We all know about the HISD bond referendum and its problems, but there will be another education-related bond proposition on the ballot this November, and it shouldn't be confused with the HISD proposal. I'm referring to Proposition 2, one of the sixteen constitutional amendments you'll be voting on. Prop 2 "Provides for issuing $500 million in general obligation bonds to finance student loans and authorizes bond enhancement agreements for general obligation bonds issued for that purpose", and its originating legislation was SJR 57 by Williams and Zaffirini (bill history here), and it appears to have passed both chambers unanimously. Here's a FAQ on Prop 2 put together and sent to me by the Texas Higher Education Coordinating Board:
What is Proposition 2?
Prop. 2 is a constitutional amendment allowing the Texas Higher Education Coordinating Board to issue bonds for providing low-interest, low-fee student loans that will enable more Texas students to attend college.
Will these bonds affect my property taxes?
No. The Prop. 2 bonds used to finance low-interest student loans will be repaid by the students who borrow the money. Prop 2. will have no impact on property taxes, sales taxes or other taxes collected by the state.
Why is a vote needed to approve financing for state education loans?
In 1965, the Coordinating Board was charged with administering the Hinson-Hazlewood Student Loan Program, which provides low-interest student loans for college. This made Texas one of the first states to enter the student loan business, even before the federal government became involved with many of the popular financial aid programs available today. Rather than fund the program with taxes, the Legislature authorized the Coordinating Board to use funds generated from general obligation bonds. The Texas Constitution requires that general obligation bonds be approved by voters. Since 1965, Texas voters have approved the use of bonds for low-interest student loans six times.
How do the loans offered by the Coordinating Board differ from those offered by private lenders?
Because the Coordinating Board is a non-profit entity and the loans are backed by the financial strength of the Texas economy, the Coordinating Board is able to offer competitive and affordable loan terms. Highlights of college loans funded with Prop. 2 bonds include:
- A low, 6% fixed-rate of interest over the life of the loan (As of Sept. 15, 2007);
- Six month grace period before repayment begins, with income-sensitive and graduated repayment schedules available;
- Interest is never capitalized;
- Loan service provided by the Coordinating Board which is under the direct oversight of the Texas Legislature and the citizens of Texas; and
- Loans are never sold to another lender