At Age 50, ISAC Shifts Focus - "Op Ed" from Executive Director Andrew Davis

College aid agency will be more profitable, Illinois-centric, responsive to demographic changes

Fifty years ago this Spring, Illinois lawmakers passed a bill creating a new state agency dedicated to helping Illinois students attend college.  In July 1957, Governor William Stratton signed the bill, and the Illinois State Scholarship Commission – now the Illinois Student Assistance Commission (ISAC) – began opening doors for millions of Illinois students to a college degree and the American Dream.

That new law was a far-sighted action in 1957, one which has produced a better-educated populace in the Land of Lincoln and we salute the bipartisan effort 50 years ago which led to ISAC’s creation.  Those policymakers, though, could not have foreseen many trends in higher education in the past half-century:

• In the emerging global economy, the demand and need for a college education are greater than ever.
• The cost of attending a college or university has soared nationwide.  
• Unprecedented numbers of college seniors graduate with 5-figure debt. 
• The student loan business is the fastest growing segment within the consumer loan industry.

As I learned recently, turning 50 is an opportunity for reflection, and maybe a new, better course.  This agency has had a stellar record over the past five decades, never straying from its core mission of helping Illinois families overcome financial barriers to access higher education.  Since 1981, 3.1 million students have received $5.7 billion in scholarships and grants through ISAC’s Monetary Award Program (MAP), MAP Plus, Silas Purnell “Illinois Incentive for Access” and other excellent programs. 

In 1977, ISAC entered the student loan secondary market through its Illinois Designated Account Purchase Program (IDAPP).  It became a major player in the lending business, not only in Illinois, but in all other 49 states, the District of Columbia and Puerto Rico.  The interest income from these loans paid for many of ISAC’s services, such as its public outreach efforts, CollegeZone.com and the cutting edge IllinoisMentor online counseling service.

Since 2001, however, the student loan arena has gotten fiercely competitive; ISAC is no longer alone on the playing field.  There are several huge competitors for the student loan dollar.  Due to scale economies, what’s unprofitable for us may be profitable for others.  Although profitable for years, IDAPP’s loan portfolio lost $7.5 million last year, with 80 percent going to non-Illinois students attending non-Illinois schools.  We lost $681,000 on Maryland loans alone!

It was this volatile portfolio we turned to last year when Governor Rod Blagojevich signed legislation authorizing ISAC to raise funds necessary for our need-based Monetary Award Program and the Governor’s innovative MAP Plus initiative to help middle-income students. 

A chunk of the portfolio (about $627 million in loans) was identified as the most appropriate to sell.  More than a dozen bids were made, and in January 2007, the portfolio was sold to two buyers – Sallie Mae and Nelnet.  Provisions were made to protect the borrowers’ benefits and enough cash was generated to pay for the MAP Plus program for the 2006-07 school year.  To cover MAP claims, ISAC must sell more of the non-Illinois portion of the portfolio soon.

Decision-makers owe it to Illinois taxpayers and college students to respond to these alarming facts: 

• The state’s student loan portfolio suffered a net loss on of $7.5 million in FY2006.
• Out-of-state borrowers received nearly 80 percent of our Illinois taxpayer subsidized loans;
• The student loan marketplace has suddenly gotten fiercely competitive; federal legislative changes may make it even tougher.
• Tens of thousands of Illinois students are still denied full access to the college or university of their choice.
• Many of our “best and brightest” students leave Illinois for a better deal elsewhere.

Critics suggest that by selling part of the loan portfolio, ISAC is “killing the goose that laid the golden egg”.  But considering last year’s $7.5 million loss, it seems our golden goose is now laying only goose eggs!

At age 50, ISAC is sharpening its focus to best serve Illinois students and taxpayers by: cutting our losses with non-Illinois borrowers, tailoring grant programs and loan offerings to Illinois residents, continuing to inform students and families about how to overcome financial barriers and promoting the College Illinois! prepaid tuition program.

For a half-century, ISAC has quietly helped educate our state’s workforce and made Illinois a better place to live.  For our 50th birthday, we vow to continue that mission.  I invite all high school and college students, parents, educators and taxpayers to visit CollegeZone.com for more information about the wide range of services ISAC provides.

About ISAC
The Illinois Student Assistance Commission is the State’s centralized provider of financial assistance aimed at helping students and families access postsecondary education and/or training. Each year, the Commission awards an estimated $400 million in scholarship and grant aid to nearly 185,000 qualified students, and also provides an additional $740 million to borrowers through its student loan programs. The agency offers credit-based alternative loans, a 529 prepaid tuition program known as College Illinois!, and a broad array of outreach and informational services to ensure that families have access to the information they need to pay for a college education. More information is available by calling toll-free 800.899.ISAC (4722) or visiting the agency’s Web site at www.collegezone.com.