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Student Lending Analytics SLA Flash Survey: Emergency Loans August 27, 2009

Student Lending Analytics SLA Flash Survey: Emergency Loans August 27, 2009. SLA Flash Survey: Emergency Loans Background.

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Student Lending Analytics SLA Flash Survey: Emergency Loans August 27, 2009

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  1. Student Lending AnalyticsSLA Flash Survey: Emergency LoansAugust 27, 2009

  2. SLA Flash Survey: Emergency LoansBackground • Situation: Given the ongoing economic challenges, more schools are emphasizing their emergency loan programs. With the Federal Reserve’s private loan regulations exempting institutional loan programs with certain characteristics, it is incumbent upon schools to review the structure of their emergency loan programs • Survey Goals • Determine the prevalence of emergency loan programs • Analyze the structure of these programs including term, interest rates and eligibility requirements

  3. SLA Flash Survey: Emergency Loans Methodology • Emailed flash survey on August 19, 2009 with due date of August 20th, 2009 • In addition to demographic questions, the survey asked respondents the following questions: • Does your school currently have a short-term (emergency) loan program? • PLEASE CHECK ALL THAT APPLY. How is your short-term (emergency) loan program funded? • PLEASE CHECK ALL THAT APPLY. Who administers your short-term (emergency) loan program? • What is the annual interest rate on your short-term (emergency) loan (e.g. 8%)? • CHECK ALL THAT APPLY. Please indicate eligibility requirements for your short-term (emergency) loan program. • The survey also asked questions for those schools considering the implementation of an emergency loan program

  4. SLA Flash Survey: Emergency Loans Methodology (Cont.) • Responses were normalized for following reasons: • Email addresses that did not correspond with an educational institution were excluded • Several schools provided multiple responses; only one response was analyzed • Responses that included demographic data but incomplete answers to main survey questions were excluded • Overall, there were 192 survey responses analyzed

  5. SLA Flash Survey: Emergency Loans Summary • Overall, 2/3 of survey respondents indicated that they have a short-term emergency loan program with 6% indicating that they were considering starting one up at their institution • 88% of respondents at 4-year public institutions indicated that they had an emergency loan program while 55% of 4-year private institutions had a current program in place • Over 95% of emergency loan programs had been in existence for over 5 years • In terms of funding, the most prevalent source was a donor gift (51% of respondents) with the University’s general fund the next most cited source of funds by 35% of respondents • In terms of program administration, 74% of survey respondents indicated that the financial aid office had primary responsibility while 47% indicated that the business office was responsible for managing the program • In terms of fund size, 62% of respondents indicated that their emergency loan fund had less than $100,000 in funding with only 3% having assets over $1 million

  6. SLA Flash Survey: Emergency Loans Summary • Here were the most common characteristics of the emergency loan programs cited by respondents to the survey: • Almost 2/3 of programs (64%) charged no interest on these loans • The five most frequently cited eligibility requirements were: • Proof of current enrollment: 77% of respondents with emergency loan program in place • Signed promissory note: 74% • No existing emergency loans: 64% • Completed paper application: 54% • Student account in good standing: 46% • The three most common maximum loan limits were: • Between $250 and $499: 36% • Between $500 and $999: 25% • Between $1,000 and $2,499: 14% • 39% of survey participants had no aggregate borrowing limits in place • Most common loan term was “end of academic term” which was selected by 27% of respondents followed next by 30 days (23%) and 60 days (16%) • Note that Federal Reserve regulations on private education loans will exempt loans provided by covered educational institutions if they have a term of 90 days or less

  7. SLA Flash Survey: Emergency Loans Profile of Survey Participants

  8. SLA Flash Survey: Emergency Loans Prevalence Survey question: Does your school currently have a short-term (emergency) loan program? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  9. SLA Flash Survey: Emergency Loans Age of Programs Survey question: How long has your short-term (emergency) loan program been in existence? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  10. SLA Flash Survey: Emergency Loans Emergency Loan Program Funding Survey question: PLEASE CHECK ALL THAT APPLY. How is your short-term (emergency) loan program funded? Note: Other Source includes student fees, campus parking fines, faculty and staff contributions, campus yard sale and advance based on refunds Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  11. SLA Flash Survey: Emergency Loans Administration of Program Survey question: PLEASE CHECK ALL THAT APPLY. Who administers your short-term (emergency) loan program? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  12. SLA Flash Survey: Emergency Loans Size of Fund Survey question: What is the total funding of your short-term (emergency) loan fund? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  13. SLA Flash Survey: Emergency Loans Annual Interest Rate Of Loans Survey question: What is the annual interest rate on your short-term (emergency) loan (e.g. 8%)? Note: Several schools assessed fees ranging from $5 to $10 for students who took out loans under this program Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  14. SLA Flash Survey: Emergency Loans Eligibility Requirements Survey question: CHECK ALL THAT APPLY. Please indicate eligibility requirements for your short-term (emergency) loan program? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  15. SLA Flash Survey: Emergency Loans Maximum Loan Amount Borrowed Survey question: What is maximum amount that student can borrow with each loan? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  16. SLA Flash Survey: Emergency Loans Aggregate Borrowing Limits Survey question: What is maximum amount that student can borrow with each loan? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  17. SLA Flash Survey: Emergency Loans Term of Loans Survey question: What is the repayment term for your short-term (emergency) loan fund? Source: SLA Flash Survey: Emergency Loan Programs, August 2009 (192 respondents)

