December 14, 2011
A new study has found that Illinois' prepaid college tuition program has a 30 percent shortfall and could require a $1.6 billion bailout from the state to remain solvent for the next 25 years.
As reported by the Chicago Tribune, the report shows that the College Illinois program had a deficit of almost $560 million as of March 31. The report, which was conducted by actuarial consultants Gabriel, Roeder, Smith & Co., predicted that without help from the state, the fund could be completely drained by 2022.
As with other state prepaid tuition plans, Illinois' program allows participants to lock in today's prices for future tuition and fees at the state's public colleges and universities. According to John Samuels, a spokesman for the Illinois Student Assistance Commission (ISAC), which oversees the program, about 35,000 families currently hold about 54,000 contracts.
Recently, the program was criticized for its faulty investment strategy and funding shortfall. As reported by Chicago Business, a Crain's investigation published on March 7 found that the Illinois plan had the greatest deficit of any prepaid program in the country. Moreover, that report revealed that the plan's executive director was placing the funds in risky investments such as hedge funds.
As of September 30, the commission stopped selling new contracts. On Tuesday, Gov. Pat Quinn told reporters that he supported that decision, but made no comment about what steps would be taken next to fix the beleaguered program.
"We're going to have to roll up our sleeves," said Quinn, who was quoted by the Chicago Sun-Times. "I really feel strongly about the importance of access to college and reducing the bite it takes on many students' wallets when they have to go to college. That's an issue we're going to work on in the coming years."
Kym Hubbard, who was recently appointed by Quinn as ISAC chairman, provided some more concrete ideas of what contract holders can expect. She told Chicago Business that the commission will make comprehensive recommendations to the governor and legislators early next year about how to fix the program. Some of those recommendations will likely include asking universities and new contract buyers to plug the gap between what the plan earns and what tuition actually costs.
"Everyone wants it to work," she told Chicago Business, "which is a good thing."
Meanwhile, State Rep. Jim Durkin announced that he will introduce legislation to make College Illinois more transparent.
"We have to convince current contract holders this is still a safe investment and also need to make this an attractive plan for down the road," he told the Chicago Sun-Times.
Compiled by Yaffa Klugerman
"College Illinois Suspends Prepaid Tuition Sales As New Chairman Plots Fixes," chicagobusiness.com, December 12, 2011, Steve Daniels
"Report: College Illinois! Could Need $1.6 Billion Bailout," suntimes.com, December 14, 2011, Dave McKinney and Stefano Esposito
"State's Prepaid Tuition Program has 30% Funding Gap, Report Says," chicagotribune.com, December 13, 2011, Ryan Haggerty