The Illinois Student Senate unanimously passed a resolution last week supporting State Rep. Naomi Jakobsson’s (D-Urbana) bill to maintain current interest rates and benefits on student loans currently provided by the Illinois Student Assistance Commission, if privatization of the loans were to occur.

Privatization would turn over government-controlled loans to private businesses.

Gov. Rod Blagojevich proposed privatizing the loans of the commission, better known as ISAC, last spring, said Becky Carroll, spokesperson for the Governor’s Office of Management and Budget. The loans are both issued directly from ISAC to students as well as loans purchased by the agency from banks.

Brett Lief, president of National Council of Higher Education Loan Programs in Washington D.C., said that privatization of government loans is a fairly new concept in the nation. Stress on loan agencies like ISAC has been increasing due to the larger graduating high school classes in recent and coming years, Leif said.

The senate passed the resolution to stand up for “hardworking students” who have a hard time getting by without loans, Justin Cajindos, Governmental Affairs Committee chair of ISS, said. The ISAC loans currently offer rates “well below market value,” he added.

Jakobsson introduced the legislation limiting interest rates on Dec. 5, 2005, and on Jan. 4 the bill was referred to Rules Committee.

Ryan Ruzic, co-president of ISS, said the resolution was well timed because discussion on Jakobsson’s bill will soon begin in the State House of Representatives. The student senators want Jakobsson’s bill to discourage privatization of ISAC, Ruzic said.

“Interest and fee rate reduction plans on college loans through the Illinois Student Assistance Commission are things upon which students have been able to rely as a way of reducing their college debts,” Jakobsson said in a news release. “This bill would maintain the program to ensure that any student with a loan at the time of the sale would be able to enjoy the same savings.”

There have not been recent developments about selling the loans, said ISAC spokesperson Lori Reimers.

The Missouri Higher Education Loan Authority, Missouri’s equivalent of ISAC, recently privatized a part of its loan system. Reimers said the sale was first of a kind in the nation because the portfolio belonged to a state agency and not a non-profit agency, as has been the case in other states.

Increasing rates are “definitely a concern” Reimers said. “We want to protect the students as much as possible.”

Carroll is optimistic about a potential sell of the loans.

“(Privatization of the loans) would create more efficiencies in the current ISAC systems,” Carroll said. “It would not be designed to increase [interest] rates.”

Carroll also said the privatization would not eliminate jobs. Instead, a sale would amount to revenues that could be used to create more funding for Illinois college students, she said.

“Solutions (like privatization) may help out in the short run,” Lief said, but long-term effects are still unknown.

However, if government loans are privatized, profits from interest on loans will go to shareholders. Currently, profits go toward benefits for borrowers, Lief explained.

The Student Loan Marketing Association, better known as Sallie Mae, has been at the center of rhetoric against privatization. The company is a provider of student loans that was created in 1972 as a government-sponsored entity and became completely privatized in 2004. According to Jakobsson’s news release, the company is charging interest rates on student loans up to 28 percent while its stock is selling for 22 times the company’s earnings.

If the loans were sold, Reimers said that privatization will not be an all-or-nothing deal. It has not yet been determined which, if any, loans would be sold.