Cahill nixes pension investment in education loans

BOSTON—State Treasurer Timothy Cahill says he will not allow state pension funds to be invested in bonds that in turn would be used by a state agency to provide tuition loans to cash-strapped students.

Speaking in his capacity as chairman of the Pension Reserves Investment Management Board, Cahill said Thursday that a $50 million investment requested by Gov. Deval Patrick would not provide the investment return state retirees need. He also said it would set a bad precedent by showing favoritism rather than analysis in making investment decisions.

Instead, the treasurer says he would support the Legislature signing a note of credit guaranteeing the state would repay $450 million in bonds so the Massachusetts Educational Financing Authority can get the money it needs.

MEFA says it cannot provide loans to about 40,000 because it cannot sell the bonds needed to underwrite them and to support federally guaranteed Stafford Loans.