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Texas Voters Pass $1.86 Billion Student Loan Proposal, AP Says

Nov. 8 (Bloomberg) -- Texas voters passed a measure to expand a loan program that lets students borrow to pay for books, tuition and living expenses at a 5.25 percent rate, the Associated Press said.

The constitutional amendment won 54 percent of the votes to almost 46 percent against with 96 percent of precincts reporting, according to results posted today on the Secretary of State’s website.

The proposal would let the Texas Higher Education Coordinating Board authority have $1.86 billion in general-obligation bonds outstanding, to be repaid by loan recipients. The amount is equivalent to all bonds issued for student loans under a state program since 1965, said Dominic Chavez, a spokesman for the Austin-based agency. The change limits debt sales to $350 million a year, he said.

“This will give us enough space and breathing room so we won’t have to come back every three or four years and seek additional authority,” Chavez said. “We want to make sure we have enough capacity to put as much capital on the street as possible.”

Texas voters have approved six previous amendments related to student loans, including one in 2007 that won 65 percent of votes cast, Chavez said. Lawmakers in June passed a budget that cut higher-education financial aid for students by about 15 percent over the next two fiscal years. Enrollment at 146 colleges, universities and health-related educational institutions in the state rose 21 percent to 1.45 million between 2006 and 2010, according to the coordinating board.

Opponents of the change argued that the state shouldn’t be taking on additional debt obligations, according to a House Research Organization report on the election. Foes said the change would create a perpetual debt of as much as $1.86 billion, in effect reauthorizing bonds originally issued as much as 45 years earlier and long since paid off, the Austin-based agency said.

To contact the reporter on this story: David Mildenberg in Austin, Texas, at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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