Illinois Student Loan Default Rate One of the Lowest in Nation

SPRINGFIELD – Data recently released by the United States Department of Education (ED) indicates that the State of Illinois continues to boast one of the lowest student loan default rates in the country. The data show that the Fiscal Year 1999 cohort default rate for the Illinois Student Assistance Commission (ISAC) dropped to 4.5 percent. That figure is lower than the national average of 5.6 percent, and is down appreciably from the 5.7 percent calculated for the Illinois agency last year. Significantly, ISAC's cohort default rate has declined every year since 1993, providing compelling evidence of the success of the Commission's default prevention efforts.

"Reducing student loan defaults has always been a high priority in this State," said Illinois Governor George Ryan, who has consistently supported the aggressive default prevention and debt management efforts initiated by the Commission. With strong support from state legislators as well, ISAC has throughout the years assembled a vast array of tools to maximize default collections, and has received funding to support system enhancements aimed at enhancing default prevention efforts.

"In large part, we also attribute our success to the cooperation and help we receive from our school and lender clients, who share our interest in helping students," observed ISAC Executive Director Larry E. Matejka. He added that the student and parent borrowers served by the agency deserve credit as well, for successfully honoring their repayment obligations. Those obligations can be burdensome, as student reliance on loans to finance postsecondary education has grown significantly in the past decade. Relative to other states, Illinois borrowers are clearly handling that burden extraordinarily well.

On behalf of the federal government, ISAC each year guarantees over 134,000 new educational loans for college students and their parents. In 1967, the State designated the Commission as its official guarantor of Federal Family Education Loan Program (FFELP) loans. On an annual basis, the 134,000 loans guaranteed by the Commission provide borrowers with approximately $600 million. Since 1967, the agency has guaranteed over $9.8 billion in student loans.

By federal law, a student is considered to be in default on a federal student loan only after failing to make payments for 270 days, or 9 months. That 9-month period follows a standard six-month grace period extended to students after they graduate.

Key to the Commission's extraordinary success in the area of default prevention is the emphasis it has placed on ensuring that borrowers understand the implications of the financial obligations they are assuming, and equally important, the consequences of failing to honor those obligations. Borrowers are provided with both "entrance" and "exit" debt counseling. They are advised that help is available to them when they encounter financial problems due to factors such as unemployment or disability.

In addition, borrowers are counseled that defaulting on their loans will seriously damage their credit records. They are advised in no uncertain terms that default could result in wage garnishment, the suspension of their professional license, the denial of any future student financial aid, the withholding of any state or federal tax refunds or other government-issued checks, and other penalties. More than anything, however, they are assured that their best recourse if they encounter problems is to request help - before they default. ISAC staff will advise them of their options, which might include loan consolidation, deferments or a revised repayment schedule.

For all parties involved - the borrower, the lender, the school, the state and federal governments, and the taxpayers who support these programs - the best possible outcome is to avoid default and facilitate repayment. When a student ends up in default, no one wins.

The Illinois Student Assistance Commission is the State's centralized agency for administering student financial aid programs, including one of the country's largest need-based grant programs, an array of more targeted grant and scholarship programs, federally reinsured and alternative loan programs, and a prepaid college tuition program. More information about the programs and services offered by the Commission can be obtained by visiting the Web site at www.collegezone.com or calling toll-free 800-899-ISAC.

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.