Eight Illinois-based credit unions will invest $100 million in
securities issued by the Illinois Student Assistance Commission to
finance low-interest, federally secured loans to Illinois students
and their families. These Stafford loans will be easily available to
Illinois students at a time when students living in other states
have been hard-pressed to find willing lenders.
"We have responded creatively and quickly to a problem that has
crippled student lending in other states," Blagojevich said. "This
financing package will enable thousands of students to attend
college this year, knowing that they can pay their tuition. I salute
the participating credit unions for investing in the young people of
The crisis has been brewing since last year's subprime mortgage
collapse. A lack of liquidity, steadily increasing tuition costs and
changes in federal policy that cut lender profits have resulted in a
"perfect storm" for student borrowers. The most vulnerable students
are those from the lowest income levels. This financing makes
college affordable for thousands of Illinois students.
As more lenders opt to leave the student loan program, many
students are having difficulty finding affordable loans. State
student loan agencies in Minnesota, Massachusetts and Pennsylvania
recently announced that they have no money to lend this year. Other
states may have similar issues. Last month, the governor of Kentucky
ordered the state treasurer to purchase $50 million in bonds to
avert the crisis. Some private lenders have simply turned their
backs on students and walked away.
Stafford loans offer students and their families several
advantages, including lower interest rates, more favorable terms and
recourse to resolving disputes. Interest on a government-guaranteed
loan is between 6 percent and 6.8 percent; interest on a private
loan can be as high as 18 percent.
The Illinois Credit Union League played a critical role in
pulling together the various credit unions. The credit unions
involved in the partnership are Alliant Credit Union, Chicago;
Baxter Credit Union, Vernon Hills; Citizens Equity First Credit
Union, Peoria; Corporate America Family Credit Union, Elgin; Credit
Union 1, the state employees' credit union, based in Rantoul; I.H.
Mississippi Valley Credit Union, Moline; Motorola Credit Union,
Schaumburg; and Scott Credit Union, Collinsville.
"We are pleased to team up with ISAC and back their efforts to
help Illinois students get a quality education," said Dan Plauda,
president and chief executive officer of the Illinois Credit Union
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A credit union is a not-for-profit financial cooperative that is
owned by the members it serves. There are about 8,500 credit unions
nationwide, counting more than 90 million consumers as members and
collectively holding about $800 billion in assets. In Illinois,
there are more than 430 credit unions, with $20.8 billion in assets,
serving more than 2.7 million members.
"When the global credit markets turned their backs on Illinois
students, these eight credit unions stood tall," said Andrew Davis,
executive director of the Illinois Student Assistance Commission.
"This deal is terrific news for Illinois students and their
families, who have more important things to worry about as classes
begin. They can rest assured that our commitment is to meet demand."
On Aug. 21 the Illinois Department of Financial and Professional
Regulation, the agency charged with regulating credit unions,
concurred with the Illinois Credit Union League, the primary trade
association for credit unions in Illinois, that credit unions could
move forward with the investment.
"This nontraditional approach is consistent with the traditional
mission of credit unions: to invest in everyday people," said IDFPR
Secretary Dean Martinez. "This is a win-win for the credit unions,
the students and the entire state of Illinois."
Students may inquire about federally guaranteed loans at their
financial aid offices or at ISAC's lending arm, the Illinois
Designated Account Purchase Program:
Financing for this agreement is subject to approval by the ISAC
commissioners at their Sept. 19 board meeting and by the boards of
directors of the credit unions at their respective meetings.
[Text from file received from
Illinois Office of
Communication and Information]