Eight Illinois-based credit unions will invest $100 million in
securities issued by the 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.
"As college students
returned to classes, they found themselves in a tough credit market
where low-interest, quality loans were not as accessible as in years
past. The financing package approved by ISAC today 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 Illinois," Blagojevich said.
The student loan 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. State
student loan agencies in Massachusetts, Pennsylvania, Michigan and
elsewhere have announced they have no money to lend this year.
Standing outside of the Scott Credit Union in Edwardsville on
Friday, ISAC Chairman Donald McNeil announced that the ISAC board
had just approved the plan. McNeil was joined by Illinois Department
of Financial and Professional Regulation Secretary Dean Martinez,
whose agency -- which oversees the state's credit unions -- had
approved the concept on Aug. 21.
"College will be more affordable for thousands of Illinois
students thanks to today's vote," McNeil said. "This deal ensures
that our college students will be protected from the credit crisis
that has paralyzed student lending in other states. Students across
the nation are faced with such undesirable options as taking an
extra part-time job, skipping a year of school or using private
lenders who impose steep interest rates."
Metro East-based Scott Credit Union is one of the eight members
of the Illinois Credit Union League that plan to participate. The
other partner credit unions 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; and Motorola Credit Union,
Stafford loans offer students and their families several
advantages when compared with private loans, including lower
interest rates, more favorable terms and greater recourse in
resolving disputes. Interest on these government-guaranteed loans is
between 6.0 percent and 6.8 percent; interest on a private loan can
be as high as 18 percent. Private loans also often include higher
fees and require a co-signer.
"When the global credit markets walked away from Illinois
students, these eight credit unions stepped up," said Andrew Davis,
ISAC executive director. "Today's vote is a relief for Illinois
students and their families, who have more vital things to worry
about as classes begin."
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"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
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
they collectively hold 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.
"This is a win-win for the credit unions, students and entire
state of Illinois," said Martinez. "This nontraditional approach is
consistent with the traditional mission of credit unions: to invest
in everyday people." His agency agreed with an opinion by the
Illinois Credit Union League that credit union investment in the
Illinois Student Assistance Commission securities is permissible
under applicable provisions of the Illinois Credit Union Act.
As other lenders pull out of the federal lending program or scale
back their offerings, the most vulnerable student borrowers are
those from the lowest income levels. "A lot of good students lack
the credit history required by many private lenders, let alone the
experience and support to be sophisticated financial consumers.
These problems are especially common for students from low-income
families, making them precisely the ones who are left behind in such
a crisis," ISAC's Davis said.
"The deal protects Illinois students as consumers," said ISAC
Commissioner Lynda Andre, who also serves as assistant
superintendent of the Edwardsville Community Unit School District.
"By enabling students to borrow federally guaranteed loans instead
of private loans, students get loans which are safer, more
affordable and less complicated."
Students may inquire about federally guaranteed loans at their
college financial aid offices or at ISAC's lending arm, the Illinois
Designated Account Purchase Program:
[Text from file received from
Illinois Office of
Communication and Information]