ILLINOIS CSA PROGRAM WOULD BE THE LARGEST IN THE COUNTRY & MAKE IT 3 TIMES MORE LIKELY LOW-INCOME STUDENTS WOULD ENROLL IN COLLEGE

On a bipartisan vote of 40-15-0, Children’s Savings Account legislation (HB2237) passed out of the Illinois Senate today, bringing Illinois one step closer to making higher education a reality for more students by expanding access to college savings accounts for children when they are born. Heartland Alliance and the Illinois Asset Building Group, along with dedicated partners, has long advocated for the creation of a CSA Program.

HB2237, sponsored by Representative Robyn Gabel and Senator Pat McGuire, expands the existing Illinois Bright Start College Saving Program, so that beginning in 2021, all children born or adopted in Illinois will receive a $50 seed deposit into a 529 college savings account at birth.

“We should be helping children build a financially secure future from day one.” said Representative Gabel. “Children’s Savings Accounts provide both hope and the means to expand educational and economic opportunity for Illinois families.”

A small amount of savings can have a substantial impact on whether or not a child attends and graduates from college. Research indicates that children from low-income households with college savings of $500 or less, are three times more likely to enroll in college and four times more likely to graduate, than those without college savings accounts.

“This program removes barriers to saving for college and supports a family’s aspirations for their child’s future,” said Jody Chong, Project Manager for Heartland Alliance. “The 65 CSA programs around the country have shown us that CSAs are a powerful tool. We are excited for Illinois to join that list of communities helping its children access higher education.”

Illinois State Treasurer Michael Frerichs, who is championing this initiative and whose office will implement the program, can work with local government, community foundations, and other partners to create matched savings incentives and other opportunities for low-income families.

“We are excited to provide this opportunity for children in Illinois. Every child should have an opportunity to afford to attend college,” Illinois State Treasurer Michael Frerichs said. “A child is three times more likely to attend college if they know a college savings account has been set up in their name. Starting a college savings account will put our children on the road to success.”

“A $50 investment in every Illinois newborn will reap great rewards for that child and our entire state. The investment will stimulate saving for college by parents. It will let kids know that we believe them to be college material. And putting college within more families’ reach will help close our state’s income gap, upskill our economy, and produce healthier, more civically-engaged Illinoisans,” said Senator McGuire.

If signed into law by Governor Pritzker, Illinois will become the largest CSA program in the country, joining a number of states that are leveraging their existing 529 College Savings Plans to help families save for college.

“This moment is more than 10 years in the making! We as parents understand and have been spreading the word about the impact that college savings can have on our children’s mindsets. This program will help them get excited and determined to go to college and we are glad that the state can now work with us to help make our dreams a reality,” said Rosazlia Grillier, Co-President of POWER-PAC Illinois.

Speaking about the importance of saving, Reemaa Konkimalla, a parent in Chicago, said, “Savings are very important to me, as a woman, wife , mother and a family budget planner. I learned the value of savings at a very young age and it has remained with me ever since. Hence when I became a mother it was important that my son at a tender young age understand and value the importance of money and how best one can save and accumulate wealth.”

The bill adopts policy recommendations from the bipartisan Illinois Children’s Savings Account Taskforce and from Heartland Alliance’s report on CSAs in Illinois. The Illinois CSA program will be a public-private partnership, and we anticipate that it will be supported with funding from both governmental and private philanthropy sources.

“Fostering early childhood development and expanding opportunities to obtain postsecondary education and training for all Illinois children through a Children’s Savings Account program is a dream come true,” said Woodstock Institute President Dory Rand. Rand served as a co-chair of the Illinois Children’s Savings Account Task Force created by the Illinois General Assembly in 2009. “I saw the promise of these programs when I administered the first CSA program in Illinois from 2004 to 2007. Since then, a growing body of research has documented the positive impacts for kids and families of these programs.”

View the factsheet for more information.

On a vote of 55-0-0, the Consumer Fairness Act of 2019 (HB88) passed out of the Senate today with unanimous and bipartisan support. This legislation brings long-overdue relief to consumers who are trying to pay off their debts and achieve financial stability.

“The Consumer Fairness Act gives a fighting chance to thousands of Illinoisans who, up to this point, have been faced with the crippling reality of years of debt accumulation with a 9% interest rate,” said Kevin Herrera, staff attorney at the Sargent Shriver National Center on Poverty Law. “Critically, this new legislation also provides clarity around the debt collections process, letting people know what debts are being collected on ─and how long the collections process will last ─ sooner. We are thrilled that Illinois is on its way to joining several other states around the country in leveling the playing field between people who owe judgment debts and the collections industry.”

Nearly one in five Illinois consumers have debt that is in collections.[1] For decades, Illinois’ laws have made it difficult for families to pay their debts while also meeting their basic needs because the automatic interest rate on judgments is set so high, at 9%. As a result, Illinois has one of the highest bankruptcy rates in the country.[2]

Moreover, the burden of debt falls disproportionally on communities of color. In Illinois, predominantly nonwhite communities have twice as many individuals in collections as in predominantly white communities.[3]

“The racial wealth divide is massive in Illinois, with white households having 29 times more net worth than black households,” said Jody Blaylock, Project Manager for Financial Justice Policy at Heartland Alliance. “HB88 is an important step towards closing that divide by helping families get out of debt and build financial security.”

