Potential MOHELA sale appeals to UM curators

Selling the loan program would bring welcomed extra funds, says UM’s Elson Floyd
Friday, January 27, 2006 | 12:00 a.m. CST; updated 3:29 p.m. CDT, Tuesday, July 22, 2008

Overall, members of the UM System Board of Curators were pleased about Gov. Matt Blunt’s plan to sell the Missouri Higher Education Loan Authority. However, they questioned whether now accepting a big infusion of money generated by the sale would limit future funding.

“Well, I tell you, the governor has really given us a pleasant surprise with this MOHELA program being placed up for sale,” Curator David Wasinger said after the board met Thursday. “So we’re probably going to have a couple hundred million dollars in capital appropriations that we didn’t know we would have last week.”

Earlier in the day, Blunt formally proposed to sell MOHELA to generate an estimated $375 million to $425 million. The money would be used to finance major building projects, student scholarships and new endowed professorships for public colleges and universities in Missouri.

“I think both the governor and the university seem to have a vision that we’re not just a state university and (will) take us to the 21st century,” Wasinger of St. Louis said.

As part of its monthly meeting, the governing board of the four-campus system heard a presentation on financing public higher education. Curators then asked whether supporting the MOHELA sale now poses long-term risks.

Jim Moody, president of James R. Moody and Associates, a governmental relations and consulting firm in Jefferson City, suggested it would be prudent to take a sure thing now instead of counting on state money that might not be substantial.

Bill Massy, a professor emeritus of education and business administration at Stanford University and president of the Jackson Hole Higher Education Group, said the university needs to take advantage of what the market has to offer — in this case proceeds of a MOHELA sale — or it won’t be able to maintain quality.

The curators’ afternoon meeting followed the morning announcement by Blunt in the airy atrium of MU’s School of Medicine. It was the first of four stops the governor was scheduled to make to unveil the “Lewis & Clark Discovery Initiative.”

System President Elson Floyd thanked the governor for his planned investment in the capital needs of the UM System. Recently, Blunt announced he was going to recommend a 2 percent increase in state money for Missouri higher education; for the UM System, that would mean about $8 million.

Later, after the curators’ meeting, Floyd called the new proposal creative and innovative.

He made clear he looks forward to receiving a large infusion of money for buildings — money that has been difficult to come by in recent years. Under the plan, MU would receive $87.5 million toward a new health sciences research and education center, $3 million toward a plant science research center and $2 million toward building offices and labs for companies spun off from campus research.

“Whatever we can get in order to help the capital needs of our campuses is an advantage,” board President Angela Bennett of Kansas City said.

Under Blunt’s plan, about $100 million would go toward the Missouri Opportunity Scholarship Fund, which would give $5 million annually to students statewide.

Under Blunt’s plan, the nonprofit MOHELA would be sold in a bid process overseen by a six-member board including the governor, the state treasurer and the state higher education commissioner. The loan authority would turn into a public-private partnership that would still underwrite loans but possibly at higher interest rates.

“We’re going to analyze the total package and then determine what is in the best interest of students,” Blunt said in talking with reporters after the announcement. “We do believe that we can get greater value than we receive today out of MOHELA.”

Democratic legislators, as well as a MOHELA administrator, have voiced concern that selling the loan agency could raise interest rates for student loans. Blunt said the loan interest rates would not increase. As a public-private partnership, the rates would remain competitive and market oriented, he said.

However, Will Shaffner, associate director of business development at MOHELA, said that if a for-profit company, such as Sallie Mae or Goldman Sachs, took over, interest rates on loans would increase.

Created in 1981, MOHELA services more than 600,000 borrowers — students and their families primarily from Missouri. The loan agency typically offers low-interest rates, sometimes 2 to 3 percent lower than the federal rate, according to its Web site.

Blunt addressed rumors that the state has already entered negotiations with potential bidders, saying that information is “a fabrication and outright lie.”

Blunt said three of the four campuses in the UM System do not use MOHELA to service their students’ loans.

However, a document prepared by the UM System states that MOHELA services nearly all loans at the University of Missouri-St. Louis and 40 percent of the loans at the University of Missouri-Rolla.

MOHELA services a negligible amount of the loans at MU, which primarily uses the Federal Direct Lending Program, and the University of Missouri-Kansas City, which uses the National Loan Education Network, the document said.

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