Student Lending Analytics Blog

3Q Private Student Loan Trends: Wells Fargo Originations Surge 29%; Sallie Mae Sees 6% Drop

Here are some snippets from recent conference calls/earnings releases/supplementals regarding 3Q private student loan originations.  This quarter tends to be the most important from a seasonal perspective and provides a good sense of how academic year originations will unfold.  Reviewing past history indicates that 35-40% of a lender's originations come in this quarter.  Here are reports from the leading private student lenders: 

• Wells Fargo noted in their 3Q earnings supplemental released today (see page 8) that "private student lending (up 29% from 3Q09)" and also that they have had great success at growing loans in the Wachovia footprint (see slide #16), "Private student lending originations up 50% YTD in Wachovia footprint."  Wells Fargo doesn't publish annual private loan data but SLA now estimates that they are rapidly approaching Sallie Mae in terms of new private loan originations. 

This Week in Financial Literacy: Debit Card Fees Rescinded...Financial Literacy Makes You Wealthier

Banks backpedaling on debit card fees...political and consumer pressure having an impact (or perhaps consumers are voting with their wallets and banks trying to stem the exodus?).  From Wall Street Journal:

In August, Wells Fargo started a pilot in five states, informing customers that the bank would start in November to charge $3 per month for their debit card. Wells Fargo at the time said it didn't expect the fee to be popular, but the backlash was evidently more substantial: It said in a statement the end of the program is "a response to customer feedback."...Even Bank of America Corp. (BAC), which is among the few banks to have already started charging a monthly fee, is now considering adding options that will reduce the number of customers affected by the fee, according to a person familiar with the matter."

Bank of America later rescinded their plans also (from Business Week):

"Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers."

"Know Before You Owe" worksheet available on government's Consumer Finance site.  Michelle Singletary at Washington Post noted the importance of showing students how much they would be expected to owe at graduation:  

This Week in Financial Literacy: Private Student Loan Growth at Sallie Mae, Fed Data Shows Persistently High Delinquency Rates

We'll start this week with student loan news and go from there...

Meanwhile, Sallie Mae continues to grow their private loan originations which they reported as of the end of the 3rd quarter were up 21% year-to-date and 29% in the 3Q (a seasonally strong quarter) as compared to last year.   Other highlights from the call:

• Growth is being driven by market share gains vs. overall market growth:  "appears more like market share gains than market size gains."

• Borrowers have strong credit profiles:  "FICO scores in excess of -- an average in excess of 750 (752) and with more than 90% cosigners (94%)."

I'm Back......What's Happening With Financial Literacy?

This weekly (or perhaps more frequent) compilation of tips, trends and news is intended to help readers improve their level of financial literacy.  Have any ideas for stories or topics feel free to send them along to me at tranzetta@studentlendinganalytics.com.  I hope you enjoy it!

SmartMoney provides a top ten list of what student loan companies won't tell you including "you may be in over your head" as default rates on loans increase:

"Nearly 10% of federal student-loan borrowers defaulted during the two years ended Sept. 30, 2010, according to the Department of Education, up from 7% in 2008. Private student loan defaults are rising also: Around 5.4% of private student loans defaulted during the second quarter of this year, up from 4.5% a year ago, according to Moody's Investors Service Private Student Loan Indices, which tracks loans."

On the subject of increasing student loan defaults, Penn State is considering bolstering their financial literacy offerings:

This Week in Financial Literacy

• National Foundation for Credit Counseling releases video focused on credit issues facing college students:  ""College Credit for Life," a nine-minute video that introduces students to lessons surrounding the temptations and responsible use of credit cards. Much of the video features young people talking about the mistakes they themselves made in college. The video also features other voices, in the form of an apartment rental agent, a car salesman, and a human resources executive, all discussing the implications that both responsible or irresponsible use of credit can have as students prepare to move on from college and into the real world."

SLA 2010 Financial Literacy Survey Finds 49% Of Colleges Offer Financial Literacy Program; Budgeting, Credit Cards, Loan Repayment Are Top Subject Areas

Full results for the SLA 2010 Financial Literacy Survey are available here (view 2009 results here). 

Here are the highlights:

• Prevalence of programs:  48% of the 230 respondents indicated that their school is currently offering a financial literacy program.  For those schools that don't currently offer a program, 51% expect to start one over the next 12-18 months.
  • 66% of schools with a financial program did not have any budget monies set aside for this purpose; 16% had a budget less than $5,000.

Just When You Thought The News Could Not Get Any Worse...

GAO investigations, lawsuits, regulatory scrutiny, well, add disgruntled investors to the list now.  Investors are taking most companies in the for-profit education sector to the woodshed again today.  I thought it might be useful to see how we got here by focusing on events over the past three weeks, which included a slew of earnings announcements, new Dept. of Education rules and new investigations/reviews from state, Dept. of Education and the SEC. 

Before taking apart the events of the few weeks, I thought it was instructive to see how the stock prices of the leading companies in the industry had performed over the past three months (hint:  it ain't pretty):

Which Financial Literacy Programs Are Aid Administrators Recommending?

The results come from the SLA 2010 Financial Literacy Survey (full results to follow in the next day or two).  Thank you to the over 220 respondents to the survey.  Sixty-three programs were named by the sixty-nine respondents to this specific question indicating the multiplicity of literacy programs available from a variety of providers.  For the second year in a row, NEFE's CashCourse is the top program mentioned by financial aid administrators (click here for last year's results).  Their website now indicates that their product is being offered at over 502 campuses making them the closest to a market standard at this point.  Please note however, that it is difficult to gauge the usage patterns of their product.  I didn't come across such statistics (if anyone has them, please feel free to pass along). 

Here are the programs mentioned, with the frequency that they were named in response to this open-ended question on the survey:  What source(s) would you recommend for a financial aid administrator interested in developing a financial literacy program for his/her institution?

U.S. Bank Lowers Rates On Private Student Loans

U.S. Bank has lowered the interest rate ranges on their private student loans effective as of November 1, 2010.  The new range of interest rates offered by U.S. Bank now stands at 3.45% to 10.95%, compared to their previous range of 4.20% to 12.20%.  As a result of this change, SLA has upgraded the rating on the U.S. Bank product to 3 1/2 stars.  U.S. Bank's last pricing change occured in April when they lowered their minimum rate from 5.20% to 4.20% while leaving their maximum rate unchanged. 

Here are the details provided in a recent email:

Financial Literacy In The News

• SLA is the midst of their 2010 Financial Literacy Survey which closes on Friday.  Ping me at tranzetta@studentlendinganalytics.com if you would like to participate.  We have almost 200 responses already. 

• Elizabeth Warren, director of the Consumer Financial Protection Bureau, spoke to student journalists earlier this week about financial literacy:  

What's New With Lender Lists?

Knee-deep into my annual analysis of school lender lists and the prevalence of lenders on those lists, I thought I would come up for air and highlight some interesting observations:

• Western Michigan University used results from a student survey to rate their alternative lenders.  The five survey questions focused on application process, value, customer service, would student recommend to friend and overall satisfaction.  Almost 20% of their student borrowers responded to the survey.  With a top possible score of 20, the scores for the seven lenders varied from 12.97 to 15.85. 
  
  • Please contact me at tranzetta@studentlendinganalytics.com if you are interested in implementing a similar survey tool at your school (at no cost!)