Student Lending Analytics Blog

ASA Cuts Staff By 17%; To Focus on Debt Management Services Going Forward

I picked up ASA's press release from NASFAA News this morning.  It noted that the company will be focusing their efforts going forward on debt management services:

"In recent years, American Student Assistance has emerged as a leader in the student loan industry, providing education debt management services to 1.8 million student loan borrowers. Secondarily, we have supported our school and lender partners in the traditional Federal Family Education Loan origination processes.

Today, we have streamlined our operations and curtailed ancillary expenditures to position ourselves to continue to provide the critical service of higher education debt management, which we believe is, and will continue to be, the most pressing need of student loan borrowers."

• SLA note:  Among large guarantors (over 25,000 borrowers in repayment), ASA had the the second lowest cohort default rate for 2007 with a rate of 3.7%.  For 2005 and 2006, ASA had the lowest cohort default rates among all guarantors with a rate of 1.5% and 1.4% respectively. 

DBRS Report Notes 66% Jump in Private Loan Defaults In 3Q

Here is their executive summary of the DBRS 3Q Private Student Loan Report, which tracks the performance of private student loan collateral backing 39 trusts:

The weak job market [SLA note:  See post on weak employment numbers and defaults] and slow economic recovery continue to plague the private student loan ABS market. In the third quarter of 2009, performance of the private student loan collateral backing the 39 trusts that comprise the DBRS Private Student Loan Indices continued to deteriorate at a steady pace. Quarterly defaults spiked to record highs, while cumulative defaults continued to rise towards unexpected levels. Forbearance rates remained historically low [SLA note: Since SLM trusts make up over 50% of the index, their strategy over the last year of reducing forbearances has had a dramatic effect on the overall index] and delinquencies remained elevated.

Barron's Article Focuses Spotlight on For-Profits

On a day when many stock indices were up over 2%, four of the larger institutions in the for-profit education sector underperformed:

Symbol	Last Trade		Change		Volume	Intraday	Related Info
APOL	4:00pm ET	55.88	0.11	0.20%	6,755,752		Chart, Messages, Key Stats, more...
DV	4:03pm ET	53.46	1.92	3.47%	2,272,416		Chart, Messages, Key Stats, more...
ESI	4:01pm ET	93.59	0.65	0.69%	1,162,308		Chart, Messages, Key Stats, more...
COCO	4:00pm ET	15.16	0.19	1.27%	4,783,445		Chart, Messages, Key Stats, more...

Why?  Blame it on the Barron's article that ran over the weekend titled "Leveraging Up To Learn."  Here were some of the highlights that seem to have attracted Wall Street's attention, but were probably not all the relevatory for readers of this blog:

FSA Posts Presentations For 2009 FSA Annual Conference

Here is a link to the presentations.

Nelnet 10-Q Provides Details on DL Servicing Contract and Another Whistleblower Suit

First the earnings report, which Wall Street cheered by pushing the stock higher by 7% to $15.64:

Nelnet (NYSE: NNI) today reported base net income of $50.2 million, or $1.01 per share, for the third quarter of 2009, compared with $23.4 million, or $0.47 per share, for the same quarter a year ago. For the first nine months of 2009, the company reported base net income of $113.5 million, or $2.30 per share, compared with $65.2 million, or $1.33 per share, for the first nine months of 2008. Base net income excludes discontinued operations, restructuring charges, and certain liquidity-related charges.

Here are a few of the highlights of the Nelnet 10-Q filed today:

• Nelnet provided some additional details on the federal loan servicing contract which they were awarded with Sallie Mae, Great Lakes and AES/PHEAA (bold type below is provided for emphasis):

In Case You Missed These Friday Posts...

• Bank of America Exiting Federal Student Loan Program

• Parsing Student Loan Corporation's 10-Q For Clues on State of Student Loan Market

• On Unemployment and Private Student Loan Defaults

• NegReg And A-T-B Tests: Ability to Borrow or Ability to Benefit?

More on the Bill To Create Private Student Loan Ombudsman Office

As posted on Friday, several senators introduced a bill to create an office of the Private Education Loan Ombudsman, in the Department of Treasury:

Sen. Sherrod Brown (D-OH), joined by U.S. Sens. Michael Bennet (D-CO), Al Franken (D-MN) and Barbara Mikulski (D-MD), today announced new legislation to help streamline assistance to Americans struggling with private student loan issues. The Private Education Loan Ombudsman Act, to be housed in the U.S. Department of Treasury, would help private student loan borrows address complaints or challenges by working colleges and universities and private lenders."

