Senate Democrats worry about MOHELA’s financial state

Wednesday, April 23, 2008 | 8:25 p.m. CDT; updated 4:51 a.m. CDT, Tuesday, July 22, 2008

JEFFERSON CITY — Senate Democrats have expressed concern over the financial stability of the Missouri Higher Education Loan Authority despite the agency’s first partial payment last week to public universities for building projects.

Sen. Chuck Graham, D-Columbia, said he fears for the future of the loan authority, which has reported suffering a net loss.

“MOHELA is in financial distress,” he said. “It can’t make the full payments for building projects that people were promised last year.”

Graham also said he specifically worries if MOHELA can make its quarterly payments to MU for the new Ellis Fischel Cancer Center.

Sen. Joan Bray, D-St. Louis County, called the current situation with MOHELA “screwed up.”

“MOHELA is in a very weak position given the economy,” she said. “It might have had problems before, but not nearly as bad as they do now.”

But Rep. Ed Robb, R-Columbia, said the agency is simply having a cash flow problem because buyers are unwilling to bid on MOHELA’s potentially risky assets, a problem that loan agencies across the nation have experienced.

“This has nothing to do with MOHELA,” Robb said. “This has to do with the type of assets.”

Robb also said partial payments should not be cause for concern because the Lewis and Clark Initiative, which funds capital improvement projects across Missouri campuses, included a provision allowing for payment delay.

“It doesn’t pose a problem to the state because it is a long-term construction process where half of the money comes from local sources anyway,” he said. “This is not a crisis in any sense of the word.”

MOHELA Executive Director Ray Bayer said its governing board elected to postpone a portion of the payments for building projects based on the agency’s minor losses in recent months.

Bayer said no one could have anticipated the crunch on the loan authority when the state legislature passed the plan to sell MOHELA’s assets last year.

He cited October 2007 as the beginning of MOHELA’s financial problems, when President Bush signed the College Cost Reduction Act, which increases scholarships and lowers loan costs.

“Since the plan was put through, the credit market crisis and President Bush’s CCRA happened at about the same time,” Bayer said. “Both have been challenging for MOHELA.”

The reduction act also increases fees MOHELA would pay if the Missouri House passes a bill allowing the agency to originate loans.

Bayer said the bill, which is one vote away from passage, would ease the financial strain.

If the bill is passed, MOHELA could originate loans as early as May.

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