Gov. Blagojevich announces new program to cut interest rates on college loans and address workforce shortages in Illinois

New initiative will save typical college student about $2,600 while providing incentive to live and work in Illinois

SPRINGFIELD – Governor Rod R. Blagojevich today announced that Illinois college students who receive federal Stafford loans may now be able to cut as much as 1.8 percent from their interest rate.  The “Low Cost Borrower Benefit Program” administered by the Illinois Student Assistance Commission (ISAC), will slash the cost of borrowing for Illinois college students who pursue careers in critical industries where there are currently shortages, such as social work, teaching or health care. Beginning this week, a borrower who has received a Stafford loan through ISAC’s lending division - the Illinois Designated Account Purchase Program (IDAPP) - is eligible to cut the interest rate by obtaining Illinois employment, earning less than $50,000 or enrolling in a direct debit program.

“College students and their families struggle with the continually rising cost of tuition and with college loans payments. This program will provide much needed relief for thousands of students and their families, and it will help boost employment by encouraging students to pursue careers right here at home in critical areas like teaching and social work,” said Gov. Blagojevich.

A student who borrows $20,000 with a ten-year repayment period will save about $2,600 over the life of the loan under this initiative, according to ISAC estimates. The Low Cost Borrower Benefits Program cuts college costs in three ways:

• A 0.5 percent interest rate reduction is earned immediately for obtaining Illinois employment.  Eligibility begins once the borrower has graduated, entered repayment and begun paying state income taxes.  Annual proof of Illinois employment is required.
   
• An interest rate reduction of 0.5 percent is applied if the borrower’s annual income is between $30,001 and $50,000.  A 1.0 percent interest rate reduction is applied if the borrower’s annual income is $30,000 or less.  Annual proof of income and Illinois employment is required.
   
• A 0.3 percent rate reduction is earned by enrolling in the direct debit program, through which the borrower may pay the loan directly from a checking or savings account.

Andrew Davis, ISAC’s Executive Director, said the “salary-sensitive” interest rate component has proven to be popular with borrowers participating in ISAC’s new College Illinois! Capstone Loan program, which has already attracted nearly 300 applications from college seniors at seven participating pilot schools.

“This unprecedented approach will reduce the amount of debt a student faces on graduation day and by cutting the interest rate for borrowers who pursue vital but lower-paying careers such as teaching, we improve the quality of life for all Illinois residents,” Davis said. “This benefit also recognizes that a state as diverse and sprawling as Illinois includes communities with much lower costs-of-living and, accordingly, lower salary levels. This encourages graduates in public service professions to contribute to these communities.”

Davis noted that the 0.5 percent interest rate reduction for borrowers who obtain Illinois jobs, “…recognizes the benefits to the state of Illinois when our scholars become taxpayers.” This feature also reflects ISAC’s new focus on Illinois students and families.

As Illinois’ central provider of student aid since 1957, ISAC administered $448 million in scholarships and grants to Illinois students last year.  It also originated $250 million and guaranteed $1.2 billion in loans to 208,000 Illinois families. For more information, visit www.idapp.com.