How companies are approaching consumer marketing of student loans and how Sallie Mae does it differently

1. 1 How companies are approaching consumer marketing of student loans and how Sallie Mae does it differently 2008 Southern Association of Student Financial Aid Administrators Conference Crystal City, Virginia Prepared by Sallie Mae Consumer Marketing Department

2. 2 Topics Cost of attendance overview What is direct to consumer marketing? Trends in direct-to-consumer student loan marketing Who is mailing what? What companies are selling mailing lists and how do they acquire them? Sallie Mae’s approach to direct-to-consumer marketing How to opt out of DTC marketing Appendix – Sallie Mae’s bedebtsavvy How students can delay/prevent/opt out of receiving calls/EM's/mailings from consolidation companies. How do these companies acquire the contact info? Who's selling it? Why does Sallie Mae cross sell students when they call in? Why do we try to sell a student Geico insurance if they're calling in to request a deferment/forbearance or a smaller loan payment? How students can delay/prevent/opt out of receiving calls/EM's/mailings from consolidation companies. How do these companies acquire the contact info? Who's selling it? Why does Sallie Mae cross sell students when they call in? Why do we try to sell a student Geico insurance if they're calling in to request a deferment/forbearance or a smaller loan payment?

3. 3

4. 4 2006 Cost of Attendance = $229 billion

5. 5 Demand for Private Education Loans

6. 6 2006 Cost of Attendance In 20 years, average tuition and fees have doubled for private institutions More than doubled for public institutions 05/06 to 06/07 increase for private tuition, fees, room, board is almost 6% to $30,367 For public institutions, increase is just over 6% to $12,796

7. 7 Borrowing for College Today More than half of all college students borrow Total federal loan dollars AY 06/07 = $74B 139% increase in 10 years in number of loans 20+% increase in two years Total private loan dollars AY 06/07 = $23B 1200% increase in 10 years 64% increase in two years 74% of students use credit cards for school supplies 24% report using credit cards to pay some portion of tuition OF NOTE: Section 529 college savings plan assets = $72 billion in just 10 years

8. 8 What is direct to consumer marketing? The promotion of services directly to consumers via broadcast and print media such as television, radio, magazines, mailings, phone calls, billboards, and the Internet.

9. 9 What trends are we seeing in the direct-to-consumerstudent loan marketplace?

10. 10 DTC trends 458 million pieces of direct mail offering student loans were sent last year (Source: Compremedia Dec 2005-Nov 2006) With the cost of attendance rising, more lenders are using direct mail to market student loans than ever before

11. 11 DTC Trends Private Loan messages are typically targeted to students, not parents More messages are from lenders; fewer messages are endorsed by or from schools Consolidation messages often have official/government look and feel Proliferation of print, television and radio advertising in national publications, airline magazines and networks More aggressive on-campus marketing campaigns Print Ads in Airline Mags: Loan-to-Learn has purchased inside front covers of major airline in-flight magazines July-Sept 2006. National Print Ads: My Rich Uncle has run multiple full-page ads in the NY Times, Washington Post and USAToday. TV Ads: Chase has run television ads on CNN. List Companies: Nelnet has purchased SMG (list company). On-campus/Guerilla tactics: My Rich Uncle has been giving packing boxes away on campus.Print Ads in Airline Mags: Loan-to-Learn has purchased inside front covers of major airline in-flight magazines July-Sept 2006. National Print Ads: My Rich Uncle has run multiple full-page ads in the NY Times, Washington Post and USAToday. TV Ads: Chase has run television ads on CNN. List Companies: Nelnet has purchased SMG (list company). On-campus/Guerilla tactics: My Rich Uncle has been giving packing boxes away on campus.

12. 12 Who is Mailing What?

13. 13 The number of student loan mailings has increased by 50% or more each year over the past 5 years.