Check back here later in the week for the text of the bill, which was not available as of this evening.  The press release from Senator Brown's office provided these additional details:

• Purpose of the bill:  "This bill would establish a federal private loan ombudsman to improve coordination and assistance for private student loan borrowers just as exists with federal student loans."
• Described earlier formation of ombudsman office for federal student loans:  "The 1998 Amendments to the Higher Education Act established the Student Loan Ombudsman, which serves as a centralized federal clearinghouse to help borrowers navigate disputes and problems with federal loans. The Student Loan Ombudsman has earned the support of borrowers and advocates alike. Currently, however, no such federal resource exists for private student loans borrowers."
• Complaints would be reported to the Department of Education:  "The Private Education Loan Ombudsman would coordinate services with the Department of Education and Federal Student Loan Ombudsman to ensure that all complaints and problems are reported. The federal body would also assist borrowers in mediating and settling disputes with private lenders.

Earlier this year, Senator Brown proposed a debt swap plan to allow borrowers to swap their private loans for federal loans for borrowers who had not exhausted their federal loan limits (see posts here and here).  One wonders if one of the ombudsman's roles would be to help facilitate this debt-swap process, which could be challenging to administer.  Also, should FFELP be eliminated through the legislative process, this could open up the possibility that lenders might aggressively market private loan products since they would no longer have a federal loan product to sell.  I will keep my eyes out for both of these bills in the Senate bill that will be coming out of the Health, Education, Labor and Pension (HELP) committee sometime over the next few months. 

What Are People Reading on the SLA Blog?

Visits were up 22% last week driven in part by the posts listed below.  Here were the five most widely read posts from last week:

• Department of Education Provides Update on Direct Loan Transition
• Bank of America Exiting Federal Student Loan Program
• Let the Matchmaking Begin...
• Which Schools Have the Largest Federal Loan Volumes?
• Incentive Compensation and the For-Profit Sector:  A History

Note To Senate: Time For An Annual Reporting Requirement on The Federal Student Loan Program

As the US Senate considers a student aid reform bill, it strikes me that they may want to incorporate a requirement that the Department of Education produce on annual report on student lending.  With the federal loan programs for 2008-09 nearing $84 billion/year and total outstanding federal student loans exceeding $550 billion, it seems high time that taxpayers demand more transparency to gauge how these loan programs are faring.   Researchers shouldn't have to spend hours piecing together data from press releases, the President's Budget, collections reports, annual reports of publicly held companies, guarantor operating statements and myriad other sources to get an incomplete, disjointed picture of the program. 

For a model, here is the report recently released by the Ministry of Education in New Zealand titled "Student Loan Scheme Annual Report 2009."  Note the plain English, descriptive charts and financial statements within the report.  With the House SAFRA legislation calling for the elimination of FFELP and for all schools to shift over to Direct Lending (Senate has not released a companion bill), the time is right to require an annual reporting requirement which includes financial statements and detailed repayment data (for example, can anyone answer the basic question of what percentage of federal loans are delinquent?), beyond the flawed cohort default rate.  An annual report seems like a perfect opportunity to build some accountability into a student aid reform bill while ensuring that the taxpayer is receiving transparent information commensurate with their $550 billion investment to date.  Who is going to step up?

Tuesday Webinar on "The Future of Student Loans: A Policy Dialogue"

For all you policy wonks out there, I came across this webinar announcement in an NSLP newsletter:

LEXINGTON INSTITUTE TO HOST NOVEMBER 10 WEBCAST ON FUTURE OF STUDENT LOANS
The Lexington Institute will host “The Future of Student Loans: A Policy Dialogue” on Tuesday, November 10 from 8:30 am to 10 am central time at the National Press Club in Washington, D.C.The event is available free by webcast. Contact Lisanne Boling by phone 703.522.5828 or e-mail to RSVP.

Confirmed speakers to date include:

• Timothy A. Connell, President, Georgia Student Finance Commission
• Donald Murphy, CEO and Managing Associate, The Wesley Peachtree Group
• Eileen O’Leary, Executive Council, National Direct Loan Coalition, Stonehill College
• John F. Remondi, Vice Chairman and CFO, Sallie Mae
• Rich Williams, Higher Education Associate, U.S. PIRG