The Student Empowerment Fund
The Office of Illinois State Treasurer Michael W. Frerichs is committed to investing in Illinois students and professionals. In 2019, Treasurer Frerichs spearheaded the effort for his office to be authorized to create a new financial program to help Illinoisans cover the financial costs associated with their education. The Student Investment Account Act (110 ILCS 991) permits the Office of the Illinois State Treasurer (“Treasurer”) to establish the Student Empowerment Fund, which will invest up to five percent (5%) of the State Investment portfolio on a continuing and recurring basis, approximately $1 billion as of September 2022, in opportunities to provide affordable and responsible education loan products to Illinois residents. These products may include loans to refinance existing student debt, tuition loans for current students, and other innovative financing products.
Why Invest in Student Loans?
For the 2020-2021 academic year, annual costs (adjusted to 2020 dollars) for tuition, fees, room, and board were estimated to be $21,300 at public four-year institutions and $49,300 at private four-year nonprofit institutions. During those same years, the Federal Direct loan limits for first-year dependent and independent undergraduates were $5,500 and $9,500, respectively.
Increasingly, private student loans fill the gaps that federal loans, grants, and scholarship aid fail to cover. Students can and have found themselves choosing between taking on expensive private debt or dropping out of school. The cost of higher education can cause graduates to delay home purchases, retirement savings, business ventures, and other major economic decisions.
The Student Empowerment Fund aims to alleviate student debt burdens in Illinois and make it possible for more students to pursue higher education. It is an investment in Illinois' future and part of a comprehensive approach at the Treasurer—which includes nationally recognized college savings accounts—to improve access to higher education.
By investing with long-term capital, the Treasurer aims to deliver education finance products at competitive rates that are advantageous to Illinois students and professionals. Alleviating inequalities in student lending is a critical step towards economic equity and prosperity.
Research and Strategic Planning
To prepare for the launch of the Student Empowerment Fund, the Treasurer took a wide-ranging approach to understand and analyze the student loan landscape. To support this endeavor, the Treasurer formalized partnerships with the Milken Institute, the Student Borrower Protection Center (“SBPC”), SL Capital Strategies, Hinshaw & Culbertson LLP, and Chapman and Cutler, LLP; spoke to numerous stakeholders and Illinois constituents; hosted virtual information-gathering panels; and issued several requests for information and services related to the Student Empowerment Fund.
Student Empowerment Fund Program Structure and Goals
The Student Empowerment Fund will not be a direct lending program. Instead, the Treasurer will make investments with existing firms that offer competitive student loan offerings. Throughout 2023, information regarding the programs and products developed under the Student Empowerment Fund will be featured as they become available at Illinois.Treasurer.gov.
Partnerships to Date
S L Capital Strategies
The Student Borrower Protection Center (SBPC) is a nonprofit organization solely focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers' rights, and advance economic opportunity for the next generation of students. As a partner with the Illinois State Treasurer, the SBPC provides insights on borrower-friendly program design, consumer protections, and current events that impact the student lending market.
Hinshaw & Culbertson, LLP
S L Capital Strategies (SLCS) is an independent strategic and financial advisory services firm with expertise in student loans and municipal sectors. As the strategic investment advisors to the Student Empowerment Fund, SLCS provides product and program design recommendations, financial modelling, and financial markets advisory services, amongst other functions.
Student Borrower Protection Center
Hinshaw & Culbertson LLP (Hinshaw) is a national law firm with over 400 lawyers. Among their areas of expertise, Hinshaw focuses on consumer financial services for non-profit and for-profit clients. As advisors to the Student Empowerment Fund, Hinshaw serves as expert outside legal counsel, providing recommendations on program design, risk management, and program oversight.
Chapman and Cutler, LLP
The State of Illinois is represented by Chapman and Cutler LLP in connection with the Student Empowerment Fund.
The Milken Institute
The Milken Institute is a nonprofit, nonpartisan think tank that publishes research and hosts programming and conferences that apply innovative, market-based solutions to social issues. Through our partnership, they spearheaded the development of a comprehensive market study of the student loan market, issues, and possible solutions. The Milken Institute published their findings and recommendations in a report titled New Models for Funding Post-Secondary Education in Illinois. Acknowledging current market needs, the report also provided potential solutions and recommendations. Click here to read the report.
How Can Institutions, Borrowers, and Organizations Participate?
Student loan providers and other institutions including, but not limited to, investment banks, student loan service providers, financial technology companies, consumer advocates, universities, and education success organizations interested in collaborating with the Treasurer should reach out to SEF@illinoistreasurer.gov.
Our office has partnered with ISL Education Lending to deliver a low-interest student loan program to borrowers who meet certain credit or co-signer criteria. Prospective borrowers can access the prequalification resources and online application via the ISL Education Lending website.
As the Student Empowerment Fund scales, the program will partner with a variety of reputable lenders with different requirements to ensure Illinois residents with varied lending needs have access to higher education
All information regarding RFPs and RFIs is posted on the Treasurer’s Procurement page. To receive automatic email notifications when new procurement opportunities are issued, sign up for the procurement notification system.
The Milken Institute is a nonprofit, nonpartisan think tank that publishes research and hosts programming and conferences that apply innovative, market-based solutions to social issues. Through our partnership, they spearheaded the development of a comprehensive market study of the student loan market, issues, and possible solutions. The Milken Institute published their findings and recommendations in a report titled New Models for Funding Post-Secondary Education in Illinois. Acknowledging current market needs, the report also provided potential solutions and recommendations. Click here to read the report.
References:
- “Table 330.10. Average undergraduate tuition and fees and room and board rates charged for full-time students in degree-granting postsecondary institutions, by level and control of institution: Selected years, 1963-64 through 2020-21,” National Center for Education Statistics, last modified December 2021.
- “Subsidized and Unsubsidized Loans,” Federal Student Aid, Accessed 09/2021.
- “Federal Student Aid at a Glance,” Federal Student Aid, last modified Spring 2017.
- “Student Loan Debt by State,” Education Data, April 2021.
- “Report: Student loan debt delays homeownership by seven years,” Washington Post, October 19, 2017.
- “Insights into College Data,” College Insight, Accessed 03/2021.
- “Disparate Debts: How Student Loans Drive Racial Inequality Across American Cities,” Student Borrower Protection Center, June 2020.
- "Student Loan Debt Statistics," Education Data, July 2022.