Section 20 AAC 14.050 - Loan interest rates, loan credits, and loan fees(a) If the corporation sets loan interest rates as variable rates the interest rates apply for the next 12-month period beginning July 1 of that calendar year and ending June 30 of the subsequent calendar year. (b) For loans originated on or before June 30, 2014, the interest rates set under (a) of this section will be based on the bond equivalent rate of 91-day United States Treasury bills auctioned at the final auction held before May 1 of the loan year plus up to 2.8 percent. (c) In setting interest rates in accordance with (b) of this section, the corporation will take into consideration the commission's and corporation's costs, during the preceding fiscal year, of administering loans of the state education loan programs. Amounts that the corporation may determine to be costs include payments for salaries, service agreements, supplies, direct and indirect costs of operation, and other costs considered appropriate by the corporation. The corporation will not include as costs amounts recovered by a loan origination fee or through payments received from the United States Department of Education as a result of claims paid on a loan guaranty.(d) The corporation may approve an annual credit for those loans that have a lower cost of administration due to (1) the borrower's election of a cost-effective repayment method made available by the commission; (2) a good faith payment history, demonstrated by the borrower having made all loan payments when due and in full for the initial 48 months of repayment; (3) the borrower's attendance at an institution in the state or physically residing within state geographic boundaries and legal jurisdiction; or (4) for those loans that are guaranteed by the United States government, subsidies paid to the corporation for administering the loans. (e) The corporation may set a loan origination fee on a loan funded by the corporation to offset losses incurred as a result of death, disability, default, or bankruptcy of borrowers. If the corporation sets a loan origination fee, the corporation will not set a fee that exceeds five percent of the total loan amount. (f) The corporation will set loan interest rates on or after March 1 of each year. The interest rates apply to loans that the corporation originates, consolidates, refinances, or purchases for the period beginning July 1 of that calendar year and ending June 30 of the subsequent calendar year. (g) In setting fixed interest rates in accordance with this section, (1) the corporation will establish rates that (A) do not exceed the legal rate of interest applicable in the state to the type of loan being originated, consolidated, refinanced, or purchased;(B) do not exceed the all inclusive cost, expressed as a rate on fixed rate debt the corporation incurs to finance or refinance fixed rate loans plus a percentage as determined by the corporation to represent allocable operating and loan servicing expenses, exclusive of costs recovered through the origination fee;(C) ensure loans made by the corporation are of sufficient value to be financed or refinanced; and (D) ensure the financial stability of the corporation's loan programs; and (2) if the corporation has not issued fixed-rate debt within the six months immediately preceding the setting of fixed interest rates, the corporation may estimate the true interest cost that would result from a current fixed-rate debt issuance to ensure loans made are financeable; a lower interest rate may be established on loans previously financed with fixed-rate tax-exempt debt if a reduction is necessary to maintain the tax exempt status on the debt.(h) In setting variable interest rates in accordance with this section, (1) the corporation will establish variable rates that (A) do not exceed the legal rate of interest applicable in the state to the type of loan being originated, consolidated, refinanced, or purchased; (B) do not exceed the interest cost expressed as a rate on variable-rate debt that the corporation incurs to finance or refinance variable-rate loans plus a percentage as determined by the corporation to represent allocable operating, debt, and loan servicing expenses, exclusive of costs recovered through the loan origination fee;(C) ensure loans made by the corporation are of sufficient value to be financed or refinanced; and (D) ensure the financial stability of the corporation's loan programs; and(2) if the corporation has not issued variable-rate debt within the six months immediately preceding the setting of the first variable interest rates applicable to a loan, the corporation may estimate the variable-rate interest cost that would result from a current variable-rate debt issuance to ensure loans made are financeable; a lower interest rate may be established on loans previously financed with variable-rate tax-exempt debt if a reduction is necessary to maintain the tax-exempt status on the debt.Eff. 7/31/2016, Register 219, October 2016Before July 31, 2016, the substance of 20 AAC 14.050 was contained in former 20 AAC 15.855. The history note for 20 AAC 14.050 does not reflect the history of the section under its former number.
Authority:AS 14.42.150
AS 14.42.200
AS 14.42.205
AS 14.42.210
AS 14.42.215
AS 14.43.122
AS 14.43.640
AS 14.43.740