CHICAGO (9/8/08)--Eight Illinois credit unions have teamed with two state agencies to provide $100.5 million in financial aid for as many as 20,000 college students in a new state program. Credit unions are investing in the securities issued by the Illinois Student Assistance Commission (ISAC), filling gaps created by other private lenders who stopped providing financial support during the economy's credit crunch. "This financing package will enable thousands of students to attend college this year, knowing that they can pay their tuition," said Gov. Rod Blagojevich (Chicago Tribune
Sept. 8). "We are pleased to team up with ISAC and back its efforts to help students get a quality education," said Dan Plauda, president/CEO of the Illinois Credit Union League (ICUL). "Earning a college diploma is crucial and on top of all of the other pressures of attending college, students should not have to additionally worry about whether or not their loan will fall through." Andy Davis, executive director of ISAC, learned of a similar program in North Carolina and contacted the league, which helped broker a deal with the eight credit unions. After meeting with Davis, ICUL determined that investing in the bonds would be permissible under applicable provisions of the Illinois Credit Union Act. The Illinois Department of Financial and Professional Regulation, the state agency that regulates credit unions, concurred. "The credit unions," Davis told the Chicago Sun-Times
(Sept. 7), "really stepped up." Credit unions will provide Stafford loans ranging from $3,500 to $20,000, carrying an interest rate of between 6% 6.8% compared with the 18% through private loans, and backed by the federal government. Credit unions were approached after federal legislation cut subsidies that banks receive when they provide funds for lending to students. Banks are wary of making loans to students, who often have no collateral or jobs. The credit crunch led to announcements by state student loan agencies in Massachusetts, Minnesota and Pennsylvania that they would not loan funds this year. Credit unions involved in the Illinois program include:
* Alliant CU, Chicago; * Baxter CU, Vernon Hills; * Citizens Equity First CU, Peoria; * Corporate American Family CU, Elgin; * Credit Union 1, Rantoul; * I.H. Mississippi Valley CU, Moline; * Motorola CU, Schaumburg; and * Scott CU, Collinsville.