Student Loan Authority sets new-borrower rates

PROVIDENCE – The R.I. Student Loan Authority (RISLA) has set a 7.74-percent fixed interest rate for new student borrowers and their families in the Rhode Island Family Education Loan program, which will be funded by last week’s $64 million bond sale.

RISLA was the first student-lending authority to sell bonds since September, when credit crunch and other turbulence in the financial markets made it nearly impossible for agencies to obtain financing.

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Numerous lenders have withdrawn from the student-loan market, and several authorities have suspended their loan programs following a collapse in the “auction-rate” bond market, where many of the agencies had for years received financing at lower interest rates.

“This has been a very difficult time for student loan authorities, but Rhode Islanders should be proud of the fact that RISLA has a track record of strong financial management,” said Charles P. Kelley, RISLA executive director. “That is what made [the] bond sale possible and allowed us to preserve a program which is helping thousands of Rhode Island families realize the dream of a college education.”

R.I. General Treasurer Frank T. Caprio, a RISLA board member, said he participated in negotiations with authority administrators and Citigroup, the lead underwriter for the bond sale.

Given the disrupted capital markets, Nick Fluehr, a managing director at Citigroup, was impressed with the outcome. “Being the first private student loan issuer in the market in 2008 was a real challenge,” he said. “Only a premier credit like RISLA could get both senior and subordinator bonds sold in the present market given investor concerns.”

RISLA officials said the $64 million bond issue will provide loans to between 5,500 and 6,000 students. The R.I. Family Education Loan program is available only to credit-worthy borrowers where the student is attending a Rhode Island college or a state resident is attending an eligible out-of-state school.

The 7.74-percent interest rate will remain fixed throughout the 15-year term of the loan.

The Family Education Loan program was started in 1992 to supplement the limited borrowing limits available with federal Stafford loans. Its default rate has remained low cumulatively, at just over 2 percent.

The R.I. Student Loan Authority was established to provide affordable higher-education loans to Ocean State students and their families. To learn more, visit www.risla.com.