14. 14 Who is sending mailings? 4.0 Student Loans AAA Academic Financial Services Academic Lending Center Academic Loan Group, Inc. All Student Loan Corporation American Education Services American Student Assistance American Student Loan Consolidation Corp. American Student Loan Services AutoMoney, Inc. Bank of America Brazos Higher Education Service Corporation, Inc. Buffalo Metropolitan Federal Credit Union CFS Affinity Services CFS-SunTech Servicing, LLC Charter One Bank Chase Citibank Class Advantage, LLC. Class One Associates CLC/College Loan Corporation Clout College Loans College Funding Consultants CollegeInvest Collegiate Funding Services Commerce Bank Commercial Bank of Texas, N.A. Compass Bank Connecticut Student Loan Foundation Direct Loans Doral Bank EdFed EdFinancial Services EdFund Edloan Education Direct National Student Loans National Student Loans Direct Navy Federal Credit Union Nelnet NextStudent North Texas Higher Education Authority, Inc. NSL Direct PNC Bank Sallie Mae ScholarPoint Financial, Inc. Student Funding Services Student Lending Works Student Loan Consolidation Center Student Loan Xpress, Inc Student Trust Student Trust, Inc. SunTrust Bank TCF National Bank The Educated Borrower The First National Bank of Bryan The Student Loan Processors, Inc. TIAA-CREF Top Consolidator U.S. Bank UFS University Financial Services Vista Financial, Inc. Wachovia Wells Fargo Xanthus Higher Education Loan Program

15. 15 The number of PLUS Loan mailings has more than doubled each year since 2004. 2002 2003 2004 2005 2006 PLUS 1,844,287 8,215,057 9,537,855 20,641,335 48,295,353 2002 2003 2004 2005 2006 PLUS 1,844,287 8,215,057 9,537,855 20,641,335 48,295,353

16. 16 Who is sending PLUS Loan Mailings? Academic Loan Group, Inc. All Student Loan Corporation American Student Loan Services Charter One Bank Citibank College Loan Corporation Collegiate Funding Services Commercial Bank of Texas, N.A. Connecticut Student Loan Foundation Education Loan Center Educational Loan Company GMAC Bank Goal Financial, LLC Higher Education Resource Organization JPMorgan Chase & Co. MyRichUncle National Student Loan Center Nelnet. NextStudent Sallie Mae Student Loan Xpress, Inc SunTrust Bank The First National Bank of Bryan Wachovia Education Finance Wells Fargo Bank

17. 17 The number of Consolidation Loan mailings has increased nearly 30% per year in the past 3 years 2002 2003 2004 2005 2006 16,260,282 57,461,465 123,030,122 170,060,018 218,316,029 2002 2003 2004 2005 2006 16,260,282 57,461,465 123,030,122 170,060,018 218,316,029

18. 18 Nearly 40% of annual loan consolidation mailings hit student’s mailboxes in May and June 2002 2003 2004 2005 2006 16,260,282 57,461,465 123,030,122 170,060,018 218,316,029 2002 2003 2004 2005 2006 16,260,282 57,461,465 123,030,122 170,060,018 218,316,029

19. 19 Who is sending Consolidation Loan Mailings? 4.0 Student Loans Academic Financial Services Academic Lending Center Academic Loan Group, Inc. All Student Loan All Student Loan Corporation American Education Services American Student Assistance American Student Loan Consolidation Corp. American Student Loan Services Bank of America Brazos Higher Education Service Corporation, Inc. CFS Affinity Services CFS-SunTech Servicing, LLC Citibank Class Advantage, LLC. Class One Associates CLC/College Loan Corporation Collegiate Funding Services EdFed EdFinancial Services Edloan Education Direct Graduate Loan Associates National Student Loans National Student Loans Direct Nelnet NextStudent North Texas Higher Education Authority, Inc. NSL Direct Sallie Mae ScholarPoint Financial, Inc. Student Funding Services Student Lending Works Student Loan Consolidation Center Student Loan Xpress, Inc Student Trust SunTrust Bank The Student Loan Processors, Inc. Top Consolidator UFS University Financial Services Vista Financial, Inc. Wachovia Bank Xanthus Higher Education Loan Program

20. 20

21. 21 Who is sending Private Loan Mailings? Top Mailers in 2007 Bank of America Charter One Bank Chase Discover Education Finance Partners GE General Motors Goal Financial

22. 22 Sample Private Loan Mailing (Chase) Sent to the student Not positioned as a gap financing option, or suggestion of using it after Federal loan options are exhausted. Emphasizes maximum available loan amount (Chase) Sent to the student Not positioned as a gap financing option, or suggestion of using it after Federal loan options are exhausted. Emphasizes maximum available loan amount

23. 23 Sample PLUS Loan Mailing (My Rich Uncle) No indication that this is a school-certified loan No suggestion that they work with their school’s financial aid office to determine the payment plan that is best for their family(My Rich Uncle) No indication that this is a school-certified loan No suggestion that they work with their school’s financial aid office to determine the payment plan that is best for their family

24. 24 (American Student Loan Consolidation Corp.) Tend to have an “official” or government look and feel. Tend to focus on dates and deadlines and interest rates “time is running out”.(American Student Loan Consolidation Corp.) Tend to have an “official” or government look and feel. Tend to focus on dates and deadlines and interest rates “time is running out”.

