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News Analysis: February 18, 2008

posted on February 18, 2008 at 3:00 PM

Beck: Hello and welcome to The Iowa Journal. Here now to help us see behind the headlines is David Pitt of the Associated Press. David, thanks for joining us.

Pitt: Well, thank you for asking me to be here today.

Beck: Well, it appears the crisis, the credit crisis is now trickling down and affecting even college students. What is happening?

Pitt: Yeah, we talked about this a few months ago when we first started hearing about the issue of home mortgage failures and the issue of how it might broaden into the economy and we are finding now that the organization that funds almost 68,000 student loans in the state is saying now that the market is getting a little bit more difficult for students to go out and find loans as they get ready to go to college in the coming year. So, it doesn't mean the loans won't be available, it just simply means that they may have to have a little bit better credit scores, they may have to have parents co-sign a loan for them, it just may be a little more difficult than it has been in the past just simply because the whole consumer credit market is shrinking and becoming a little more strict.

Beck: Could that mean the interest rates are higher as well on those student loans?

Pitt: Well, it could but it probably means just availability. I mean, you have to get to a bank, to a credit union, to someone who will loan you the money. The issue here has been this organization called Iowa Student Loan Liquidity Corporation which has backed most of these student loans and has been the organization that has sold bonds to back the loans, to guarantee them basically and it's that bond market that has become so soft and difficult so that financial support for the loans are no longer there. This organization has gone to credit unions and banks in the state of Iowa and they have worked out a situation in which many of the banks and credit unions will hold the loans themselves and maybe take a little bit of the risk. But that is why the loans may be a little more difficult for some people to get. I mean, you'll have to have better credit and you'll have to be able to substantiate the fact that you can pay them back.

Beck: Which it comes at a difficult time for the state as the state looks at a workforce shortage and wants more and more young people to go on to higher education.

Pitt: But it is a national issue, it's not just an Iowa issue, it's happening across the states. So, it's not just here and this situation of working with banks and credit unions directly is somewhat of a unique situation at least for now for Iowa so at least to have that kind of stop gap to get us into the season, the next college season.

Beck: As we look at young people another issue that is on the table is now Governor Culver has suggested some new proposals to try to help keep young people insured in Iowa.

Pitt: Right, this has been something that has been a priority for the state government for a while and something they have been trying to do as we go along. Governor Culver held a press conference earlier today in which he discussed this issue and he wants to add about 7500 more children to the state program called the Hawkeye Program which is the program that funds health insurance for children who are not insured under any other method. So, he wants to do that. He also wants to allow youngsters to remain on their parents' group policies until 25, the age 25. Just trying to expand upon that program, now, the Governor's proposal is probably not as broad as some states. He is saying that he believes there will be a Democrat in the White House in this next term and both Hillary Clinton and Barack Obama have programs to mandate healthcare coverage for everyone. So, I think he is betting that's going to happen and so the state program that he is proposing may not be quite as broad and far reaching as other states may have.

Beck: Because there is even a state senator who was advocating that we need to mandate insurance coverage for all children so that parents would be required to find insurance coverage for their kids whether it be through the state or their own employer or what not. And the Governor is not going that far?

Pitt: No, that's right. And, again, he said at a press conference today that he really believes, he has come out in support of Barack Obama's presidential campaign and so I think he hopes that whoever gets in the White House is going to try to push something through on the federal level, on a national level.

Beck: So, he's at wait and see.

Pitt: Yeah.

Beck: One thing that they are going to have to get going on, though, is the state budget as the legislature is expected to adjourn in April and with about two months left the state budget is looming.

Pitt: Right and it is the time of the year when they start talking about budget issues. They usually do the education piece real early on in the session and they have done some of that. They still have more to go on education. But they also really have to get started on a lot of different proposals and I think we were talking earlier how they may wait a little bit longer because I think there is a new estimate of how much the state brings in in tax receipts in March. There may be some hope that maybe that is a better number than it was in December which would fill some of the concerns that we might not have enough money coming in to pay for all the proposals that have been laid out there by the Governor and his staff. And so there is going to be some discussion I'm sure about where the money is going to come from, a couple of issues that the Governor had hoped to get some money from have been taken basically off the table it sounds like and unless something happens and they come back alive one of those is the bottle bill, the bill that would bring in more revenue through bottle and can deposits. That appears not to be something that is going to go anywhere. So, we'll have to see where the budget comes from, where the money comes from.

Beck: Alright, David, thanks for joining us today, we appreciate it.

Tags: colleges debt education Iowa Iowa legislature news students

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