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Ohio Student-Aid Agency to Dissolve Itself

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In a nod to the changing landscape of financial-aid policy, an Ohio agency that guarantees student loans has moved to abolish itself.

The commissioners of the Ohio Student Aid Commission voted last month to begin proceedings to dissolve the 33-year-old agency. They are awaiting word from officials at the U.S. Department of Education, who will determine which group would take over loans guaranteed by the commission.

The decision by the Ohio agency is the latest in a series of similar moves recently by loan-guarantee agencies in other states.

Rae Ann Estep, the agency's executive director, said the OSAC's primary duty is to administer the the federal guaranteed-student-loan program. In addition, the agency provides loan information to students and their families, and administers a state grant and scholarship program.

Ms. Estep said competition from private companies and the agency's subsequent declining market share of student loans led to the decision to close the agency. In 1989, the OSAC guaranteed 99 percent of the state's loans, but that number has since fallen below 50 percent, she said.

The agency faces the threat of cuts in funding from the federal government, she pointed out.

"Here we are, a state agency, but we are administering a federal program with federal money, and we're competing with private companies offering the same service," she said.

But one commissioner, Carson K. Miller, blamed the new federal direct-lending program for taking away the Ohio agency's market share and ultimately leading to the termination vote.

"It was a difficult, long decision," said Mr. Miller, who is the president of Washington State Community College in Marietta. "But it's a new era in lending, and we simply need to resolve to working within the new system."

'One in a String'

Ms. Estep noted that, because the agency is financed by the federal government, its closing would not be a direct cost-saving measure for Ohioans. The grant and scholarship program, which is the only part of the commission's operations the state pays for, will shift to another state agency.

The agency's goal is to close by June 30, 1997, the end of the current budget cycle, Ms. Estep said.

The Ohio agency is "one in a string" of state guarantors that have closed recently, said Susan Conner, a spokeswoman for the Indianapolis-based USA Group Inc., the parent company for the nation's largest student-loan guarantor, United Student Aid Funds Inc. She said several states have closed their smaller agencies and have allowed larger regional groups to take over.

"The student-loan changes in the last three years have caused a real upheaval," she said, "and this is just one of the manifestations of it."

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