Office of Loan Programs
STIP (Short-term Investment Pool)
The interest rate for your MOP loan is determined by "the most recently available four-quarter average rate of return earned by the University of California's Short-Term Investment Pool (STIP)." This phrase produces one of our most frequently asked questions:
"What is the Short-Term Investment Pool?"
The simplest way to describe the Short-Term Investment Pool, or STIP, is a very large investment account. All University of California funds, including retirement, endowment, payroll, operating expenses and construction funds are deposited into STIP. In addition, funds waiting for investment into one of the long-term pools are deposited into STIP to earn maximum daily interest until investment. As of June 30, 1998 (the end of the fiscal year), the STIP portfolio totaled 4.6 billion dollars.
The University Treasurer's Office invests these funds in a broad spectrum of money market and fixed income instruments with a maximum maturity of five years. The investments include: bank and Eurodollar certificates of deposit, time deposits, commercial paper, corporate notes, federal agencies, and mortgage-backed securities.
The Treasurer's Office seeks to maximize the return of STIP funds consistent with the safety of principal. The investments are structured to ensure that sufficient funds are on hand to meet the cash flow requirements of the University. Investment strategies that improve quality and yield, while maintaining liquidity, are also employed. In 1984, The Regents authorized funding the MOP program with funds from the STIP account. In addition to funding the MOP program, STIP funds are also used to fund loans to the four University medical centers/teaching hospitals. All of these loans are investments of STIP and contribute to the rate of return of the pool.
Each quarter,the average rate of return for STIP funds is calculated by the General Accounting Office in the Office of the President. The rate of return for the most recent four quarters is averaged and added to an administrative fee component of .25 percent, thus determining the interest rate for new MOP loans. Existing loans which are due for an interest rate adjustment will also receive this rate, provided it is within the 1 percent maximum annual adjustment (up or down) from the current rate.