S 759 Session 110 (1993-1994)
S 0759 General Bill, By Setzler
Similar(H 4130)
A Bill to amend Section 59-115-80, as amended, Code of Laws of South Carolina,
1976, relating to the authority to issue revenue bonds under the State
Education Assistance Act, so as to delete a reference to the aggregate
principal amount of such bonds which may be outstanding at any time and
provide for a parity bond test for the issuance of additional bonds.
05/06/93 Senate Introduced and read first time SJ-3
05/06/93 Senate Referred to Committee on Education SJ-3
A BILL
TO AMEND SECTION 59-115-80, AS AMENDED, CODE OF LAWS
OF SOUTH CAROLINA, 1976, RELATING TO THE AUTHORITY
TO ISSUE REVENUE BONDS UNDER THE STATE EDUCATION
ASSISTANCE ACT, SO AS TO DELETE A REFERENCE TO THE
AGGREGATE PRINCIPAL AMOUNT OF SUCH BONDS WHICH
MAY BE OUTSTANDING AT ANY TIME AND PROVIDE FOR A
PARITY BOND TEST FOR THE ISSUANCE OF ADDITIONAL
BONDS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The General Assembly finds:
(1) In 1971 it established the State Education Assistance Authority
as a public instrumentality of the State of South Carolina and
empowered it to provide financial assistance to residents of South
Carolina through the making or guaranteeing of student loans. The
authority is governed by its members who are, by statute, the members
of the State Budget and Control Board. The authority acts through its
contractual agent, the South Carolina Student Loan Corporation, a
private nonprofit corporation.
(2) The authority has designated the corporation to serve as a central
statewide lender and to date over 266,000 loans have been made to more
than 118,000 students and parents.
(3) The administration of this program is totally separate from the
loan programs administered by colleges and universities throughout the
State whose lending and collection experiences are quite dissimilar. For
fiscal year 1992, the authority's default rate was one and eight tenths
percent and has remained below two percent for each of the last nine
years. Student loans made by the corporation from revenue bond
proceeds of the authority are one hundred percent guaranteed by the
authority against the death, disability, or default of the student borrower.
This guarantee does not in any way represent a pledge of the State's full
faith and credit. The guarantee is limited to monies available in a reserve
fund maintained by the authority funded through an insurance premium
which is deducted from the loan made to each student borrower. On
September 30, 1992, there was approximately four million seven
hundred thousand dollars in the reserve fund.
(4) The State's guarantee is further backed by a federal program of
reinsurance. The amount of this reinsurance relates to the annual default
rate on student loans and ranges from one hundred to eighty percent.
Unless the State's default rate exceeds five percent in any given year, all
loans are reinsured at one hundred percent. Any defaults in excess of
five percent, but less than nine percent, are reinsured at ninety percent;
all defaults above nine percent are reinsured at eighty percent.
(5) Since the federal program of reinsurance began in 1978, defaults
on all loans made by the corporation have always remained below five
percent and thus the State has been reimbursed for one hundred percent
of all default payments.
(6) In recent years, in an effort to gain the flexibility of entering the
tax exempt market at the most advantageous time, the authority has
authorized the corporation to arrange for lines of credit from commercial
banks.
(7) Also in recent years, the authority has, in connection with an
upgrade of its revenue bond rating to "AA", agreed to a
parity bond test for the issuance of additional bonds.
(8) For the above reasons, the General Assembly has determined to
enact the provisions of Section 2 of this act.
SECTION 2. The first paragraph of Section 59-115-80 of the 1976
Code, as last amended by Act 509 of 1990, is further amended to read:
"Subject to the right to enlarge the authorization to issue
revenue bonds, the The General Assembly authorizes the
authority to provide for the issuance, at one time or from time to time,
of revenue bonds of the authority in an aggregate principal amount
outstanding at any time of not exceeding three hundred million
dollars for any of its authorized purposes, including the use of a
portion of the proceeds of any issue of bonds for the establishment of a
reserve for the payment of principal and interest of the bonds. The
reserve may be deposited in the sinking fund. Prior to the issuance
of a series of bonds, the authority shall establish its compliance with the
most restrictive of each parity bond test then imposed by the authority
or by any nationally recognized rating agency which maintains a current
rating of bonds of the authority. The bonds must be designated,
subject to such additions or changes as the authority considers advisable,
`State Education Assistance Authority Revenue Bonds, Series
________,' inserting in the blank space a letter or numerals identifying
particular series of bonds."
SECTION 3. This act takes effect upon approval by the Governor.
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