Governor Quinn Signs Legislation to Aid Those with Defaulted Student Loans

Illinois Student Assistance Commission poised to purchase 3,000 rehabilitated student loans

CHICAGO - May 8, 2009. Illinois Governor Pat Quinn signed legislation this week to help more than 3,000 Illinois residents clear their credit record of defaulted student loans. Under the new law, the Illinois Student Assistance Commission (ISAC) can purchase these loans and expedite their repayment.

"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.

Senate Bill 325, co-sponsored by State Senator Ed Maloney (D-Chicago) and State Representative David Miller (D-Dolton), allows ISAC to use up to $50 million in bond proceeds to purchase student loans from the U.S. Department of Education. ISAC has worked with student loan-holders to recover payment and the agency’s purchase of the notes will complete the formal U.S. Department of Education rehabilitation process.

The Department of Education’s loan rehabilitation process allows borrowers in default to clear their credit history by making nine straight on-time loan repayments. Once that occurs, the note is sold to a lender and then removed from the Department of Education’s books.

The ongoing credit crunch has jeopardized demand for rehabilitated student loans, which is why ISAC is stepping in and acquiring the notes.

"We are thankful to Governor Quinn, the co-sponsors, and the leadership in both houses for recognizing the importance of this program," 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. Allowing the borrowers to clear the default from their record allows doors to education to once again be opened up to them."

The bond documents were approved by ISAC on Thursday. The bonds represent the first-ever portfolio solely comprised of rehabilitated student loans, and they are the first student loan bonds guaranteed with the full faith, credit and resources of the State of Illinois.