Colorado is selling its student loan agency to a private education finance company for $41 million and more than half the money will be used to help send more low-income students to college.
The College Access Network will continue to guarantee loans to Colorado students and parents but Lincoln, Neb.-based Nelnet Inc. will service the loans. The company will pay $41 million upfront and then $4 million a year for 10 years to take over the operation and the software developed by the network.
There are also 110 network employees who have accepted offers to work for Nelnet.
Under the deal, $14 million of the sale price will be put in a network reserve fund to back up the loans and $2 million will be used to support the operation of the network, which doesn’t get state funding. The remaining $25 million will be used to provide additional scholarships to low-income students who take pre-collegiate classes and maintain a 2.5 GPA in high school and stay out of trouble with the law.
The scholarship program was approved by state lawmakers earlier this year and its original endowment was expected to help 375 middle and high school students when they reach college. The interest on the $25 million from the Nelnet deal will enable another 200 students to participate.
A student in a family of four earning less than $45,000 a year would qualify for the program but how many children are enrolled is also taken into account. The goal is to help low-income students to avoid taking out more loans to cover tuition.
Rick O’Donnell, executive director of the Colorado Department of Higher Education, said there usually isn’t enough financial aid to fully meet the needs of students.
Sen. Abel Tapia, D-Pueblo, said he has been encouraging all students who qualify to consider applying for the program.
“My goal is to get 100 percent of students to sign up so, even if they don’t follow that track, they will have that opportunity,” he said.
O’Donnell said many states have gotten out of the loan-servicing business as it has become more competitive. He said students paying off loans in Colorado shouldn’t see a difference and could even see lower fees because Nelnet is a larger operation that can spread out its costs more easily than Colorado’s network.
