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NCHELP Spring Convention What Schools And Families Want

NCHELP Spring Convention What Schools And Families Want. This presentation does not constitute formal policy or legal advice and should not be relied upon as such. What Schools and Families Want Agenda. Federal Student Loans

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NCHELP Spring Convention What Schools And Families Want

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  1. NCHELP Spring ConventionWhat Schools And Families Want This presentation does not constitute formal policy or legal advice and should not be relied upon as such.

  2. What Schools and Families Want Agenda • Federal Student Loans • Trends in projected market share for FFEL and Direct Lending programs • Schools rate the strengths and weaknesses of the programs • Updated information on “Who’s Going Direct?” • Private Student Loans • Cutback in private loan availability leading to sharp increase in federal loans • Schools remains concerned about availability of private loans for 2009-10 • Schools utilizing variety of strategies to deal with expected shortfall • Financial Literacy programs • Recent research suggests significant room for improving financial literacy of students • Schools recognize importance of programs but suffer from resource constraints when it comes to implementation • $500 million fund likely to lead to explosion of on-line offerings catering to college population

  3. SLA Flash Survey: Trends in FFEL and DIRECT Lending ProgramsCurrent Plans for FFELP Participants (Overall) - Respondents Survey question: Which description most accurately describes your school's federal student loan plans for the 2009-10 school year? Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  4. SLA Flash Survey: Trends in FFEL and DIRECT Lending ProgramsCurrent Plans for FFELP Participants (By School Type] Survey question : Which description most accurately describes your school's federal student loan plans for the 2009-10 school year? Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  5. SLA Flash Survey: Trends in FFEL and DIRECT Lending ProgramsReasons for Staying in FFELP Survey question: Please indicate the importance of each factor in your school's decision to remain a participant in FFELP. Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  6. SLA Flash Survey: Trends in FFEL and DIRECT Lending ProgramsReasons Considering (or Switching To] DL Program Survey question: Please indicate the relative importance of each factor in your decision to switch to Direct Lending (or to consider making the switch) Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  7. What Schools and Families WantWho’s Going Direct? Source: SLA research, May 2009

  8. SLA Flash Survey: Trends in FFEL and DIRECT Lending ProgramsImpact of Obama Budget Blueprint on FFEL/DL Decision Survey question: To what extent has the Obama Administration's recent budget proposal to shift entirely to Direct Lending had an impact on your school's decision-making process for 2009-10? Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  9. SLA Flash Survey: Lender Customer Service Loan Processing Ratings Survey statement: This lender processes transactions (cash & non-cash) in a timely manner after loans are certified. Source: SLA Flash Survey: Lender Customer Service Survey, October 2008

  10. SLA Flash Survey: Lender Customer Service Lender Representative Ratings Survey statement: This lender's representatives are prompt and responsive in addressing questions and problems. Source: SLA Flash Survey: Lender Customer Service Survey, October 2008

  11. SLA Flash Survey: Lender Customer Service On-Line Application Ratings Survey statement: This lender's on-line application process for borrowers is user-friendly. Source: SLA Flash Survey: Lender Customer Service Survey, October 2008

  12. SLA Flash Survey: Lender Customer Service Value-Added Services Ratings Survey statement #3: This lender provides value-added services including default prevention, financial literacy and/or detailed reporting on loan activity. Source: SLA Flash Survey: Lender Customer Service Survey, October 2008

  13. SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs Satisfaction Ratings for Direct Lending Survey question: Describe your level of satisfaction with the Direct Lending program for each of the factors described below. Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)

  14. SLA Flash Survey: Lender Customer Service Reasons for Selecting Lender As Best • Loan processing • “Unlike other large national lenders, they don't seem to tell our students we have the funds when we don't. We don't have very many issues, but they are very responsive at fixing any issues.” • Value-added services • “They have extensive Financial Literacy materials on their web site for students to access when/where they want to.” • Customer service to borrowers • “Students who have had reason to call this lender with questions or concerns routinely stop back by to tell me how great the service was.” • Customer service to financial aid office • “We rarely have issues that need to be resolved, and their customer service center is the best we've worked with.” • Commitment and Consistency • “In looking back 9 months to 1 year, this is our only lender who has maintained the same level of contact with the school and kept the same lender rep as our contact.”

