The state of Texas sold more than $133 million in bonds to fund an ongoing student loan program.
The bonds mature between 2027 and 2044, yielding between 3% and 4.233%. The issuance also included a $19.5 million term bond due August 1, 2046 that is priced to yield 4.262%. The securities received a rating of Aaa from Moody’s Investors Service and AAA from S&P Global Ratings.
The rating “reflects multiple strengths including a strong economy that in the long run will outpace the nation, robust population growth, strong reserves that provide a very healthy buffer to economic and revenue downturns, strong fiscal management and governance, and low bonded debt, offset by high long-term liabilities that are driven by a history of pension underfunding,” according to Moody’s.
The issuance comes amid simmering national debate over who should pay for student loans. Last week, the Supreme Court ruled that an executive order issued by President Joe Biden that would have forgiven up to $20,000 in federal student loans for 43 million people was unconstitutional.
Americans owed $1.73 trillion in student loan debt in 2021, according to the Council on Foreign Relations, up from $500 billion in 2006. That far outpaces the growth of other forms of debt such as credit card debt and auto loans, both of which were greater than student loan debt in 2006 and are significantly less today.
This week’s issuance will support a program that offers low interest rate loans to students at Texas universities. As the program is run by the state of Texas rather than the federal government, loans it funds do not qualify for Biden’s loan forgiveness plan.
The bonds are general obligations of Texas, secured by the full faith and credit of the state. Texas has about $15 billion in general obligation debt outstanding.
Jefferies LLC served as underwriter on the issuance, purchasing the bonds for more than $140 million. The price reflected a net issue premium of $7 million.