State approves $100 million deal for college student loans

The state commission in charge of student loans approved a $100 million deal Friday to keep offering loans to students in Illinois.

The Illinois Student Assistance Commission met in Edwardsville and approved a unique arrangement with eight credit unions, including metro-east-based Scott Credit Union. The deal was brokered fairly quickly, with only six weeks from the beginning of talks to Friday's news conference.

Andy Davis, executive director of the commission, said he approached 12 major banks and at least half a dozen foreign banks to invest in student loans, but major lenders nationwide have bailed on student loans to shore up their financial walls during the subprime mortgage crisis. Some states, including Minnesota, Massachusetts and Pennsylvania, simply shut down student loan programs, though Massachusetts recently announced it would resume student loans after a mass bond sale.

The credit unions are a unique solution in the United States, Davis said.

College will be more affordable for thousands of Illinois students thanks to today's vote," said Donald McNeil, commission chairman. "This deal ensures that our college students will be protected from the credit crisis that paralyzed student lending in other states."

Student loans administered by states are guaranteed at 97 percent by the federal government. Illinois agreed to cover the remaining 3 percent for the credit unions, which has been approved by the Illinois Department of Professional and Financial Regulation.

Locally, 78 percent of students at Southern Illinois University and more than 90 percent of students at McKendree University rely on some form of financial aid.

Lynda Andre, assistant superintendent of Edwardsville District 7 and a commission member, said the deal will "protect Illinois students as consumers."

"By enabling students to borrow federally guaranteed loans instead of private loans, students get loans which are safer, more affordable and less-complicated," she said.