State treasurer and gubernatorial hopeful John Chiang is wading into the increasingly high-profile debate over college affordability with a new push for California to play a role in alleviating the burden of high-interest private student loans.
Chiang is sponsoring legislation that would create a $25-million fund that would offer a degree of protection to student loan providers. With the state assuming some of the risk, the measure’s proponents say financial institutions will be more likely to offer lower interest rates to those carrying student debt.
“We know that unfortunately too many Californians, too many Americans, are saddled with extraordinary debt,” Chiang said in an interview, touting his plan as an effort to “try to get them out of debt as quickly as possible.”
The proposal, which is being carried in the Legislature by Sen. Ben Allen (D-Santa Monica), is among a swell of measures introduced in the Legislature this year aimed at tackling the high cost of college. Allen and Chiang will unveil the legislation at a Capitol news conference Tuesday.
Assembly Democrats have proposed a sweeping “debt-free college” plan that would help offset living expenses in addition to tuition. Other lawmakers have proposed freezing tuition at University of California and California State University campuses, or doing away with tuition altogether at those institutions and community colleges by imposing a tax on millionaires.
The measure by Chiang and Allen, which is backed by the powerful labor group Service Employees International Union, would aid those already yoked to student debt. The assistance would be open to California residents with private student loans of $25,000 or less that are currently employed and have an associate, bachelor’s, graduate or technical degree.
Under the plan, borrowers would apply to a financial institution for loan refinancing. Once the lender approves, a credit package would then go to the California Educational Financing Authority, which is run by the treasurer’s office. The authority would agree to offer first-loss protection on up to 10% of the loan, meaning the state would guarantee that portion in event of a default.
You can read the rest at the Los Angeles Times.
Special Hat Tip to Anna Iskikian to spotting this story first.