It costs an arm and a leg to attend college in Illinois. The Institute for Government and Public Affairs 2008 report on higher education found that state funding has dropped by 17.9 percent for public universities and 13.1 percent for community colleges in recent years. As a result, schools have dragged more cash out of their students by way of tuition and fees. As the National Center for Public Policy and Higher Education laid out late last year, the average net cost -- one year’s tuition, fees, room, and board minus financial aid -- at a four-year public school reached a whopping 35 percent of the state’s median family income, a 16 percent boost since 2000.

These days, the only recourse is public and private loans. Not surprisingly, the student debt burden is growing considerably. According to new research from the Project on State Debt, 56 percent of Illinois graduates in the class of 2007 -- the last year for which data is available -- left school with debt. The average amount came to $18,500. And while Illinois invests considerably in its main financial assistance program -- the Monetary Award Program -- the ratio against federal dollars received has decreased from 89 percent to 82 percent since 1993, meaning it hasn't kept up with tuition spikes or inflation.

In steps the private market, which lawmakers nationally are working hard to reform. Sen. Dick Durbin has spoken eloquently about the problems with the Federal Family Education Loan (FFEL) program, which simply costs taxpayers too much. The American Prospect's Tim Fernholz nicely summarized the state of play this morning:

Currently, the government spends a lot of money unnecessarily guaranteeing student loans through private lenders; ending that program and lending directly to students would save between $4 billion and $6.5 billion a year that could be plowed back into Pell Grants to expand college access even further. In response, lenders -- and the politicians whom they donate to -- accuse the government of trying to "capture" private-sector profits without ever explaining why it's the government's job to provide those profits in the first place.

President Obama issued a dramatic change of course when he unveiled his 2010 budget, making the Pell Grant program permanent and increasing the maximum awards by $200 next year. He hopes to pay for the aid by replacing subsidized loans with direct government lending, which the Congressional Budget Office estimates would save $94 billion over the next decade.

Like every other potential law in Washington that might effect their bottom line, the banks are pushing hard to beat back the reform. Thankfully, the House and Senate released a compromise 2010 budget resolution (PDF) giving the Obama administration a chance to push its plan using budget reconciliation, allowing for a simple majority vote on the measure. But in the fine print, there is some language that will delight the banks and lawmakers like Sen. Ben Nelson with parochial interest in the private lending industry, according to Inside Higher Ed:

But in a clear nod to Congressional supporters of the bank-based loan program, the compromise budget blueprint also includes a non-binding "Sense of the Congress" resolution that praises the role of lenders and guarantee agencies and requires that "any reform of the federal student loan programs ... include some future role for the currently involved private and non-profit entities." 

Whether thousands of Illinois students catch a break on college cost will depend in large part on the heft of the banking sector. If they continue to "own the place," young people will continue to pile up debt.

Image used under a Creative Commons license by Flickr user JanetandPhil.