  15. What Schools and Families WantThe Geography of FFELP program • Thirteen states had at least 90% of the institutions within their state participating in the FFEL Program in 2007-08: • West • Alaska • Hawaii • Montana • New Mexico • Utah • Wyoming • Midwest • Nebraska • North Dakota • South Dakota • East • Pennsylvania • New Hampshire • Vermont • South • Mississippi

  16. What Schools and Families Want Agenda • Federal Student Loans • Trends in projected market share for FFEL and Direct Lending programs • Schools rate the strengths and weaknesses of the programs • Updated information on “Who’s Going Direct?” • Private Student Loans • Cutback in private loan availability leading to sharp increase in federal loans • Schools remains concerned about availability of private loans for 2009-10 • Schools utilizing variety of strategies to deal with expected shortfall • Financial Literacy programs • Recent research suggests significant room for improving financial literacy of students • Schools recognize importance of programs but suffer from resource constraints when it comes to implementation • $500 million fund likely to lead to explosion of on-line offerings catering to college population

  17. What Schools and Families WantWho’s Taking Out Those Private Student Loans? • From Project on Student Debt Analysis of NPSAS Data: • Percentage of all undergraduate students who borrowed private student loans jumped from 5 percent in 2003-04, to 14 percent in 2007-08. • At proprietary (for-profit) colleges and universities, the percentage of students who took out these loans skyrocketed from 13 percent in the 2003-04 school year, to 42 percent last year. • One in four private student loan borrowers in 2007-08 didn’t take out any federal Stafford loans that year

  18. What Schools and Families Want How Has The Supply of Private Student Loans Been Impacted by Credit Crunch? • Supply of private loans declined rapidly in August-September 2008… • Lenders representing over 30-35% of private loan market left the market • Credit line pulled: College Loan Corp., Education Finance Partners • Parent company afflicted by sub-prime issues: Wachovia, CampusDoor • Inability to access ABS market: Key Bank, Bank of America (TERI) • While incumbents have not picked up the slack… • Securitization markets have been relatively dormant since 2007 • Recent Sallie Mae deals have been done at extremely high prices • Concerns over consumer credit quality has plagued student loans • Sallie Mae expected to write-off $1 billion in private student loans in 2009 • Limited access to capital • And new entrants have added much new supply into market • Discover entered market in 2007 • Credit unions starting to increase their market presence • Peer-to-peer lenders, Fynanz and GreenNote, met with limited success

  19. What Schools And Families Want How Have Students Adjusted To The Decline in Availability of Private Loans? • While traditional funding sources to finance a college education have been whacked… • Home equity has plummeted given nationwide declines in home prices • 529 plans have suffered in the bear market which reduced equity values over 50% • Students turning to federal loans in record numbers • According to the Department of Education, federal loans have seen 20.8% growth through the end of February for the 2008-09 academic year • Stafford unsubsidized loans increased by $2,000 in July 2008 • 10% increase above trend in federal loan borrowings amounts to about $7 billion in incremental borrowing • Parent PLUS loan growth appears to be flat • Sallie Mae, the largest FFELP lender, saw 57% growth in Stafford volume in their internal brands for 2008 while Parent PLUS volume was flat over the same timeframe • Leading indicator, FAFSA filings, are up 20.8% in first quarter, so expect this trend of increased federal loan borrowings to continue

  20. What Schools and Families WantStudent Concern About Transparency Selected comments from SLA Private Student Loan Ratings survey: • “While the interest rate was not disclosed on the website after being approved without a cosigner, I called the customer service line and they were very helpful: they told me what my rate was, which was prime plus 2 or 3%. I asked if I could get a lower rate with a cosigner and they said I could try, so I did and got a much lower rate.” • “They want you to sign the promissory note before you know what the interest rate is. The interest rate is not part of the promissory note. I had to call their customer service department to find out that my rate would be prime + 1/2%. Why do they expect us to sign a promissory note before we know what the interest rate is?”

  21. What Schools and Families Want Transparent Disclosures • University Credit Union (Maine) • University of Southern California Credit Union

  22. What Schools and Families Want Degree of Concern Regarding Private Student Loans Survey question: How concerned are you about the availability of PRIVATE loans for your students for the 2009-10 academic year? Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)

  23. What Schools and Families Want Prevalence of Lender Lists for Private Loans Survey question: Is your institution planning to provide students with a lender list for private loans for the 2009-10 school year? Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)

  24. What Schools and Families Want Lender Selection Process for 2009-10 Survey question: Please describe your institution's process for developing a lender list for private student loans. Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)

  25. What Schools and Families Want Selection Criteria for Private Lenders Source: Survey of SLA Clients, June 2009

  26. What Schools and Families Want Lenders On Private Loan Lists Survey question: How many lenders does your institution plan to have on your lender list for private loans for the 2009-10 academic year? Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)

  27. What Schools and Families Want Strategies For Challenging Times Survey question: What are your current strategies to help students find private, nonfederal loans for the 2009-10 school year? Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)

  28. What Schools and Families WantOther Strategies/Observations • “Reach out to lenders who may be coming out with new loan programs that have favorable terms.” • “We're only recommending private loans to foreign students who will need to provide a co-signer. Although we're not recommending PELs to other types of students, we are leaving it up to them providing counseling on good and bad points of PELs vs federal loans.” • “We package students with a PLUS or Grad/PLUS loan, those seeking alternative loans [must] request [one] or are due to PLUS denial.” • “The issue is not availability. the banks keep raising their interest rates and fees. We are a grad business school only and even our students who have excellent scores are getting high rates. If students get co-signers, they get much better rates.”

