By Jamey Dunn
The state's prepaid tuition program, College Illinois, is no longer fulfilling its mission, according to the director of the commission that administers the program.
The Legislative Audit Commission today reviewed an audit of the Illinois Student Assistance Commission (ISAC) that has caused ISAC and College Illinois to come under scrutiny. The program is being investigated by the legislature, the secretary of state, the auditor general, the inspector general and the attorney general. Gov. Pat Quinn replaced the majority of ISAC commissioners in the fallout. For more on the audit, see Illinois Issues May 2011.
ISAC has cut off sales of new prepaid tuition contracts until problems with the program can be resolved.
The audit found problems with the way ISAC got investment advice. After ISAC took the questionable advice, the program lost a $12.78 million investment in a bank that went under.
“We will make sure that these findings do not repeat,” said John Sinsheimer, the interim executive director of ISAC. He said while he did work as ISAC's chief financial officer when the $12.78 million in investment was made, he was not involved in the decision. Sinsheimer served as director of capital markets for the state before he returned to ISAC. “We will no longer do direct investments of this nature. Period.”
Critics say many of the investments made by ISAC for the program are too risky. “This whole world of alternative investments, which over the last three years the past board embarked on, I think it’s too risky. It’s not what parents signed up for,” said Rep. Jim Durkin, a Republican from Western Springs.
College Illinois is underfunded by about 30 percent. Sinsheimer said that the program is in no immediate danger of running out of money, but it could have problems paying out by 2020. “We can’t solve this problem by ourselves, and the stock market won’t fix the problem, either. It’s going to require working with the university systems and working with the General Assembly and stakeholders to develop a solution that works for everybody.”
Sinsheimer said among the 10 other states that offer similar programs, some have had to rework their plans, and Illinois has many options to consider. College Illinois currently sells tuition by the semester. He said that one option might be requiring people to instead buy credit hours, which can vary greatly by semester. “There are a number of potential solutions out there that we believe should be discussed openly with the stakeholders.”
The most extreme option Sinsheimer mentioned was permanently cutting off sales of new contracts and asking the General Assembly to find the money — in addition to College Illinois’ $1.1 billion fund — needed to pay off all outstanding contracts. However, Sinsheimer said he thinks Illinois should have a program like College Illinois. “But I think it’s lost its way, and it has become far too expensive for the average Illinoisans too afford.”
Sinsheimer said the program is no longer doing what it was created to do. “We need to fix College Illinois,” he said. “In essence, it has drifted from its policy goal, which was to help make college affordable for all Illinoisans.” He said that contracts are “predominantly” held by residents of the northern suburbs of Chicago and the collar counties because contracts were “sold very aggressively” to state workers in the 1990s. Sinsheimer said that there is also “kind of a blip around Springfield.”
He said that increasing tuition costs are outpacing investments. “There is no way College Illinois could invest to meet that kind of growth. This is a problem that was destined to happen no matter what College Illinois invested in.”
Sinsheimer said that discounts from universities could help get the program get back on its feet. “College Illinois pays full sticker price to all of the universities.”
Sen, Bill Brady, a Bloomington Republican, said that ISAC must have set prices too low for contracts, mismanaged investments or both. Sinsheimer acknowledged that the contracts were priced too cheaply in the “early years of the program.”
Brady said that if universities were to give ISAC a break on tuition costs, it would mean that they were being asked to “subsidize” costs for a select group of students who bought contracts.
But Sinsheimer said it is something colleges already do for many students.
“When my daughter went to college, before we even accepted, she got a letter offering her a 5 percent discount encouraging her to go. So did my son,” he said. “The schools are already offering discounts and subsidies — if you will — to students to attract them, and there’s nothing you can do about that. We just need to have that in this program in order to make it more viable because it can’t keep up with tuition growth. There’s just no way that it can do that.”