Coming to aid of college students

Having to borrow money is an economic fact of life for most of us.

And for the most part borrowing has been good for both the consumer and the economy.

But when money is borrowed recklessly by individuals with the full cooperation of lending institutions, a disastrous day of reckoning is bound to dawn.

We are seeing this now, with billions of dollars worth of bad home loans going unpaid, fueling a rise in foreclosures and a drop in economic activity. And it's not just the borrowers and the lenders who are getting hurt. So are those who have not taken out unwise loans and need and should be able to borrow money, like students who need help to pay for college.

The nation's credit crunch brought on by bad loans has made it much more difficult to get student loans, according to a story last week Associated Press. Lenders are pulling out of the student loan market at the very time other forms of college financial aid are harder to obtain.

But students in Illinois counting on student loans to pay for college - particularly those whose families do not earn a great deal of money - can breathe a sigh of relief thanks to eight Illinois credit unions and state government. They have agreed to be partners to provide $100 million in financial aid for college.

The funding will come in the form of Stafford loans. They typically range from $3,500 to $20,500, at a 6.8 percent interest rate. The program will be run by the Illinois State Student Assistance Commission (ISAC). Baxter Credit Union of Vernon Hills, Corporate America Family Credit Union of Elgin and Motorola Credit Union of Schaumburg are among the credit unions that have agreed to participate.

Certainly the credit unions will make money on this deal, which is to be backed by a state bond. But as ISAC Executive Director Andrew Davis noted: "When the global credit markets turned their backs on Illinois students, these eight credit unions stood tall."

As a result, a financial burden will be eased on about 25,000 Illinois college students.

You might ask if these student loans are risky in their own right. At one time, yes. In 1990, the default rate on student loans was an astounding 22.4 percent, according to the U.S. Department of Education. But improved management of the loan program and heightened responsibility on the part of student loan holders saw the default rate fall to 5.4 percent by 2001. In 2005 it was 4.6 percent.

We commend these credit unions and the state for coming to the rescue of this vital form of college financial aid. Without these loans, higher education would not be possible for thousands of Illinois students.