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PAG LIN 1 1 Section 1. Section 261.37, subsections 3 and 6, Code 1995, 1 2 are amended to read as follows: 1 3 3. Collect an insurance premium of not more thanone1 4percent per annum of the principal amount of any loan1 5guaranteed, beginning with the date of disbursement and ending1 6one year after the date on which the borrower expects to1 7complete the course of study for which the loan was madethe 1 8 amount authorized by the federal Higher Education Act of 1965. 1 9SuchThe premium shall be collected by the lender upon the 1 10 disbursement of the loan and shall be remitted promptly to the 1 11 commission. 1 12 6. To reimburse eligible lenders forone hundred percent1 13of the principal and accrued interestthe amount authorized by 1 14 the federal Higher Education Act of 1965 on defaulted loans 1 15 guaranteed by the commission upon receipt of written notice of 1 16suchthe default accompanied by evidence that the lender has 1 17 exercised the required degree of diligence in efforts to 1 18 collect the loan. 1 19 Sec. 2. Section 261.71, subsection 1, paragraph d, Code 1 20 Supplement 1995, is amended to read as follows: 1 21 d. The student hasmade application for, using the1 22procedures specified in section 261.16, andreceived moneys 1 23 through the college student aid commission from the funds 1 24 allocated for loans under this section. 1 25 Sec. 3. Section 261.71, subsection 2, Code Supplement 1 26 1995, is amended to read as follows: 1 27 2. Of the moneys loaned to an eligible student, for each 1 28 year of up to and including four years of practice in Iowa, 1 29thean amountofequal to twenty-five percent of the original 1 30 principal and the proportionate share of accrued interest, or 1 31 one thousand one hundred dollars, whichever is greater, shall 1 32 be forgiven. If a student fails to complete a year of 1 33 practice in the state, as practice is defined by the college 1 34 student aid commission, the loan amount for that year shall 1 35 not be forgiven. Forgivable loans made to eligible students 2 1 shall not become due, for repayment purposes, until after the 2 2 student has completed the student's residency. A loan that 2 3 has not been forgiven may be sold to a bank, savings and loan 2 4 association, credit union, or nonprofit agency eligible to 2 5 participate in the guaranteed student loan program under the 2 6 federal Higher Education Act of 1965, 20 U.S.C. } 1071 et 2 7 seq., by the commission when the loan becomes due for 2 8 repayment. 2 9 Sec. 4. NEW SECTION. 261.72 CHIROPRACTIC LOAN REVOLVING 2 10 FUND. 2 11 A chiropractic loan revolving fund is created in the state 2 12 treasury as a separate fund under the control of the 2 13 commission. The commission shall deposit payments made by 2 14 chiropractic loan recipients and the proceeds from the sale of 2 15 chiropractic loans, less costs of collection of delinquent 2 16 chiropractic loans, into the chiropractic loan revolving fund. 2 17 Moneys credited to the fund shall be used to supplement moneys 2 18 appropriated for the chiropractic forgivable loan program, for 2 19 loan forgiveness to eligible chiropractic physicians and to 2 20 pay for loan or interest repayment defaults by eligible 2 21 chiropractic physicians. Notwithstanding section 8.33, any 2 22 balance in the fund on June 30 of any fiscal year shall not 2 23 revert to the general fund of the state. 2 24 EXPLANATION 2 25 This bill conforms Iowa Code language, relating to the 2 26 duties of the college student aid commission, regarding the 2 27 Iowa guaranteed loan program, to federal requirements. The 2 28 bill also changes the chiropractic graduate student forgivable 2 29 loan program to make it comparable to the osteopathic 2 30 forgivable loan program, and creates a chiropractic loan 2 31 revolving fund. 2 32 The bill permits the commission to collect an insurance 2 33 premium and to reimburse eligible lenders for defaulted loans 2 34 in the amount authorized by the federal Higher Education Act 2 35 of 1965. Current law sets the figure, while the bill ties the 3 1 amount to whatever amount is authorized by the federal Higher 3 2 Education Act of 1965. 3 3 Language creating the chiropractic graduate student 3 4 forgivable loan program was enacted in Senate File 266 in 3 5 1995. This bill makes the language of the program more 3 6 comparable to the osteopathic forgivable loan program by 3 7 adding a provision allowing the commission to sell unforgiven 3 8 loans due for repayment to a financial institution eligible to 3 9 participate in the guaranteed student loan program. 