State AG Weighs in on State Student Loan Portfolio Sale

by Patrick Lunsford, CollectionIndustry.com

Illinois Attorney General Lisa Madigan has issued an opinion letter stating that Gov. Rod Blagojevich could be allowed to sell portions of the state’s student-loan portfolio, but only if proceeds are used to support state student loans, according to an Associated Press story.

Early last year, Blagojevich said that selling the portfolio ? which stands at about $3.8 billion — to private companies could earn as much as $500 million to help balance the state budget. The portfolio is managed by the Illinois Student Assistance Commission (ISAC). Madigan also stated that Blagojevich can’t sell the entire portfolio unless he gets approval from the state?s General Assembly.

In an opinion letter issued Friday, Madigan held that Blagojevich does have the authority to sell parts of the portfolio but any money must go back into accounts related to the student loan program.

ISAC Chairman Don McNeil said the opinion validates the commission’s plan to sell or restructure portions of the portfolio to raise $100 million for more college scholarships, per a plan enacted by the state?s legislative body last year. The General Assembly approved expanding needs-based scholarships by $34.4 million, helping about 68,000 more students.

“Any sale of the student loan portfolio will go first and foremost to fund these programs,” McNeil said in a written statement. “Other proceeds will go to the student loan operating fund to promote access to higher education.”