Texas sold $105.8 million in bonds backed by student loans to finance a state-backed student loan program.
The bonds mature between 2028 and 2047, yielding between 3.47% and 4.47%. They received a rating of Aaa from Moody’s Investors Service and AAA from S&P Global Ratings.
The rating reflects “Texas’ rapid and broad economic expansion, which is supported by favorable demographic, employment, and productivity trends that we expect will continue to exceed those of state peers and the U.S. over the outlook horizon,” S&P analyst Thomas Zemetis said in a press release.
Texas will use the proceeds to back low interest rate loans to students pursuing higher education in the state. The loan program distributes more than $100 million annually to Texas students, and the state expects to issue approximately $127.8 million in student loans this fiscal year, according to the official statement accompanying the sale of the bonds.
U.S. student loan debt has grown tremendously in recent years, leading some economists to warn of its unsustainable trajectory. Americans collectively owe some $1.75 trillion in student loan debt, exceeding that owed for common loans such as for cars or credit cards, according to data from the U.S. Federal Reserve. Most of these loans are federal, though like Texas, every state has some form of student loan program too.
The bonds are general obligations of the state of Texas, secured by its full faith and credit.
J.P. Morgan Securities LLC won a competitive bid for the bonds, purchasing them for almost $112 million. The price reflected a premium of $6.2 million. Hilltop Securities Inc acted as financial advisor.