
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, July 29, 1990                   TAG: 9007290121
SECTION: VIRGINIA                    PAGE: D-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Medium

VA. STUDENT LOAN PROGRAM HEALTHY

Problems with student-loan guaranty programs in other parts of the country will not affect Virginia students' access to loans, the executive director of the state's student loan program said.

Muriel Murray, executive director of the Virginia Education Assistance Authority, said Friday that the authority guaranteed $200 million in loans for 50,000 to 100,000 students last year.

Murray, president-elect of the National Council of Higher Education Loan Programs, said the state program has more than $1 billion in loans outstanding.

Murray said she is worried publicity about problems in other states might scare off Virginia students seeking loans.

The Higher Education Assistance Foundation, a Kansas-based group that is one of the largest loan guarantors in the country, is in serious financial trouble and may face bankruptcy, according to news reports last week.

The Kansas organization, like Virginia's authority, insures student loans provided by banks by paying bank lenders 100 percent of a defaulted loan.

The U.S. Education Department, in turn, reinsures the guarantors' loans. But the federal government repays only 90 percent when defaults exceed 5 percent of the loan portfolio and only 80 percent when defaults exceed 9 percent.

Virginia program's default rate last year was 2.5 percent, and it never has exceeded 5 percent, Murray said, so it is in no danger of not being fully reimbursed.

The foundation in trouble had a risky loan portfolio, Murray said. For the last four years, it was reimbursed at only 80 percent and was left with severe cash flow problems, news reports indicated.

The federal government was looking for other guarantors to take over the foundation's loan portfolio.

The adverse publicity triggered a decline in the stock of the Student Loan Marketing Association, a federally chartered corporation that buys student loans from banks. The stock is listed on the New York Stock Exchange.

Murray said the troubles elsewhere may "increase the demand for our services" in other areas of lending, such as loan servicing.

Murray said no state money is involved in the Virginia program. She said taxpayers would be affected only if the federal government loses money through its reimbursement program.

by CNB