A coalition of legal aid and community organizations, along with Representative Will Guzzardi and Assistant Majority Leader Senator Iris Y. Martinez, led efforts to pass HB88 in the Illinois General Assembly to help consumers who are stuck in debt.

“With debt judgments collecting 9% interest for up to 26 years, debt is plaguing families across this state,” said lead bill sponsor Representative Will Guzzardi. “This legislation brings much-needed relief to Illinoisans who are trying to balance their budgets and get ahead.”

“The people of Illinois deserve the opportunity to get ahead,” said Assistant Majority Leader Senator Iris Y. Martinez, lead sponsor for the bill in the Senate. “I am proud to sponsor this legislation, which will help low-income families become financially stable.”

Under our current law, judgments accrue 9% interest for up to 26 years and the Consumer Fairness Act of 2019 is an important step towards giving all Illinoisans the opportunity to thrive by decreasing the post-judgment interest rate from 9% to 5%, and decreasing the timeframe to collect on a debt from 26 to 17 years. Taken together, these reforms will make debt more manageable and help families more quickly balance their budget and build financial security.

“Debt collection laws should reflect modern realities and treat everyone fairly,” said Ashlee Highland, Supervising Attorney at CARPLS. “The changes in HB88 will allow many of our clients to pay off their judgments rather than being saddled with financially debilitating wage garnishments, or filing for bankruptcy.”

A coalition of legal aid and community organizations urges the Governor to sign HB88 into law, ensuring that Illinoisans have a fair shot at paying their debt.

Check out the fact sheet for more information.

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[1] Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer (date accessed: May 2, 2019). Found at: https://www.philadelphiafed.org/eqfx/webstat/index.

[2] Prosperity Now Scorecard. 2019. Found at: https://scorecard.prosperitynow.org/data-by-location#state/il

[3] Illinois Debt Collection Fact Sheet. National Consumer Law Center. 2018.

By Sarah Martin, Policy & Advocacy Intern for Heartland Alliance

IABG advocates for policies that address the growing racial wealth divide, expand savings opportunities, and protect Illinoisans from wealth-stripping financial products and practices. Since the legislative session began in January, we have supported bills in the Illinois General Assembly that would cap interest rates on title loans, create universal children’s savings accounts, reform debt collection practices, and more. Here is an update on our 2019 policy priorities.

Strengthen Consumer Protections

HB2468 – Fair Lending Act: Caps interest rates on auto title loans at 36%.

HB2468 has received significant bi-partisan support from legislators, and currently has 42 co-sponsors. It passed out of committee unanimously and is waiting to be called for a vote on the Floor of the House. Learn more about the bill.

Oppose HB2825 – Regulatory Sandbox Act: Creates a barebones sandbox initiative, which allows companies to test “innovative” financial products for one year without commonsense consumer protections

Due to our opposition, HB2825 is not moving forward this year. This is great news for Illinois consumers who won’t bear the burden of companies testing risky financial products. 

Expand Access to Higher Education

HB2237 – Universal Children’s Savings Accounts: Automatically provides a $50 seed deposit into a 529 college savings account for every child born or adopted in Illinois and gives the State Treasurer’s Office the ability to develop savings matches and incentives.

After a lot of great work from IABG partners and the State Treasurer’s office, HB2237 passed out of the House and is now in the Senate Appropriations II committee. Read more about the bill, and stay tuned for future action alerts.  

HB217 – Ban the Box in Higher Education: Prohibits Illinois higher education institutions from asking about an applicant’s criminal record in the admissions process.

HB217 did not have enough support to advance this session. We will continue working to move this campaign forward in the coming months.

Reform Burdensome Debt Collection Practices, Fines, & Fees

HB88 (Previously HB281) – Debt Collection Reform: Lowers the post-judgment interest rate and decreases the time frame to collect on a judgment.

HB88 passed unanimously out of the House and is currently in the Senate Judiciary committee. Download the fact sheet to learn more about the legislation.

SB1786 – Driver’s License Suspension Reform: Prohibits driver’s license suspension for non-moving violations, including parking and tollway violations.

SB1786 passed out of the Senate, and has been assigned to the Transportation: Vehicles & Safety Committee in the House. Check out the License to Work website for more information.

Expand Access to Safe & Affordable Financial Products

SB1332 – Illinois Bank On: Creates a statewide “Bank On” program that promotes access to safe and affordable checking accounts, which are foundations for financial success.

SB1332 passed out of the Senate unanimously, and is now in the House. We will keep working to advance the bill this session.  

More to Come

We have made some great advances so far this legislative session, and there is still a lot of work to be done to advance economic stability for all Illinoisans. Sign up for our emails and follow us on Twitter and Facebook to stay up to date and receive action alerts for these bills that support equity and opportunity in Illinois.