Student loans on the ballot in Texas
By Jimmy Ardis
Texans will head to the ballot box next week to decide the fate of ten proposed amendments to the Texas Constitution. How voters decide on one amendment, Proposition 3, will impact the amount of state funding available for student loans over the coming years. The amendment provides additional bonding authority for the state's student loan program and gives the Texas Higher Education Coordinating Board "evergreen authority."
Student loan debt now hovers around an estimated $1 trillion nationally, outpacing credit card debt for the first time in US history. Traditional wisdom says that a college education is the ticket to opportunity, so any debt incurred in its pursuit is worth it. But the price of college keeps going up while the economy continues to struggle and unemployment remains high. These factors leave a large portion of new graduates in a seemingly impossible situation - in debt and with no job to pay it off. Unsurprisingly, student loan defaults are up. Data released by the US Department of Education last month show the national default rate on federal student loans climbed to 8.8 percent in 2010, up from 7 percent in 2008. Texas was amongst the top 10 states with the highest default rates, at 10.13 percent. Despite these troubling trends, student loans remain one of the chief available sources of money to pay for higher education in light of across the board budget cuts that have reduced education spending.
Proposition 3 would authorize the issuance of general obligation bonds to finance the longstanding Hinson-Hazelwood College Student Loan Program. The program provides low-interest loans to students who aren't able to finance the full cost of college through other sources. Since the Texas Constitution prohibits the state from taking on debt without a constitutional amendment, voters must approve additional bond authorization if the program is to continue offering loans.
To date voters have approved a total of $1.86 billion in bonds over seven elections to fund Hinson-Hazelwood. Voters last approved an additional $500 million in bonds for the program in 2007. Previous authorizations were approved via election in 1999, 1995, 1991, 1989, 1969, and 1965. Of the $500 million authorized in 2007 approximately $275 million remains unissued. The remaining $275 million is expected to be exhausted by 2013. The program would not be able to offer student loans after the remaining bonds are issued without additional authorization.
Texas voters have approved each of the seven amendments proposing Hinson-Hazelwood bond increases. But Proposition 3 proposes something slightly different than past amendments. Traditionally lawmakers have asked voters to approve fixed amounts of bonding authority. Once those bonds are issued new approval must be obtained at the ballot box before issuing more. This amendment proposes an "evergreen authority" to allow the program to continue issuing bonds in perpetuity as long as the amount of loans outstanding at any one time does not exceed the amount previously approved by voters - $1.86 billion.
Supporters say that ensuring the student loan program continues is critical in light of recent cuts to education spending. Supporters also remind voters that the bonds are self-supporting and not a drain on general revenue. In its 45-year successful history the program has never had to use general revenue from the state to pay for the bonds. Further, proponents of the amendment claim the evergreen provision makes sense because it eliminates costly tax-payer funded constitutional elections to ask for permission for funding authorization voters already approved in the past - since the amendment limits outstanding bond issuances to the total of previously approved authorizations. Amongst its many supporters is Texas Higher Education Commissioner Raymund Paredes, who earlier this month said that Proposition 3 was “critical to higher education in Texas.”
The central opposition to Proposition 3 has not been with the increased bond authorization, but with the evergreen provision that allows bonds to be issued indefinitely into the future, as long as the outstanding amount doesn't surpass the $1.86 billion previously approved by voters. Opponents argue that this would effectively authorize long-term state debt on a continuing basis, something that has been traditionally done through the voters at the ballot box. They say the power to review the need for such funding should be retained by the voters and done on a periodic/as-needed basis. Texans for Fiscal Responsibility opposes the measure partly on grounds that state subsidized student loans could lead to even higher tuition costs down the road. "Tuition costs are too high as it is, and more availability of taxpayer-subsidized student loans only incentivizes universities to further raise rates without addressing costs."
- Texas Education Loans Finance Amendment, Proposition 3 (2011)
- Texas 2011 ballot measures
- 2011 ballot measures
- Chicago Tribune, "Obama introduces student loan initiatives," October 30, 2011
- The Houston Business Journal, "Texas among top states for student loan defaults," October 19, 2011
- Texas House Research Organization: "Focus Report for Amendments Proposed in November 8, 2011 Election"
- Texas Tribune, "Higher Ed Officials Tout Student Loan Amendment," October 4, 2011
- Empower Texans," "2011 Constitutional Amendments," October 7, 2011