  18. SLA Flash Survey: Emergency Loans Reasons For Starting A New Program • Among the groups targeted by schools considering the implementation of an emergency loan program were: • For juniors/seniors who cannot pay past due balances and only have one year left of school and for students who are seniors who cannot secure a credit-worthy cosigner • Help economically challenged students facing tough choices: help with car repairs, electric bill, etc. • To address severe financial circumstances on a very limited basis

  19. Thank You • Thank you again for your participation! • Please contact Tim Ranzetta if you have any additional comments or questions regarding this survey • Send email to tranzetta@studentlendinganalytics.com • Phone: 650-218-8408 • Look for more upcoming SLA Flash Surveys in the future • Please provide us with topics that matter to you! • For more information on Student Lending Analytics, proceed to the final six slides

  20. 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, unbiased and comprehensive process • Services • RFI Management of FFEL and Private Loans • Research • Successes to Date • Managed RFI process at institutions with over one billion dollars 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 2,000 financial aid professionals on a variety of timely topics • Dozens of Schools Linking To Private Loan Options and SLA’s 2009 Private Loan Guide which provides students and financial aid offices with an objective and focused list of lenders • SLA Student Satisfaction Surveys measures student satisfaction with lenders

  21. Unlocking the Mysteries of Private Student Loans Student Lending Analytics: Resources Available • SLA Private Student Loan Ratings • 2009 SLA Private Loan Series • 2009 SLA Private Loan Guide • Paying For College Blog • Student Satisfaction Surveys • Coming Soon: Private Loan Quiz

  22. Unlocking the Mysteries of Private Student LoansPrivate Student Loan Ratings • Available at http://www.studentlendinganalytics.com/ratings.html • Featured on front page of New York Times Business • Focused on evaluating eight lenders that appeared most frequently on over 700 school lender lists that SLA researched • Includes the following factors in ratings: • Expected loan cost • Borrower benefit savings • Fee structure • Flexibility of repayment options • Customer service • Financial stability • SLA receives no compensation from any lenders on this list • New Service: Private Loan Insights to capture real-time information about interest rates and approvals

  23. Unlocking the Mysteries of Private Student Loans 2009 SLA Private Loan Series • Most popular post:  Shopping for Private Student Loans Makes a Difference! • Results from 6 student loan applications yields interest rates between 7% - 12% • Before You Apply for a Private Student Loan • Provides checklist of items to complete prior to considering a private student loan • What About Credit Unions? • Explores the increasing role that credit unions are providing in the private student loan market • "Miss A Payment On Your Private Student Loan, You Could See Your Interest Rate Rise" • Highlights two lenders that have clauses in promissory notes which could result in 2% increases in interest rates triggered by one late payment • Borrower Benefits on Private Student Loans • Provides examples of savings opportunities available to private loan borrowers • What Ingredients Go Into the "Secret Sauce"? • Insights into the factors that lenders consider in making their credit decisions • Does It Make Sense To Shop Around For Private Student Loans? • Provides details on new Fair-Isaac policy about the impact of applying for multiple student loans on your credit score (hint:  it helps student borrowers) • The Promissory Note • Highlights the key terms to be aware of when evaluating lender promissory notes • What is the Meaning of "Instant Credit Response"? • Reviews the on-line application process and analyzes the speed of lender credit reviews • Private Loan Fee Structure • Benchmarks most common fees assessed by private lenders for both origination and servicing of loans

  24. The Student Lending Analytics ProcessRFI Management

  25. Student Lending AnalyticsResearch Services • Inform financial aid offices on industry developments (implications for their lender lists and relationships) • Student Lending Analytics Blog • Key resource for thousands of professionals in the student lending industry • Timely insights to developments in student lending industry • Alerts • Legislation, lender exits, earnings calls, industry insight • Monthly newsletters • Webinars • December 2008 – A Conversation about FFELP and Direct Lending • May 2009 – Unlocking the Mysteries of Private Student Loans • August 2009 – What Do Financial Aid Administrators Think About…? • Surveys (summaries available on our website) • FFEL vs. Direct Lending • RFI Practices • Implementing Increased Federal Stafford loan limits • Availability of Alternative Loans • Legislative and regulatory updates • White papers • Help Line to answer questions/resolve issues throughout the year

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