25. 25 What companies are selling mailing lists and how do they acquire them?

26. 26 Who sells lists? Industry lists & Compiled Lists: American Student List Student Marketing Group (SMG) FastWeb Kaplan Test Prep Princeton Review Alloy/360 Youth Credit Bureau Lists: Equifax Experian TransUnion Most Industry and Compiled Lists offer mostly direct mail addresses with some portion of email addresses. Often when they offer email addresses they do not send the lists out, but perform the email launches themselves on behalf of a mailer. ECRA Survey – “Student Marketing Group had created a not-for-profit front called the Educational Research Center of American (ECRA)… mails an annual survey to teachers of 14M students [and school faculty members] nationwide. Nelnet owns SMG. Also My Rich Uncle just bought Embark which provides software and services to help college admissions offices automate the application process. The company competes primarily with the Common Application and another player called ApplyYourself, Inc. An article from Inside Higher Education suggests that Embark may be trying to conceal the fact that MyRichUncle is its new owner. The transaction was revealed in an exhibit to Princeton Review's 8-K with MyRichUncle listed as the buyer, although MyRichUncle has not yet made a press release. From the filings, its not clear if MyRichUncle purchased 100% of Embark or if Embark's management also retained an equity stake in the company. There are numerous other sources of email lists, many which are compiled and less reputable than these companies. Some email list providers include Cheetah Mail, etc. Most of the big name lenders do not tap into these types of lists due to the risk of violating spam laws, and potential damage to their brands. Some of the smaller name or start-up student lenders and loan consolidators do use these lists.Most Industry and Compiled Lists offer mostly direct mail addresses with some portion of email addresses. Often when they offer email addresses they do not send the lists out, but perform the email launches themselves on behalf of a mailer. ECRA Survey – “Student Marketing Group had created a not-for-profit front called the Educational Research Center of American (ECRA)… mails an annual survey to teachers of 14M students [and school faculty members] nationwide. Nelnet owns SMG. Also My Rich Uncle just bought Embark which provides software and services to help college admissions offices automate the application process. The company competes primarily with the Common Application and another player called ApplyYourself, Inc. An article from Inside Higher Education suggests that Embark may be trying to conceal the fact that MyRichUncle is its new owner. The transaction was revealed in an exhibit to Princeton Review's 8-K with MyRichUncle listed as the buyer, although MyRichUncle has not yet made a press release. From the filings, its not clear if MyRichUncle purchased 100% of Embark or if Embark's management also retained an equity stake in the company. There are numerous other sources of email lists, many which are compiled and less reputable than these companies. Some email list providers include Cheetah Mail, etc. Most of the big name lenders do not tap into these types of lists due to the risk of violating spam laws, and potential damage to their brands. Some of the smaller name or start-up student lenders and loan consolidators do use these lists.

27. 27 How do companies acquire their mailings lists? Industry lists & Compiled Lists College-bound Students Scholarship searches College prep classes and inquiries Surveys Online websites In-college Students Compiled University Directories On-campus Surveys Online websites General Compiled Lists Product Warranty Cards Public Information sources including: home ownership records, drivers licenses in some states, auto registrations, even college registrations through the freedom of information act. Industry and Compiled Lists are often used by Federal and Private Student Loan Marketers as well as by cell phone companies, and other companies offering consumer products via direct mail.Industry and Compiled Lists are often used by Federal and Private Student Loan Marketers as well as by cell phone companies, and other companies offering consumer products via direct mail.

