Abilene Higher Education Authority splits into two organizations; new structure allows more flexibility in using funds
For Immediate Release
April 4, 2000
ABILENE, Texas - Three local universities are gaining scholarship funding for area students because the Abilene Higher Education Authority has converted to a nonprofit foundation.
AHEA, incorporated in 1972, has purchased student loans from banks and managed them, said AHEA executive director John Wright. Under a 1996 federal law, the organization gained the chance to convert to a charitable foundation, allowing it to use accumulated funds for charitable purposes.
In the process, a new for-profit corporation also has been formed to manage student loans in the future, Wright explained. The new foundation is called the Abilene Higher Education Foundation, and the new corporation's name is Abilene Higher Education Resources, Inc.
"This transition allows more dollars to be channeled into the hands of area students to attend one of Abilene's universities," said John Combs, senior vice president of Bank of America and a member of the AHEA board. "This signifies a real investment in Abilene's future, and the benefits will be seen many times over."
Abilene Higher Education Resources will administer federal and private student loans currently serviced by AHEA. Students should notice no difference in their loan services, Wright said.
"The government has provided AHEA an opportunity to benefit the community more directly by sharing accumulated assets with the universities that helped establish this organization," said Scott Dueser, president of First National Bank and a member of the AHEA board. "The board voted unanimously to pursue this once-in-a-lifetime opportunity. We believe it's a very positive move for the organization and for area college students.
The transition was authorized by a law passed as part of the Small Business Job Projection Act on Aug. 20, 1996. It allowed AHEA to elect to cease status as a "qualified scholarship funding corporation" so assets in trust could be transferred to a newly created for-profit subsidiary.
Seven Higher Education Authorities exist in Texas, and each operates independently. Abilene's HEA is the first in the state to make this conversion, although other states have already completed this process, Wright said.
"When this organization was first created, banks did not want to hold student loans for 10 years or longer or handle the tedious work of collections required to keep their federal insurance in effect," Wright said. "ACU first obtained eligible lender status and began making student loans in the 1960s."
When the loan demand exceeded the resources of the college, then president Dr. John C. Stevens and business manager L.D. "Bill" Hilton talked to a firm about issuing bonds to finance student loans.
Instead, the firm decided it would be more helpful to form a higher education authority that could issue tax-exempt bonds and serve as a secondary market for student loans. So began the work to create the AHEA - including approval from the U.S. Treasury Department, the Securities Exchange Commission, the Department of Education, the State of Texas, the City of Abilene and other regulatory agencies.
Abilene's three universities provided the initial capital to help create AHEA, and ACU continues to serve as the administrative sponsor. ACU, HSU and McMurry incorporated AHEA in 1972 with City of Abilene sponsorship, and the first bonds were issued in 1976 to finance student loans.
Prudent management has resulted in a substantial organizational net worth which, under its previous status, AHEA could not effectively use to fund scholarships, said Wright.
When the organization transitioned to a charitable foundation, those assets could be utilized primarily to provide scholarship support to Abilene students who apply for financial aid to attend ACU, HSU or McMurry.
The conversion was approved at the March 6 AHEA board meeting and became effective on April 1, Wright said.
Abilene Higher Education Authority Transition