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SPRINGFIELD - Despite warnings that it could result in higher costs for college students, the presidents of Illinois' public universities are backing a plan to sell off the state's student loan portfolio.

The move, expected to be detailed by Gov. Rod Blagojevich in his annual budget address at noon today, is aimed at generating $300 million to $500 million.

The presidents say the proceeds of the sale should be put toward universities, which have seen no significant funding boosts in four years.

"We encourage Illinois to move forward with this initiative," the presidents said in a letter to the governor released Tuesday.

The proposal, which was dumped by lawmakers last year amid concerns that it would drive up the cost of loans for students, is among several higher-education-related plans expected to be outlined by Blagojevich during his speech.

Private lenders seeking a profit would need to charge higher interest rates and fees, opponents of the plan argue.

The governor already has floated a proposal to offer a $1,000 tax credit to students who keep their grades at a B-average or better. That will cost an estimated $90 million.

He also is expected to boost overall spending on universities by 1.9 percent and is expected to increase the Monetary Award Program budget by nearly $8 million.

"Not only will this increase relieve some of the burden on low- and middle-income families, but it will also provide a much-needed balance to reductions in college aid on the federal level," the presidents noted in their letter.

Illinois State University President Al Bowman said he was encouraged by the governor's decision to support a small increase in spending for universities for the first time in four years.

Bowman said he wasn't sure ISU, like other Illinois universities, would have to raise tuition again this year. But he said the additional financial support would soften the blow of any tuition boost.

"This is a small step in the right direction," said Bowman.

Lawmakers, however, are skeptical of the governor's plans.

Senate Republicans surveyed Tuesday expressed concern that public universities were agreeing to a 1.4 percent overall funding increase while the state sells off more than $4.5 billion in student loan assets for a short-term gain.

"It's like having a gun to your head," said state Sen. Dave Luechtefeld, R-Okawville. "They (university presidents) know who is in charge and who's not in charge this session."

"The key for me is going to be seeing whether or not all the money goes back to higher ed, and people who are already paying don't have their terms changed on them," said state Rep. Chapin Rose, R-Mahomet.

The portfolio currently is managed by the Illinois Student Assistance Commission. The presidents are backing the governor's plan on the condition that it doesn't result in cuts to ISAC's work force of about 500 employees.

Democrats, however, say the proposal will benefit the universities, which have been forced to raise tuition in recent years to make up for the shortfall in state support.

"All of the money is guaranteed to go to higher ed in some form or another," said state Sen. Ed Maloney, D-Chicago, who chairs the Senate Higher Education Committee.

Senate President Emil Jones said selling the loans to private companies wouldn't hurt students by driving up loan prices.

Meanwhile, Democrats did say the governor's tuition tax break plan likely will be changed because it would be offered to any family, regardless of financial need.

"It should be based on the financial need of the family," said state Sen. Rickey Hendon, D-Chicago. "I think it's a good plan, but he needs to tweak it a little bit."

Jones and Maloney agreed. "It will probably end up somewhere in the middle," said Maloney.

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