  29. What Schools and Families Want Agenda • Federal Student Loans • Trends in projected market share for FFEL and Direct Lending programs • Schools rate the strengths and weaknesses of the programs • Updated information on “Who’s Going Direct?” • Private Student Loans • Cutback in private loan availability leading to sharp increase in federal loans • Schools remains concerned about availability of private loans for 2009-10 • Schools utilizing variety of strategies to deal with expected shortfall • Financial Literacy programs • Recent research suggests significant room for improving financial literacy of students • $500 million fund likely to lead to explosion of on-line offerings catering to high school/college populations • Schools recognize importance of programs but suffer from resource constraints when it comes to implementation

  30. What Schools and Families WantFinancial Literacy Research • Negative trends at the high school level • The financial literacy of high school students has fallen to its lowest level ever, with a score of just 48.3 percent. • College students score 30% higher than high school students • Scores increase by each grade level in college • In terms of their topical strengths and weaknesses: • Strengths: Income and Spending • Weaknesses: Money Management and Saving • College student test results question efficacy of high school courses in personal finance or money management • May not be appropriate until students care (situation specific) • Simulations/Interactive exercises seem particularly effective Source: The Financial Literacy of Young American Adults, by Lewis Mandell, Ph.D.

  31. What Schools and Families Want$500 Million College Access and Completion Innovation Fund • Proposed in 2010 budget with $2.5 billion commitment over 5 years • To fund outreach and literacy programs on state-by-state basis • Support federal/state partnerships to increase college completion rates • Recent credit card bill also may spur literacy programs • Education/Treasury/Office of Financial Literacy to study current activities • Looking into funding these programs through credit card transaction fees • Expect an explosion of online financial literacy programs • College Foundation, Inc. • NSLP • USA Funds

  32. What Schools and Families Want Increased Interest in Financial Literacy Programs Survey question: Have you seen an increased interest in financial literacy by the students at your institution? Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)

  33. What Schools and Families Want Prevalence of Financial Literacy Programs Survey question: Does your institution currently offer a financial literacy program beyond standard entrance and exit loan counseling to your students? Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)

  34. What Schools and Families Want Financial Literacy Topics Survey question: What are the topic(s) covered by your financial literacy training? Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)

  35. What Schools and Families Want Content Delivery for Financial Literacy Programs Survey question: How does your institution administer the financial literacy program? Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)

  36. What Schools and Families WantRecommended Financial Literacy Sources • Student groups • Students in Free Enterprise (SIFE) association • Schools • Brigham Young University • James Madison University • Midwestern University • Montgomery College • Texas Tech’s Red to Black Program • University of Georgia • University of Wisconsin-Madison • Virginia Tech • Media • Magazines: Money, Kiplinger • Online: Motley Fool, CNN Money

  37. What Schools and Families WantRecommended Financial Literacy Sources (continued) • Guarantors • TGSLC – Positive Balance • NSLP – Financial Literacy Online • NY HESC • USA Funds Life Skills • EdFund • MGSLP • Non-Profits/Associations • NASFAA • National Endowment for Financial Education (NEFE) – Cashcourse.org • WASFAA Spring Training 2008 – Developing and Delivering Financial Literacy Program

  38. What Schools and Families WantQuestions ????

  39. Student Lending AnalyticsBackground • Founded in 2007 • Independent Research and Advisory Service with NO lender affiliations • Mission: Find best lenders for students through an analytically rigorous and comprehensive process • Services • SLA grades private loans with SLA Private Loan Ratings • RFI Management of FFEL and Private Loans • Research • Successes to Date • Managed RFI process at institutions with over $850 million in loan volume • Inside Student Lending, our monthly newsletter, reaches over 5,000 financial aid administrators • Student Lending Analytics Blog has become the go-to source for breaking developments and analysis on the student lending industry • SLA Flash Surveys have included the insights from over 1,500 financial aid professionals on a variety of timely topics • Private Loan Options and the SLA’s 2008 Alternative Loan Guide provides students and financial aid offices with an objective and focused list of private lenders

  40. The Student Lending Analytics ProcessRFI Management

  41. Student Lending AnalyticsResearch Services • Inform financial aid offices on industry developments (implications for their lender lists and relationships) • Student Lending Analytics Blog • Timely insights to developments in student lending industry • Alerts • Legislation, lender exits, earnings calls, industry insight • Monthly newsletter • August – Tips for Lender Lists • Webinars • April – Lessons Learned in Trenches of Lender Selection Process • September – HEOA and Lender Lists • December – Conversation about FFEL and Direct Lending Programs • Surveys (summaries available on our website) • FFEL vs. Direct Lending • RFI Practices • Implementing increased Federal Stafford loan limits • Alternative Loans • Private Loans for International Students • Legislative and regulatory updates • White papers • Help Line to answer questions/resolve issues throughout the year

  42. For more information about SLA contact us at: Tim Ranzetta Student Lending Analytics LLC 650-218-8408 tranzetta@studentlendinganalytics.com www.studentlendinganalytics.com Student Lending AnalyticsContact Information

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