Welcome to the Senate Republican Press Search.

View Article Details

Print

College Illinois sales halted, program's future uncertain

Crain's Chicago Business

Wednesday, December 6, 2017  |  Article  |  By STEVE DANIELS

Education Funding (36a) , Education--Higher (37)
For the second time in six years, the state has closed College Illinois to new investors while it sorts out the future of the financially troubled college savings program.

The Illinois Student Assistance Commission, which administers College Illinois, is huddling with state lawmakers on how to fill a gap between the dollars in the investment fund backing the program and the family-purchased contracts to attend the University of Illinois at Urbana-Champaign and other state schools in the future. ISAC hopes to determine a course of action during next year's legislative session.

"Fruitful and productive discussions require a review of all options and ideas that will, first and foremost, best serve our current plan holders, including a review of scenarios that continue and those that discontinue future sales," ISAC spokeswoman Lynne Baker emailed.

The agency is declining to identify specific options for now.

There are more than 38,000 contacts outstanding to attend Illinois colleges. College Illinois enables families to purchase contracts covering tuition and other expenses on behalf of future students. The vast majority of contracts are to attend the flagship in Champaign.

The program is marketed as a worry-free way for parents or others to lock in the cost of tuition and pay it gradually ahead of time. But the security of the investment depends on the rate of tuition inflation and the investment performance of the $901 million fund supporting the contracts, as well as the number of new participants in the program.

As of June 30, the fund was $320 million short of what it needs to support College Illinois' obligations, according to the most recent actuarial report on the health of the program. It's run a deficit for years, and an ill-advised and -conceived attempt a decade ago to close the gap by investing in unorthodox funds and businesses led to scandal and then-Gov. Pat Quinn's decision in 2011 to close College Illinois for a year.

Since reopening in 2012, ISAC has struggled to sell contracts. It sold just 433 new contracts in the 2016-17 sales year, an all-time low since the 1998 creation of College Illinois.

The fund is projected to run short of money to support all its obligations in 2025 if College Illinois is closed to new investors. At the present level of annual sales, it would fall short in 2026.

Under state law, if the governor decides contracts are in danger of not being honored, he or she must ask the Legislature to consider bailing it out. The General Assembly, however, is under no obligation to act.

Absent a dramatic change in College Illinois' fortunes, it's difficult to envision a scenario where more state money won't be needed to ensure contracts are honored, whether or not contract sales resume. A draconian option would be to refund contract holders, but that, too, might require state funds.

College Illinois is the lesser-known of the state's two college savings programs. BrightStart, a 529 plan managed by the state treasurer's office, enables parents to save and invest in tax-advantaged funds for future college payments. But it's a savings vehicle only and provides no guarantees on how much of the ultimate cost the proceeds will cover.