Utah is getting out of the student loan servicing business, which could result in the creation of a $289 million endowment for scholarships and grants for Utah students.
Earlier this month, the Utah Board of Higher Education authorized the sale of the Federal Family Education Loan Program portfolio administered by the Utah Higher Education Assistance Authority. The authority is a subsidiary of the Utah System of Higher Education.
Financial advisers estimate the net proceeds of the sale of the federal student loan portfolio could be between $207 million and $220 million, according to a document prepared for an upcoming legislative meeting.
The higher education board is recommending combining $68.7 million in cash currently held by the assistance authority to create an endowment “to hold these released funds and to reinvest the profits from the successful UHEAA program back into Utah students.”
The resolution also authorized Utah Commissioner of Higher Education David Woolstenhulme to work with state lawmakers to establish an endowment with the sale proceeds.
The Utah Legislature’s Higher Education Appropriations Subcommittee was briefed on the proposal during its meeting Tuesday.
Rich Amon, the Utah System of Higher Education’s chief financial officer, told committee members that the Board of Higher Education spent nearly a year studying the state’s role in the student loan servicing business before voting to sell the portfolio on Oct. 1. The decision presents a rare opportunity for the state’s higher education system, he said.
“The headline here is, ‘The market has changed for student loans.’ What we have now is an opportunity that only comes up every several decades, as we reposition this business portfolio,” Amon said.