Loan program nearing change
HB 17-1078, aiming to overhaul state fund, likely will receive OK from full Senate.
A bill to gut a 25-year-old state loan program that languished with default rates 10 times the national average breezed through a state Senate committee Thursday and appears headed for the governor’s desk.
If it passes the full Senate, which appears likely, HB 17-1078 will transfer what’s left in the Family Support Loan Fund to community boards that give grants to families with expenses that accommodate special-needs children and relatives.
The loan fund has “been in existence quite a while and everybody has come to the conclusion, including the department (that manages it), that maybe it is not being the best that it can be,” co-sponsor Sen. Don Coram, R-Montrose, told the Senate Finance Committee, which passed the measure 5-0.
The bill’s main sponsor is Rep. Lois Landgraf, R-Fountain, who saw it pass the House on Feb. 6.
About $124,500 remains unallocated — and another $300,000 is owed on outstanding loans — although new loans are due to be made in the next several months because the laws governing the program don’t allow for the state to refuse making them if a person otherwise qualifies.
“The department is administratively inefficient in loan writing,” said Zach Lynkiewicz with the Colorado Division of Health Care Policy and Financing, which oversees the fund. “The department wants to get out of the business of being a bank and the families can be assisted through a better program, the Family Support Services Program.”
About $100,000 in new loans are made from the fund each year, the division told Landgraf in a memo shared with The Denver Post. The maximum amount is $8,000 and repayment terms are generous, with interest rates as low as 1 percent and five years to pay.
The legislation comes after a Denver Post report found that nearly half the loans currently outstanding were in default, with several more close to failure. It also found receipts for active loans totaling more than $660,000 — half of them in default — were virtually nonexistent.
Though the state boasts that more than $845,000 in loans have been repaid over the fund’s 25-year history, an internal accounting obtained by The Post showed another $531,000 in loans have been forgiven, set aside because of bankruptcies or were simply written off as uncollectable over that time frame.
The fund was established in 1992 and administered by the Department of Health and Human Services until that role was transferred to the health care policy division in 2014.