3 10 The bill also creates a chiropractic loan revolving fund, 3 11 the language of which differs from the osteopathic loan 3 12 revolving fund only in that the commission may withhold from 3 13 deposit into the fund the costs of collection on delinquent 3 14 chiropractic loans. The commission is directed to deposit 3 15 payments made by loan recipients and the proceeds from the 3 16 sale of chiropractic loans into the revolving fund, less the 3 17 costs of collection of delinquent chiropractic loans. 3 18 BACKGROUND STATEMENT 3 19 SUBMITTED BY THE AGENCY 3 20 Section 1 of the bill specifies the maximum amount of 3 21 guarantee fee which may be charged borrowers under the federal 3 22 guaranteed student loan program. Federal law has preempted 3 23 the Iowa Code in this area by setting a national maximum 3 24 guarantee fee of 1 percent. The fee is a one-time fee charged 3 25 at the time a loan is disbursed. The commission currently 3 26 charges a one-time guarantee fee of 0.5 percent. While the 3 27 commission is not in conflict with either federal law or the 3 28 existing Iowa statute, the federal prerogative to set a 3 29 maximum guarantee fee clearly suggests the Iowa statute should 3 30 be clarified. The commission recommends the statute be 3 31 amended to provide that the commission may charge a guarantee 3 32 fee of not more than the amount provided by the federal Higher 3 33 Education Act of 1965. 3 34 Section 1 also provides that the commission shall reimburse 3 35 lenders for 100 percent of the principal and accrued interest 4 1 of default claims which have been properly serviced by the 4 2 lender. Current federal law prohibits the commission from 4 3 reimbursing lenders for more than 98 percent of the accrued 4 4 principal and interest on defaulted loans disbursed on or 4 5 after October 1, 1993. At this time, it appears federal 4 6 budget reconciliation will further reduce the level of lender 4 7 reimbursement to 95 percent. The commission is recommending 4 8 the statute be amended to provide that the commission 4 9 reimburse lenders for the amount provided by the federal 4 10 Higher Education Act of 1965. 4 11 Sections 2 and 3 of the bill change the chiropractic for- 4 12 givable loan program so the program will operate in a manner 4 13 similar to the osteopathic forgivable loan program. Both 4 14 programs provide for the commission to make loans to students. 4 15 The loans will be forgiven if the student remains in the state 4 16 to practice in their professional field after completion of a 4 17 residency program. Loans which are not forgiven must be 4 18 repaid to the commission. 4 19 The commission is also requesting authority to sell loans 4 20 which are not forgiven to a commercial lender or secondary 4 21 market. This will improve cash flow and allow for 4 22 reinvestment of sale proceeds in new loans. The existing 4 23 legislation also provides for forgiveness of up to $1,100 per 4 24 year for a maximum of four years. Under this legislation 4 25 students with greater than $4,400 in forgivable loans would 4 26 not be eligible to have their entire indebtedness forgiven. 4 27 Since the intent of the legislation is to provide an incentive 4 28 for chiropractors to remain in the state, the commission is 4 29 recommending annual forgiveness of 25 percent of original 4 30 principal plus applicable interest charges or $1,100, 4 31 whichever is greater. This will allow students to assume more 4 32 than $4,400 in forgivable loans and should improve the 4 33 incentive for them to take advantage of the forgivable feature 4 34 of the program. The provision is similar to language enacted 4 35 for the osteopathic forgivable loan program. 5 1 Section 4 establishes a revolving fund so that moneys 5 2 collected from loans that are not forgiven may be used in 5 3 subsequent years to supplement the annual appropriation, 5 4 thereby increasing the amount of loan funding available to 5 5 students. Similar language has already been enacted for the 5 6 osteopathic forgivable loan program. 5 7 LSB 3365DP 76 5 8 kh/jw/5
Text: SSB02054 Text: SSB02056 Text: SSB02000 - SSB02099 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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