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State's student-loan agency cutting 68 jobs

Posted November 06, 2007 10:00 pm

Adriana Colindres

The Illinois Student Assistance Commission is slicing 68 jobs from its 470-member work force, largely because of the anticipated impact of a new federal law to bolster financial aid for college students, ISAC's executive director said Tuesday.

The state agency has begun laying off 50 employees, most of whom have "bumping rights" they can exercise to move into positions held by workers with less seniority. Because of that wrinkle, it probably will take about 10 days to determine exactly which 50 employees will lose their jobs, said executive director Andrew Davis.

An additional 18 positions, which presently are vacant, also will be eliminated.

The affected positions are civil service, and the employees are not union-represented.

Under civil service rules, state law and federal law, the laid-off employees will receive 60 days' worth of salary, health benefits and other employment benefits. While those workers generally will leave the agency right away, they nonetheless will be subject to callback if ISAC needs their professional expertise during the 60-day period, Davis said.

Davis cited three reasons for the cuts.

The main one, he said, is the College Cost Reduction and Access Act, a new federal law that will beef up financial aid for college students. To fund the new law, though, the federal government will reduce the subsidies paid to student-loan lenders and guarantors.

The subsidies to ISAC, which is both a lender and a guarantor, will drop by about $9 million a year, Davis said.

"It's a pretty good hit to take," he said.

Secondly, Davis said, ISAC's costs for funding loans are rising by an estimated $4 million to $6 million this year because of turmoil in capital markets, a situation fueled partly by problems with the subprime mortgage industry.

Thirdly, he said, the agency has been looking for ways to operate more efficiently.

Since January, ISAC has sold about $3 billion of its student-loan portfolio. About $1.2 billion remains.

Davis said the sale of those assets had nothing to do with the layoffs at the agency. Indeed, he said, ISAC would be facing bigger financial problems if it had not completed those sales.

Some state lawmakers long have questioned the wisdom of selling ISAC assets, and one of them, Rep. Chapin Rose, expressed skepticism Tuesday about the stated reasons for the layoffs.

"They can say whatever they want," said Rose, R-Mahomet. "They killed the goose that laid the golden egg."

"I'm sad to see it happen," added Rep. Rich Myers, a Colchester Republican who serves on two House committees dealing with higher education. "I understand the situation. I just don't know what we could have done to avert it."

Adriana Colindres can be reached at (217) 782-6292 or adriana.colindres@sj-r.com.

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