28. 28 How do credit bureau lists work? Credit Bureau Lists Pre-screened Lists All Federally regulated lending institutions are required to report their consumer lending relationships to at least one credit bureau. The mailer submits a list request with specific credit criteria such as minimum FICO score, loan balance, deferred or not-deferred payment status, etc. that meet the requirements for the loan being offered. Mailer must extend a firm offer of credit in their mailing Invitation to Apply Lists Demographic data pulled from the credit files, and compiled lists held by the credit bureau. The mailer submits specific demographic criteria (age, income, age) that they wish to target. No individual credit information is provided to the mailer Mailer is an invitation to apply Firm offers of credit must: State the amount for which they are pre-qualified Tell recipient how to opt-out of receiving future pre-screened offers via bureau NEXT SLIDE IS A SAMPLE OF A PRE-SCREENED TUITION ANSWER DIRECT MAIL. Note the information on how to opt-out of future pre-screened offers (all pre-screened offers from all mailers are required by law to include this notice) Credit bureau data is most often used for Federal Loan Consolidation and Private Student Loan Offers as well as by credit card, mortgage and other consumer finance companies. A pre-screened offer must inform the consume that they are “pre-qualified” for the offer based on their credit information provided by the credit bureau. The offer must also include any other requirements, such as proof of income, maximum/minimum amount of credit they have been pre-qualified for, and any other qualifiers or information that they must provide in order to obtain the loan. If the consumer meets all the defined criteria and their credit has not changed from the time the pre-screen list was pulled, then the lender is obligated to extend the loan to the consumer. All pre-screened offers must include a clear statement in at least 10pt bold font actions the consumer can take to opt-out of receiving future pre-screened offers.NEXT SLIDE IS A SAMPLE OF A PRE-SCREENED TUITION ANSWER DIRECT MAIL. Note the information on how to opt-out of future pre-screened offers (all pre-screened offers from all mailers are required by law to include this notice) Credit bureau data is most often used for Federal Loan Consolidation and Private Student Loan Offers as well as by credit card, mortgage and other consumer finance companies. A pre-screened offer must inform the consume that they are “pre-qualified” for the offer based on their credit information provided by the credit bureau. The offer must also include any other requirements, such as proof of income, maximum/minimum amount of credit they have been pre-qualified for, and any other qualifiers or information that they must provide in order to obtain the loan. If the consumer meets all the defined criteria and their credit has not changed from the time the pre-screen list was pulled, then the lender is obligated to extend the loan to the consumer. All pre-screened offers must include a clear statement in at least 10pt bold font actions the consumer can take to opt-out of receiving future pre-screened offers.

29. 29 Sallie Mae’s Direct to Consumer Marketing Approach

30. 30 Five Simple Consumer Marketing Best Practices from Sallie Mae Best practice #1: Sallie Mae's 1-2-3 approach to paying for college.SM Free - Get the free money first Federal - Apply for federal student loans Private - Fill any gap with private loans

31. 31 Sallie Mae Consumer Marketing Best Practices… Encourage students to apply for scholarships and grants first, then federal loans, then private funding. Provide online tools including cost-of-attendance calculators and award letter analyzers to help families determine the cost of attendance at their chosen school and to estimate prospective repayment amounts. Provide online services such as courtesy emails to remind in-school students of FAFSA deadlines, help them borrow responsibly and maintain good credit, and encourage them to graduate. Prevent over-borrowing and provide educational materials and online tools and support on managing finances.

32. 32 What should schools expect from lenders?

33. 33 Cost of attendance calculator

34. 34 Sallie Mae’s 1-2-3 Approach to Paying for College

35. 35 Graduate Student Loan Pages Advise Federal Options First

36. 36 Private Loan offers remind students about federal loan options and reinforce the message of not exceeding the cost of attendance

