KHEAA Update
September 2005

Hurricane Relief Efforts
The Kentucky Higher Education Assistance Authority (KHEAA) and The Student Loan People collected and delivered money, personal items, bedding, bottled water, nonperishable food, generators/fuel, school supplies, and clothes to people affected by Hurricane Katrina in early September. In addition, the Alabama Student Loan People collected money to purchase cases of water for those affected by the hurricane.

KHEAA and The Student Loan People are also providing relief to student loan borrowers in the stricken areas. Without a request, borrowers in repayment and who reside or work in one of the designated disaster areas are being granted up to three months of administrative forbearance from August 29, 2005, through November 29, 2005. The forbearance temporarily halts payments or permits smaller payments. For defaulted borrowers who reside or work in one of the designated disaster areas, KHEAA is curtailing collection activities from August 29, 2005, through November 29, 2005. Borrowers who otherwise have been impacted by Hurricane Katrina may be granted forbearance for a period that ends no later than November 29, 2005.

KHEAA has notified schools that Kentucky Educational Excellence Scholarships (KEES) earned by students who were attending postsecondary schools affected by Hurricane Katrina may still use their awards if they wish to enroll in a Kentucky postsecondary institution. KEES is a merit-based scholarship program. All need-based student aid has been exhausted.

Student Aid—FY 2005
With the help of school partners, KHEAA disbursed $164.5 million directly to students from 12 state student aid programs, including $75.4 million in need-based grants and $81.3 million in merit-based KEES funded by state lottery proceeds. KHEAA funded and implemented a new award called the Mary Jo Young Scholarship and disbursed $183,000 to disadvantaged high school students to pay the costs of dual credit and AP courses and exams. Kentucky’s 529 plans disbursed $1.8 million and reached a combined Program Fund Balance of more than $171 million. In addition to providing student financial aid, KHEAA guaranteed $1.2 billion in Federal Family Education Loans for borrowers in states throughout the country, primarily in the SASFAA region.

Kentucky’s Affordable Prepaid Tuition (KAPT)
The membership of the KAPT Board of Directors was replaced by members of the KHEAA Board of Directors on July 1. In August, the Board voted to drop a cross-claim and take a neutral position on a lawsuit between the State Attorney General’s Office and Finance and Administration Cabinet regarding the return of $13.7 million to the General Fund and removal of the Unclaimed Property Fund as a backup for KAPT shortfalls. Although the cross-claim was dropped, the Board adopted a resolution emphasizing its commitment to KAPT contract holders and pledging to work vigorously with the 2006 Kentucky General Assembly to pass legislation that all currently held KAPT contracts will be honored if an unfunded liability arises at the time benefits would be paid on behalf of contract holders.

Kentucky Education Savings Plan Trust (KESPT)
KESPT demonstrated solid account growth with 1,363 new accounts, a slight increase over FY 2004. The program fund balance grew to $65.3 million, representing a $13 million increase over FY 2004.

Loan Services
The Student Loan People serviced a portfolio of $7.1 billion in student loans, keeping in touch with borrowers to ensure they are aware of repayment options and alerting them to opportunities and potential problems. To ensure funds were available for future student borrowing, the state legislature raised the debt limit over $3 billion. Approximately $400 million in bonds was issued during the year.

Borrower Benefits
To fill the gap between student financial aid and the increasing cost of higher education, The Student Loan People provided low cost Federal Stafford Loans through its BestStart program. With zero origination fees and interest rate reductions for timely and automatic payments, BestStart saved borrowers $9 million. To encourage teachers and nurses to work in Kentucky when they graduate, the Best in Class and Best in Care programs provided interest and loan forgiveness totaling $12.7 million. Zero insurance fees from KHEAA saved borrowers another $7.7 million. And, the Board of Directors approved another new benefit for FY 2006 called Best in Law for public service attorneys.

Visit The Student Loan People website at www.studentloanpeople.com for details about the borrower benefits, which include interest-free PLUS Loans for borrowers employed as teachers, nurses, and public service attorneys in Kentucky. PLUS borrowers may also be eligible for cancellation benefits for teachers, nurses, and public service attorneys employed in specialty areas.

Default Collections
KHEAA and KHESLC collected about $40 million in defaulted student loans. Efforts to rehabilitate rather than consolidate loans have resulted in a significant increase in borrower payments. Rehabilitation is the best option for borrowers.

Outreach
KHEAA and The Student Loan People administer comprehensive outreach programs to provide needed information and services to students and families. All of the following are provided without charge:

GEAR UP Grant
KHEAA has partnered with the Kentucky Council on Postsecondary Education (CPE) GEAR UP program to obtain a $3.5 million multi-year grant to expand the program’s efforts to increase the college-going rate among low-income Kentucky students. As a joint partner in the grant, KHEAA is providing a $1.1 million annual contribution.

Affordability Study
KHEAA and the Kentucky Council on Postsecondary Education (CPE) contracted with JBL, Associates, Inc., Washington, D.C., to perform an in-depth analysis of the affordability of undergraduate postsecondary education in Kentucky. JBL presented a final draft of the Affordability Study to CPE in late August. After review, CPE submitted a detailed list of items to JBL for clarification. The final report is expected to be completed by November 7.

The report essentially concludes that, when measuring all sources of student financial aid against cost of attendance, postsecondary education in Kentucky is largely affordable for full-time, undergraduate dependent students who work to contribute $5,000 above their expected family contribution (EFC) to the cost of their education. It is somewhat less affordable for full-time, independent undergraduate students under the same conditions. The report also notes students are now borrowing more than ever before to finance the cost of their postsecondary education.

Zip Answer
The first phase of implementing Zip Answer is in place. Zip Answer is part of the University Coordinated Advising Network (U CAN), which is a statewide program to link current and prospective students to resources throughout the state and provide free advice and information about postsecondary education. All interactions with students will be tracked in a common system to ensure all inquiries are answered. Zip Answer was linked to KHEAA’s website on August 3, and many people have begun to use the new service.