A new effort to save Birmingham-Southern and other colleges at risk of closure is gaining ground in the Alabama legislature.

SB278, filed Tuesday, would establish the Distressed Institutions of Higher Education Revolving Loan Program Fund to provide temporary aid to struggling public and private colleges in Alabama.

Lawmakers unanimously approved the bill in committee Wednesday.

Read more: Birmingham-Southern College will remain open, ‘moving forward’ to next school year

“This is going to be great for the state of Alabama,” Rep. Juandalynn Givan, D-Birmingham, told AL.com after the vote, noting that the legislature wasn’t “in the business of bailing out institutions,” but could now provide a low-cost solution for colleges like Birmingham-Southern that need immediate help.

The program is intended to support Birmingham-Southern, but could theoretically help other struggling colleges in Alabama. It is not clear whether any have asked the legislature for help. Officials say Judson College, which closed in 2022, did not ask for state support.

The bipartisan bill is brought by Senators Jabo Waggoner, R-Vestavia Hills, and Rodger Smitherman, D-Birmingham, both Jefferson County lawmakers who have been working to support Birmingham-Southern, a private liberal arts school that has been on the verge of closing after years of financial distress.

After months of lobbying, and pushback from the governor’s office, Birmingham-Southern officials told students last month that the school would stay open, citing “encouraging” news from the legislature.

At the time, Givan and other lawmakers hinted at a potential loan program, but the details had not yet been ironed out.

Givan, who represents several Birmingham neighborhoods near the college, said she now plans to introduce a similar bill in the House, which could drop as early as Wednesday afternoon.

“We hope [the colleges] won’t get in a posture or a position to where they would need assistance from the state, and that they will be self-sustaining and be able to maintain themselves as an institution of higher learning,” Givan said Wednesday. “But this legislation will help if it should be enacted.”

How will legislative support work?

Birmingham-Southern officials said they would need a total of $37.5 million – including $30 million in state funds – to keep the school open. The loan program, if enacted, doesn’t promise a specific amount of funding.

In order to qualify for the loan, colleges that apply must meet the following criteria:

• The college must have been in operation for more than 50 years in Alabama
• Have a significant impact on the local community
• Be at risk of closure due to financial hardship
• Must maintain operations and have a plan to fundraise as it receives the loan
• Have assets that it can pledge as collateral if it is unable to pay back the loan

Other details – like total loan amounts, repayment interest rates and timing of disbursements – will be up to the state treasurer to determine. The state will also audit recipients annually to assess their financial viability.

The money for the loan program will come from an appropriation in the state budget. All repayments will go back into that fund to use for future applications.

Givan stressed that the fund is not an “outright gift,” but a loan process that will come with plenty of guardrails and consequences if it cannot be repaid.

“We want to make sure that the public is aware that this is a process that will create a level of transparency, number one, most importantly, a level of accountability, number two,” she said.

“This is a loan, and it is a loan that will require a collateral,” she added. “And if you shall fail and there is a default, there will be an expectation that we will collect on that default.”

The Senate bill will now go to the chamber for a full vote. If passed by Gov. Kay Ivey, the act would go into effect immediately.