37. 37 Does Sallie Mae sell students other products besides student loans when they contact us? Protecting the privacy security of our customer data is one of our highest priorities at Sallie Mae.  We do not sell our customers lists nor do we provide our lists to outside companies for marketing purposes.   We do not mail IN-SCHOOL Customers any credit card offers from Sallie Mae or from any other company. Through the Sallie Mae Success Program, we do periodically send customers who are IN-REPAYMENT information about companies with whom we have partnered with, such as Geico, MBNA or the credit bureaus. But we always send the mailing ourselves - you will notice that they are always in an envelope return labeled Sallie Mae and they are always signed from Bob Jackson at Sallie Mae. The lists are never sent to those companies, we always perform the mailings on those companies behalf. Within our Success Program, we have partnered with companies we have carefully selected due to their strong national consumer brands and good reputations for customers service and quality products. (MBNA/Bank of America for Credit Cards, Geico Auto Insurance, Capital One Auto Finance, Dell Home computers, Experian free credit reports). We offer in the Success section on our website select products in which our customers in repayment have expressed interest. We also periodically make specific offers available to repayment customers when they call our call center, if they are interested, we refer them to the partner company. Even borrowers in forbearance may need items such as gap healthcare insurance and auto insurance (not credit cards of course).Protecting the privacy security of our customer data is one of our highest priorities at Sallie Mae.  We do not sell our customers lists nor do we provide our lists to outside companies for marketing purposes.  We do not mail IN-SCHOOL Customers any credit card offers from Sallie Mae or from any other company. Through the Sallie Mae Success Program, we do periodically send customers who are IN-REPAYMENT information about companies with whom we have partnered with, such as Geico, MBNA or the credit bureaus. But we always send the mailing ourselves - you will notice that they are always in an envelope return labeled Sallie Mae and they are always signed from Bob Jackson at Sallie Mae. The lists are never sent to those companies, we always perform the mailings on those companies behalf.

38. 38 How can students stop receiving marketing communications? As mentioned before, bedebtsavvy doesn’t cater to just Undergrads or those about to apply for school – it has great advice for any consumer who is interested in building theirs and their families credit and debt management awareness. One of the cornerstones of bedebtsavvy is informing consumers that they don’t have to stand for being solicited by unwanted offers in their mailbox or through their phone. By guiding consumers toward easy online credit bureau opt-outs and the National Do Not Call Registry, we promote peace of mind for all consumers sick of these unwanted sales pitches. Also, issues such as identity theft and privacy protection continue to make headlines. Bedebtsavvy features several articles on how to avoid being a victim, and if an incident occurs, how to quickly go about limiting the damage. The real heart of bedebtsavvy is in making consumers aware of the power, and danger, of credit. With the persistent offering of credit cards at most higher ed institutions, its critical for credit users to understand what they are signing up for and how to safely utilize credit, not just for student loans, but for auto loans, mortgages and beyond. From understanding a credit report, knowing what a FICO score is, identifying key terms in credit, and more, these articles deliver the foundation borrowers need to feel empowered about credit.As mentioned before, bedebtsavvy doesn’t cater to just Undergrads or those about to apply for school – it has great advice for any consumer who is interested in building theirs and their families credit and debt management awareness. One of the cornerstones of bedebtsavvy is informing consumers that they don’t have to stand for being solicited by unwanted offers in their mailbox or through their phone. By guiding consumers toward easy online credit bureau opt-outs and the National Do Not Call Registry, we promote peace of mind for all consumers sick of these unwanted sales pitches. Also, issues such as identity theft and privacy protection continue to make headlines. Bedebtsavvy features several articles on how to avoid being a victim, and if an incident occurs, how to quickly go about limiting the damage. The real heart of bedebtsavvy is in making consumers aware of the power, and danger, of credit. With the persistent offering of credit cards at most higher ed institutions, its critical for credit users to understand what they are signing up for and how to safely utilize credit, not just for student loans, but for auto loans, mortgages and beyond. From understanding a credit report, knowing what a FICO score is, identifying key terms in credit, and more, these articles deliver the foundation borrowers need to feel empowered about credit.

39. 39 Does Sallie Mae offer financial counseling to students and parents?

