Senators prod Patrick on student loans
Banks, schools could help, lawmakers say
The state Senate is urging Governor Deval L. Patrick to help restore student loan funds at the Massachusetts Educational Financing Authority, in an eleventh-hour bid to help thousands of families secure tuition financing for fall.
In a letter delivered to the governor early yesterday, the senators suggested that the administration use its muscle to persuade banks to step in to assist the authority. They also asked Patrick to press wealthy colleges and universities to either invest in MEFA's bonds or to provide backing so the authority can attract investors in the open market.
"Ultimately it's in their own best interest," said Senator Brian A. Joyce, a Milton Democrat who is leading the student loan effort, "not just to have higher institutions with a social conscience, but also a good, solid investment that ultimately will benefit not only tens of thousands of Massachusetts families, but the schools themselves."
A statement from the governor's office said, "We are reviewing the letter and recommendations," but said it was mainly encouraging the student lender to continue exploring its financial options. The governor has been talking to the lending authority about its troubles over recent months, according to MEFA's chief, Thomas M. Graf, and at Patrick's request it has recently reached out to colleges for possible assistance.
The Association of Independent Colleges and Universities in Massachusetts next week is putting together a meeting of financial executives from a number of its member institutions to discuss the issue, "to see if there's something that might be done," said its president, Richard J. Doherty.
The talks may be too little, too late, for about 40,000 students and their families who learned this week that MEFA would have no money for loans this year, just days before college bills are due. But a number of senators and a local fiscal watchdog are asking: How can the Commonwealth justify bailing out the Massachusetts Turnpike Authority and ignore a student lender that so many taxpayers relied upon? MEFA made $510 million in loans last year.
The administration has led a massive effort to bail out the financially troubled turnpike authority, which ended yesterday with a deal that insures $1 billion of the debt and investment obligations. Joyce said the Senate is not suggesting that the state put its full faith and credit behind the student loan authority - even though it's in far better financial shape with few defaults. "We cannot afford that right now, and fiscally it would be an imprudent thing to do," he said.
Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a sharp critic of the turnpike bailout, said the governor should bring his power to bear to help resolve the student loan crisis.
"With something of this magnitude, it's incumbent on the administration to take the lead and try to find a solution," Widmer said. He said that the universities and colleges, which all lobbied for the creation of the state lending authority nearly 30 years ago, have enough financial reserves to offer more help.
Harvard University, with the deepest pockets of any school in the nation, said fewer of its students are relying on MEFA because it has replaced loans with grants. Still, spokesman John Longbrake said, "Over time, many of our students and their families have relied on MEFA and we welcome the opportunity to learn more about the challenges it is facing and to think about ways to address them."
Joyce also challenged state Treasurer Timothy P. Cahill to take a stand on student loans, arguing that a slice of the $52 billion state pension might reasonably invest in the MEFA bonds - auction-rate bonds that are still paying market-rate interest but which have not traded since February, due to the broader market collapse of this type of bonds.
Cahill declined to comment.
Beth Healy can be reached at bhealy@globe.com.
