WINOOSKI - The Vermont Student Assistance Corporation (VSAC), a public nonprofit that counts education loans among the many college planning and financing services it offers, on Thursday announced an agreement with KeyBank that will enable VSAC to provide student and parent loans during the 2008-09 academic year.
VSAC, like many nonprofits and municipalities throughout the U.S., had previously used a bonding mechanism called auction-rate securities to raise the capital it needed to fund its loan programs. Auction-rate securities were popular with investors and bond issuers because of their efficiency and rate of return compared to other options.
However, upheaval in the financial markets led to the collapse of the auction-rate system, and left organizations like VSAC searching for alternative sources of capital. As a result, about 70 student loan providers nationwide have announced they will not be able to issue loans for the coming academic year, and the federal government is implementing emergency measures to make sure students have the funds they need to start or continue their programs.
Under the agreement announced Thursday, KeyBank will provide VSAC with credit enhancements totaling $230 million, which will allow VSAC to raise an equivalent amount in the bond market through instruments called variable-rate demand obligations. That $230 million, combined with $160 million in "recycled" VSAC loan funds, will enable VSAC to meet its customers’ loan needs for the next academic year. By law, VSAC is allowed to serve Vermont residents attending any college and non-residents attending Vermont institutions.
VSAC will close on the agreement with KeyBank and go to the bond market in June, the month VSAC normally secures its loan financing for the next academic year. VSAC decided to announce its plans early, because uncertainty at the national level has many Vermonters wondering whether they will have the loans they need to pay for college in the fall. Students and parents typically apply for new loans as early as May and on throughout the summer. VSAC processes applications as they arrive and disburses new loans about the time school begins.
"Thanks to KeyBank’s desire to invest in Vermont, and the fact that VSAC is a healthy organization operating in a small state, Vermont will be able to weather what is clearly a significant crisis affecting students and parents throughout the country," said Don Vickers, VSAC president and CEO. "We can’t say enough how appreciative we are that KeyBank values its role in the community and the importance of higher education to all of us as individuals and as a state."
VSAC was established by the state in 1965 to help Vermonters plan and pay for education beyond high school. It has grown to become a comprehensive organization offering a full range of services in career and college planning and college financing. VSAC administers Vermont’s 529 college savings plan, state education grants, public and private scholarships, and federal and private loans, in addition to providing extensive outreach and information activities.
Posted 05/09/08 to www.NASFAA.org. Posting of press releases is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
