Illinois Student Loan Commissions Sells $1.38 billion in Student Loans

The Illinois Student Assistance Commission (ISAC) Monday closed the sale of $1.38 billion in student loans to two not-for-profit agencies. The transaction will help ISAC pay down its debt, exit the increasingly unprofitable business of holding loans made to non-Illinois students, and focus on making college more affordable for Illinois students.

The sale is the culmination of a standard public offering which began with bid solicitations going out to 42 firms nationwide. Ten bidders responded, with the winning bids coming from Brazos Higher Education Service Corporation, based in Waco, Texas, and Panhandle-Plains Higher Education Authority (PPHEA), of Canyon, Texas. The transaction was supervised by the consulting firms Morgan Stanley and Gardner, Underwood and Bacon.

The portfolio sold by ISAC is comprised of 368,924 student loans made to 191,914 borrowers. The average borrower indebtedness is $7,239. Of these loans, more than 90 percent are “non-Illinois nexus” loans, meaning loans to non-Illinois students attending non-Illinois schools. As with ISAC’s earlier portfolio sale in January, existing borrower benefits will be retained as a condition of the sale.

Most of the sale proceeds will go toward retiring a portion of ISAC’s existing debt. Of the remaining net proceeds, $26.8 million is earmarked for the state’s need-based Monetary Award Program (MAP) grants for about 17,500 students attending Illinois universities and colleges during the Spring 2007 term, as appropriated in the State FY07 budget. The balance of the net proceeds will be used to support State programs as authorized by the Illinois General Assembly.

“We are happy with the terms of the deal. This transaction enables us to pay down debt while recasting ISAC as an Illinois agency serving Illinois students and taxpayers,” ISAC Chairman Don McNeil said. “This is another giant step for ISAC in exiting the business of lending to students from Utah going to college in Boston.”