has virtually halted all borrowing by student lenders who for years sold auction-rate securities. The market for such securities has collapsed as auctions have failed and investor demand dried up.

The switch to a fixed-rate deal coincided with another student lender, in Arkansas, last week arranging for a line of credit from a state conduit borrower to enable it to make loans, while federal officials are moving ahead with several plans to re-establish liquidity in student-loan backed bonds.

The Rhode Island authority May 1 sold $64 million of tax-exempt 15-year fixed-rate bonds, interest on which is subject to the alternative minimum tax, at a total cost of 5.886%, according to state Treasurer Frank Caprio.

Caprio, who serves on the RISLA board, said the proceeds will fund the authority's Rhode Island family education loan program, which offers 15-year fixed-rate loans to students.

The deal included $57.5 million of term bonds maturing in 2018, 2023, and 2028; $2.5 million of serial bonds maturing between 2013 and 2017; and a $4 million subordinate bond maturing in 2028. The serial bonds were sold largely to retail investors in the state, according to Citi, which was the lead manager on the deal.

Edwards Angell Palmer & Dodge was bond counsel.

State officials estimated the bond deal should provide enough funds for RISLA to make loans to up to 6,000 borrowers. The family education loan program is for students in colleges or universities in Rhode Island and for Rhode Island residents attending eligible schools out of state.


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