Southeast blanket student fee covers university's million-dollar debt

A nearly decade long practice of growing student tuition and fees means Southeast is borrowing money to cover its budget and relying on raising student fees to make loan payments.

The General Maintenance and Repair Fee assessed to every student for every credit hour this year is used to fund repayments of Missouri Health and Educational Facilities Authority.

Vice President of Finance and Administration Kathy Mangels said the fee is used to “pay back a portion” of the bond debt.

The MOHEFA program started using these bonds under the MOHEFA Act to help operate educational facilities in the state of Missouri.

Every year, the school must disclose to the underwriting bank Hilltop Securities Inc. how they plan to pay back the bonds with interest.

Since the bonds were originally issued, the fee has been set at a level the school could use revenue from to afford to pay back the debt with interest. That fee is now up to $13.90 per credit hour, a $1 increase over last year’s fee rate.

Southeast currently is set to repay roughly $46 million in bond loan payments.

According to Mangels, Southeast issues the bonds every year, under the understanding that the money will be used for maintenance and repairs on campus. The university issued bonds this July to “capture interest cost savings” through a lower interest payment per each bond, part of the principal $46,155,000 of the university’s taxable “Build America Bonds.”

As they continue to issue bonds each year, the university eventually must make principal and additional interest payments on each bond issued.

Mangels explained the university refinanced the refunded bonds this summer, “just like you would your car or house,” to lower the interest payments they would be making on top of the original principal of the bonds.

The university is responsible for making principal and interest payments on each bond when it reaches maturity. With the significant financial size of the MOHEFA bonds, the school renegotiated the bonds this summer without adding any debt to “capitalize on these savings,” Mangels said. The university will recognize $5.13 million in interest savings over the life of the bonds, a savings of 10.364%.

Despite the savings from the refinancing, the school is set to be making multi-million dollar bond payments with interest to pay off the bonds until 2041. The initial principal on the bonds was nearly $55 million when the school first started borrowing the money in 2010.

Every first day of April and October, the university must make payments on these bonds, and are scheduled to do so through April 2041. By that year, the school will be responsible for paying off the remaining debt.

Mangels believes the university will have no problem paying the bonds with interest by the time they all mature.