40. 40 Goals Centralize and integrate Sallie Mae’s debt management materials to for the benefit of a wide variety of audiences. Provide a clear roadmap for consumers for borrowing wisely and navigating education financing options. Teach consumers how to establish and maintain good credit through responsible financial habits. Do lenders take responsibility for helping prevent students from over-extending themselves? Sallie Mae does. We established several immediate goals for this service: 1 – As a financial services company, we had many pieces out in the field that talked to various audiences on effective borrowing practices; but they were not all tied together. Bedebtsavvy allowed us to consolidate this information and deliver a wide range of tips to all potential, current and past borrower, whether they be applying for school, in school, or graduated, in careers and repayment. 2 – A highlight of bedebtsavvy is the continual reinforcement of our ‘1-2-3’ approach to student loan financing. Bedebtsavvy features advice on finding free money/scholarships for school, then applying for federal loans, and finally as a last option if necessary applying for alternative loans. Bedebtsavvy also caters to borrowers who are about to start repaying or are in repayment, and counsels on different repayment options and how they might benefit borrowers. 3 – Besides a strong focus on borrowing wisely, bedebtsavvy also is geared toward teaching the principles of credit, how to grow and protect a healthy credit history, and also how to pull and read a credit report We established several immediate goals for this service: 1 – As a financial services company, we had many pieces out in the field that talked to various audiences on effective borrowing practices; but they were not all tied together. Bedebtsavvy allowed us to consolidate this information and deliver a wide range of tips to all potential, current and past borrower, whether they be applying for school, in school, or graduated, in careers and repayment. 2 – A highlight of bedebtsavvy is the continual reinforcement of our ‘1-2-3’ approach to student loan financing. Bedebtsavvy features advice on finding free money/scholarships for school, then applying for federal loans, and finally as a last option if necessary applying for alternative loans. Bedebtsavvy also caters to borrowers who are about to start repaying or are in repayment, and counsels on different repayment options and how they might benefit borrowers. 3 – Besides a strong focus on borrowing wisely, bedebtsavvy also is geared toward teaching the principles of credit, how to grow and protect a healthy credit history, and also how to pull and read a credit report

41. 41 What does bedebtsavvy deliver?

42. 42 Available freely at www.salliemae.com/bedebtsavvy Interested students or parents simply need to navigate to Sallie Mae’s homepage at www.salliemae.com; there is a link for bedebtsavvy on this page which takes the user to the micro site. Once here, a user is informed of advice at four different borrower life stages: Before you borrow While in school Preparing to graduate In repayment There is also general credit and debt management advice for borrowers who might not put themselves into any of these segments. All the articles are categorized by topic and are freely available to read or print. Interested students or parents simply need to navigate to Sallie Mae’s homepage at www.salliemae.com; there is a link for bedebtsavvy on this page which takes the user to the micro site. Once here, a user is informed of advice at four different borrower life stages: Before you borrow While in school Preparing to graduate In repayment There is also general credit and debt management advice for borrowers who might not put themselves into any of these segments. All the articles are categorized by topic and are freely available to read or print.

43. 43 Before You Borrow The first segment bedebtsavvy focuses on is Before You Borrow. Content in this section is geared toward those consumers who are exploring how to approach borrowing for school, and include articles on topics like: the ‘1-2-3’ approach to borrowing Living within your means – how to budget when in school Borrowing only what you can afford using a free online debt calculatorThe first segment bedebtsavvy focuses on is Before You Borrow. Content in this section is geared toward those consumers who are exploring how to approach borrowing for school, and include articles on topics like: the ‘1-2-3’ approach to borrowing Living within your means – how to budget when in school Borrowing only what you can afford using a free online debt calculator

44. 44 While in School The next section, While in School, offers tips for borrowers during their educational track. Articles in this section begin to introduce or reinforce comprehension of credit, while also counseling on budgeting effectively during the lean school years.The next section, While in School, offers tips for borrowers during their educational track. Articles in this section begin to introduce or reinforce comprehension of credit, while also counseling on budgeting effectively during the lean school years.

45. 45 Preparing to Graduate The Preparing to Graduate section addresses students as they come toward the end of their educational track. At this time, bedebtsavvy introduces guidance on repayment options, the importance of an exit interview with the school FAA, and the continuation of understanding/building credit as they transition from school to career. The Preparing to Graduate section addresses students as they come toward the end of their educational track. At this time, bedebtsavvy introduces guidance on repayment options, the importance of an exit interview with the school FAA, and the continuation of understanding/building credit as they transition from school to career.

46. 46 In Repayment Finally, bedebtsavvy has advice for borrowers in repayment. From simple help in setting up electronic payment to ensure credit isn't damaged by a late payment, to addressing issues that affect adult borrowers such as identity theft and privacy protection, this section has great guidance for the professional borrower. Finally, bedebtsavvy has advice for borrowers in repayment. From simple help in setting up electronic payment to ensure credit isn't damaged by a late payment, to addressing issues that affect adult borrowers such as identity theft and privacy protection, this section has great guidance for the professional borrower.