Inside the Federal Student Loan Numbers (Part 1) (Updated)

As the WSJ reported last week, federal student loan volume jumped 25% to $75 billion in the 2008-09 school year.  I reviewed federal loan origination data on the Department of Education site and cut the data a few different ways for your review: 

By School Type

School Type	Originations	Percent of Total
Public	$34,839,239,257	46.7%
Private	24,794,603,326	33.2%
Proprietary	14,471,657,255	19.4%
Foreign	572,512,585	0.8%
TOTAL	$74,678,012,423	100.0%

By Program Type

Program Type	Foreign	Public	Private	Prop.	Overall
FFELP	100%	55.6%	82.5%	82.0%	70.0%
Direct Lending	0%	44.4%	17.5%	18.0%	30.0%
TOTAL	100%	100.0%	100.0%	100.0%	100.0%

By Loan Type

Loan Type Totals Percent of Total Unsub. Stafford  $     32,017,472,250 42.9% Subsidized Stafford  $     30,618,030,100 41.0% Parent PLUS  $       9,265,274,010 12.4% PLUS  $       2,777,236,063 3.7% TOTAL  $     74,678,012,423 100.0%

I will have year-over-year comparisons available later in the day on Tuesday. 

Update (9/8/2009):  I heard from a Dept. of Ed. official this afternoon that the information on their Data Center which was used for this analysis would be updated over the next 24 hours.  I had a hunch this was the case, as their figures didn't seem to make sense when I began doing a year-over-year comparison.  I will update this analysis tomorrow after they post the new data. 

Comments

[Will Paul]

So even after all of the transitions to DL, FFELP still has 70% of schools? WOW. Does the government really think they can transition another 70% to DL in 9 months (really 3 for packaging purposes)?

[Rod]

Tim -- could you also post a link to the ED website used as your volume source? The OPE loan volume update site only includes information through March (although the trend is similar).

[Craigie]

70% of dollar volume has absolutely no relation to "70% of schools." Most of the expensive schools (for-profit and not-for-profit) are in FFEL due to the perceived ability access alternative loan products. In addition, far fewer schools transitioned from FFEL to DL during spring 2008 than the media hubbub would have led you to believe. The the FFEL bailout liquidity provisions ("ECASLA") was on paper quite successful at dissuading schools of the need to switch to DL.

[W. Paul]

70% of $ or 70% of schools is really irrelevant. DL is made up of mostly large institutions that offer lots of loans. If we were to assume that every school correctly weighed the pros and cons of moving to DL as the administration has proposed, why would such a large proportion of the loan totals still reside in FFELP? Craigie thinks there's a correlation to access to private loans, but that's simply not the case. Just ask those in DL. I'm sure no one is shying away from marketing their students for private loans. Does anyone else think that schools have quitely made the decision on what program works best for their institution? No one seems to be standing up for FFELP in public, but everyone had the choice and certainly enough hype to move to DL and has not. Maybe the administration should realize that FFELP works (although with flaws).

[Craigie]

Neither loans nor schools were even touched on by this post. Lots of loans could mean lots of small loans adding up to less dollars than relatively few larger loans. The correlation between FFEL and increased access to private loans is documented in NCES/NPSAS; FFEL Stafford borrowers are much more likely to borrow private loans than DL Stafford borrowers and at higher average dollar amounts than DL Stafford borrowers. Depending on your viewpoint you may try to spin the explanation one way or another. At the financial aid conferences several years ago a well-known presenter who was a financial aid director at a private not-for-profit DL school highlighted the advantage for a DL school to give its PLUS business to a FFEL lender that offered private loans in order to negotiate a better deal on the private loan product. The explanation was that if you give the lender only your school's private loan business you aren't going to get nearly as good a deal as if you at least throw them some of your federal loan business.

Aside from a brief period during 1993-95, there has been no one out on the road traveling to all the schools to make the pro-DL case. Of course if you only hear one side you are much more likely to choose that "option." While it would be easy for an outside observer to say that the pro-FFEL people "doth protest to much" and hence unintentionally make the best case for DL, it is difficult to see things that way when the person is in your office and the office of your college president. In addition, schools have seen countless attempts to repeal direct lending both directly and indirectly (through mislabeled "parity" initiatives such as HERA and HEA98); they know better than to count chickens that haven't hatched. Paul says that no one is standing up for FFEL but that's simply not the case. And, as many have pointed out, 2008-2009 and 2009-2010 FFEL is just direct lending except without any oversight. The funding liquidity is from the U.S. Treasury. Once schools see the volume of in-school loan corrections resulting from "participation and put," they will likely choose DL over "DL lite" (today's FFEL program).

[W. Paul]

Unfortunately the last post sounds like a back room think tank session and not reality for day to day administrator of a federal loan program. FFELP as it existed 2 years ago is broken and many of the powerful processing flows are no longer applicable. School types (segments) dictate private loan need/usage, not what federal loan program they choose to use. Comparing apples to apples has not been done in any of these arguements. If a high cost private institution in FFELP today switched to DL tomorrow, they'd have the same need for private loan funding to offset the gap in their packaging strategies. I'd say that FFELP under the ECASLA model is DL-premium and DL is not DL-light. Imagine being able to utilize the powerful technologies FFELP lenders have created to maximize efficiencies, yet have a single program that streamlines the delivery of those funds. I don't think the discussion should be about which program works, it should be about what component pieces of both programs could be combined to exact the RIGHT program. Not a program that was created by those who don't know how the programs works on the ground today.