The state announced Sunday a financial aid program that could benefit low-income students this year, thanks to a $100 million investment from eight credit unions.
The state announced Sunday a financial aid program that could benefit low-income students this year, thanks to a $100 million investment from eight credit unions. “This financing package will enable thousands of students to attend college this year, knowing that they can pay their tuition,” Gov. Rod Blagojevich said in a written statement. Had the state not been able to broker such a deal, it is likely it would not have been able to provide loans beyond this year, said Andrew Davis, executive director for the Illinois Student Assistance Commission, a state agency. Considered Stafford loans, they will range from $3,500 to $20,500 and carry an interest rate of 6.8 percent or lower, compared with rates of up to 18 percent for private loans. Up to 97 percent of the principle and interest of the loans is guaranteed by the federal government. The state will guarantee the remaining 3 percent. Previously ISAC could get banks to finance student loans administered through them with no problem. However, with the student loan default rate on the rise and a soft economy, finding lenders had become a challenge. Federal law had allowed for subsidies to lenders, making them highly profitable. But last fall, federal lawmakers cut the subsidies in response to the mortgage crisis. Banks are not so anxious to lend money to students with no jobs anymore, said Timothy Snow, a senior mortgage banker for Bank of America. ______ Copyright 2008 Chicago Defender. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.