Governor Gives Green Light to Bond Package for Student Loans

Press Release

Maine Governor Paul LePage has agreed to allow the Maine Educational Loan Authority (MELA) to proceed with issuance of tax-exempt student loan revenue bonds to fund student loans for the upcoming academic year. The decision follows a meeting among the Governor, Senate President Raye and Shirley Erickson, Executive Director of MELA.

"MELA appreciates Governor LePage's recent decision to approve of the Authority's spring bond issue. His willingness to assist MELA during this time of transition will ensure the continuity of funding for Maine students and families utilizing the Authority's supplemental student loan program for the 2011-2012 academic year," said Shirley Erickson, MELA Executive Director.

Private activity bonds are issued by quasi-governmental agencies to support private projects that serve a public purpose. Bonds issued by MELA fund the authority's student loan program, which is designed to assist Maine students and families with expenses that exceed other financial aid resources. Since 1988, MELA has disbursed $263 million in student loans and served its debts with the revenue streams associated with student loan repayment.

"I am delighted by Governor LePage's decision to allow the Maine Educational Loan Authority to move forward with this year's issuance of bonds," said Senate President Kevin L. Raye. "The Governor's action is another clear signal that education is a priority for him, and it means that more than 800 Maine students will be able to continue their education this fall."

"Governor LePage has shown strong leadership in his decision to allow the issuance of MELA bonds," said Maine Speaker of the House Robert Nutting. "While we must be vigilant in our efforts to rein in our state's debt, I think the exception the Governor has made for the sake of these students makes good sense, and I commend him for it."

Tax exempt private activity bonds are backed by the moral obligation of the State of Maine and its taxpayers. Quasi-governmental agencies in Maine have approximately $5 billion in indebtedness outstanding. While the track record of repayment of these agencies is excellent, the taxpayers of Maine are ultimately responsible for the debts should an agency default.

Despite the constitutional mandate requiring voter approval of indebtedness, only about four percent of Maine's $12.9 billion in outstanding debt has been approved by voters. Governor LePage has notified the issuers of tax-exempt private activity bonds that voter approval will be required before additional bonds can be sold.

Governor LePage has agreed to make an exception to his policy for one additional round of bond issuance by MELA. Unlike other agencies, MELA does not have other funding options and hundreds of Maine students will be of need of assistance this fall before voter approval can be achieved. In future years, MELA will need to work with the Legislature and the Governor to put a bond approval question before the voters.

"I am pleased the governor will allow moral obligation bonding this year for the Maine Educational Loan Authority. This decision enables the authority to offer low interest loans to students this September and provides the time to make adjustment s for upcoming years," said State Treasurer and MELA Board Member Bruce Poliquin.

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