Study to examine possible loan sale

By Kathleen Foody

State Rep. Naomi Jakobsson (D-Urbana) introduced a measure calling for a state study on the potential effects of selling the state’s Illinois Student Assistance Commission loan portfolio to a private, for-profit company.

The study would examine the results that the sale could have on student loan borrowers and the Illinois State Student Assistance Commission’s programs. Jakobsson said concerns from current and former Illinois college students who depend on loans from the Commission prompted her to propose the study.

“There had been talk about selling the ISAC portfolio last summer, but they stopped for awhile,” Jakobsson said. “Now the discussion has started again. I want to ensure that the benefits of ISAC loans would not be diminished.”

These benefits include lower interest rates and rewards for students who make consistent payments or electronic payments, Jakobsson said.

“They have wonderful opportunities to offer for students financing their own education,” she said.

The resolution calls for a study conducted by the Commission on Government Forecasting and Accountability in cooperation with the Illinois Board of Higher Education, but does not specify how to perform it.

“The study would really see if the sale should take place by looking at the effects it would have,” Jakobsson said.

Randy Erford, public information officer for the Illinois State Student Assistance Commission said the organization operates as an originator for loans, but more often serves as a guarantor. In this role, the commission lowers risk to lenders, such as private banks, who offer low-interest loans to students.

“As far as federal student loans go, the maximum interest rate is set at the federal level,” he said. “The benefits we offer now however would not be guaranteed if the sale goes through.”

Jakobsson passed another piece of legislation requiring interest rate reduction plans currently in place for ISAC’s student loans to transfer to private companies should the state portfolio be sold.

“The bill passed unanimously in the House and I had a lot of support for it,” she said. “It has not been called out of rules in the Senate, but I am hoping it will.”

According to a press release from Jakobsson’s office, the study would have to be released by July 1, 2006 and no action could be taken to sell the portfolio until May 31, 2007.

“Before the state moves forward on this, it should study the issue further and make sure that we protect student loan borrowers and financial aid programs that rely on revenue generated from ISAC’s loan portfolio,” Jakobsson said in a press release.

The resolution was referred to the Senate Rules Committee on April 12, 2006, but no further action has been taken.

According to the press release, ISAC guarantees loans for about 335,000 Illinois student loan borrowers. This number has increased by 54 percent from 2000 to 2005.

“We need to make sure that student loan borrowers are not harmed financially,” Jakobsson said in the press release. “This issue deserves the time and attention of legislators.”