Highlights of Sallie Mae National Straight Talk Conference Call Held Today

Sallie Mae held a conference call to discuss the current state of the student loan reform legislation.  Sallie Mae speakers included:  Jack Remondi, Vice Chairman and Chief Financial Officer and Barry Feierstein,  Executive Vice President, Sales and Marketing.  The call was originally expected to provide "an in-depth analysis of the House Education and Labor Committee’s review or “mark up” of the President’s student loan proposal."  However this "mark up" did not occur as expected, so much of the call was focused on discussing differences between the Obama Administration's proposal and Sallie Mae's recommended "enhancements" to that proposal.

Here were some of the highlights from the call: 

• Reiterated on several occasions that this was a momentous time on Capitol Hill with the student reform legislation pending and urged schools to ensure their voices are heard regardless of their position on the issue. 

• Most interesting part of the call was discussion of SLM's recent award of the Title IV servicing contract along with Great Lakes, Nelnet and AES/PHEAA (see earlier post for additional details)

• Initially responsible for servicing all FFELP loans purchased by the Department of Education under ECASLA (see this earlier post for information about participants in the Dept.'s financing programs)
• Starting in August 2010, servicing of all newly originated federal student loans will be performed by these four servicers. 
  
  • ACS, the current sole source for the DL program, will not be given ANY new loans to service starting in August 2010.
    • Several financial aid directors noted their concerns over split servicing for those direct loan borrowers using ACS as servicer today who will presumably have a different servicer starting in August 2010.   
• Contract runs for 5 years with one 5 year option. 
• To ensure continuity, when any of these four servicers "put" (or sell) loans to the Department they will retain servicing rights on these loans
  • No decisions have been made as to how FFELP loans not serviced by one of these four will be allocated to these servicers
    • Decision on this cannot be far off as servicing under this contract will begin in mid-August

• Expect CBO scoring of Sallie Mae proposal to be close to the $87 billion in savings of the President's proposal.  
  • My sense is that this has the potential to shift the debate if the savings figure for the Sallie Mae proposal exceeds the President's. 

• Highlighed Chronicle of Higher Education article, which was cited in an earlier post, indicating that the proposal to make Pell Grants an entitlement was endangered given its high price tag:

"Either way, lawmakers are not expected to use the savings to make Pell Grants an entitlement, as Mr. Obama has proposed. Instead, they are likely to provide an infusion of “mandatory” money for the program, while allowing appropriators to continue to set the maximum award, lobbyists say."

• Indicated that federal loan proposal was forthcoming from a group of financial aid administrators and called for additional Congressional hearings (see earlier post about hearings held on May 21st)
  • On several occasions referred to their proposal as an "industry proposal" rather than the "Sallie Mae proposal" that they had alluded to earlier; I have not seen any public announcements in support of their proposal from other FFELP lenders, although the fact that they support maintaining choice in origination platforms should be popular with some. 

Update (6/26/09):  Here is playback information for the conference call:

Dial-in:  800-642-1687
Conference ID:  15876212
Through:  7/9/2009

Comments

[Budgeteer]

Nelnet signed on to the Sallie Mae proposal several weeks ago, so in that sense it is an "industry" proposal.

Another drag on Pell as an entitlement is that there is little or no research to show Pell grants increase access, which is understood in the appropriations committees.