Illinois State Agency Proposes Bond to Fund Increases in the State's College Grant Program
The Illinois Student Assistance Commission (ISAC) is proposing to issue 10-year taxable revenue notes or bonds to increase funding for the state’s college grant program. The bonds would provide $100 million a year in additional funding for the MAP grant program on top of current state appropriations of $405 million. This would increase the number of recipients to as many as 200,000 from the current 140,000.
Demand for MAP grants significantly exceeds the current funding. The funding for the 2010-11 school year ran out on April 18, 2010. From April 19, 2010 to December 10, 2010, a total of 127,326 qualified applicants were denied MAP grants because of inadequate state funding. The commission’s bond proposal would provide enough funding for one quarter to one half of the eligible students currently denied MAP grants.
Low income students who receive college grants are more likely to graduate and get better jobs. The increase in state income tax revenue from these college graduates is sufficient to cover the cost of the grants. The commission’s proposal would use the state income tax revenue from the MAP recipients to repay the bonds.
The bonds would not be guaranteed by the state, but data has demonstrated that about 90 percent of MAP grant recipients remain in the state for 10 or more years after graduation. MAP grant recipients also earn higher salaries, sufficient to repay the 10-year bonds.
The proposal would need to be adopted by the state’s higher education board at its meeting on February 15 and the Illinois General Assembly would need to pass legislation allowing the use of the state income tax revenue from MAP grant recipients to repay the debt.
If the Illinois program is successful, other states may initiate similar programs to start or supplement state college grant programs.
The Illinois commission’s proposal is a clever variation on an idea suggested by an article published in the July 2007 issue of the Journal of Student Financial Aid, The Financial Value of a Higher Education. That article demonstrated that replacing loans with grants in the financial aid packages of low income students would pay for itself in less than a decade through increased federal income tax revenue. College grants not only help low income students pursue a college education, but also provide the government with a good financial return on its investment.