Governor Quinn to give hope to 3,000 Illinois residents with bill signing
CHICAGO - Illinois Governor Pat Quinn signed Senate Bill 325 into law Friday, meaning that 3,000-plus Illinois residents will have a chance of clearing their credit record of defaulted student loans through the federal student loan rehabilitation program.
"During the current credit crisis, I am pleased the Illinois Student Assistance Commission will assist those who have defaulted on student loans but have seriously tried to make amends and repayment," said Governor Quinn.
The bill, co-sponsored by State Representative David Miller and State Senator Ed Maloney, amends the Higher Education Student Assistance Act, providing that bonds issued in accordance with the Act may be designated by the Illinois Student Assistance Commission (ISAC) as guaranteed by the State of Illinois with the full faith, credit, and resources of the State of Illinois.
"We are thankful to the co-sponsors, the leadership in both houses and Governor Quinn for recognizing the importance of this program for so many Illinois residents," said ISAC Executive Director Andrew Davis. "We are pleased and proud to be beneficiaries of this legislation, which provides for a unique Illinois solution to a national problem."
Simply put, ISAC's lending arm, the Illinois Designated Account Purchase Program (IDAPP) will utilize the bond proceeds to purchase loans from the U.S. Department of Education--loans that ISAC has worked to rehabilitate. The purchase of these loans by IDAPP will complete the rehabilitation process.
The Department of Education's loan rehabilitation process allows defaulted borrowers to have their credit records cleared by making nine straight on-time loan payments before the note is sold to a lender and removed from the Department of Education's books. It became clear that the freezing of the credit markets had jeopardized the rehabilitation program last November when SunTrust, the last bank nationwide to purchase rehabilitated student loans, stopped doing so. Since that time, there has not been a market for such loans, whether rehabilitated by ISAC or any other guaranty agency under the Federal Family Education Loan Program (FFELP).
"Allowing the borrowers to clear the default from their record allows doors to education to once again be opened up to them," continued Davis. "Now they are again eligible for financial aid and student loan opportunities if they wish to return to school, or at the very least, it will help their credit-worthiness down the road."
The proceeds of the bonds issued by ISAC will not exceed $50 million and will be used in connection with the U.S. Department of Education loan rehabilitation program. It is estimated that the bond issuance would allow IDAPP to rehabilitate approximately 5,000 students.
The bond documents, approved by the Commission Thursday, are unique in that a) the bonds represent the first-ever portfolio solely comprised of rehabilitated student loans; b) they are the first student loan bonds guaranteed with the full faith, credit and resources of the State of Illinois; and c) the bonds will be insured by Assured Guaranty to ensure timely payment of both principal and interest of the bonds.
For a detailed synopsis, legislative history and the full text of the bill, visit the Illinois General Assembly web site at www.ilga.gov/legislation and type SB0325 in the "Search by Number" field. The law takes effect immediately.
The Illinois Student Assistance Commission provides students of all ages and backgrounds with the resources and support to obtain financial aid for higher education. A state agency, ISAC has paved the path to post-secondary education with innovative programs for more than 50 years. Last year alone, ISAC continued its mission to make college accessible and affordable for Illinois students by issuing over 186,000 grants and scholarships totaling nearly $431 million.
The Commission provides educational funding with student loans, as a loan guarantor and via numerous public programs such as the successful Monetary Award Program (MAP), the Illinois Veteran Grant and College Illinois!sm the Commission's groundbreaking 529 prepaid college tuition program. Students and families have free access to a wealth of financial aid and college planning information at ISAC's family of websites available at www.knowhow2GOIllinois.org and www.IDAPP.com.
The Illinois Designated Account Purchase Program was started in 1977 and is the student loan division of ISAC. Last year, IDAPP originated $177 million in student loans to more than 32,000 borrowers, providing expert loan service and advice to students, schools and financial institutions in Illinois.
Posted 05/12/09 to www.NASFAA.org. Posting of press releases is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
