What's Happening In Private Student Loan Land?

I thought I would provide a brief update of several new developments with private student loans:

Two states have formalized their fixed-rate private student loan products for 2010-11:

• Vermont Student Assistance Corporation (VSAC) is offering a private student loan with fixed rates ranging from 6.9% to 7.75% [dependent on repayment option selected] and fees ranging from 0% to 5% [dependent on credit scores].  Applications will be available in early August. 

• Maine Educational Loan Authority (MELA) is offering a private student loan with a fixed rate of 7.75% and a 4% guarantee fee.  Interest payments are required during the in-school period.

Several lenders have recently tweaked (or announced an upcoming change) the range of interest rates on their private loan products (each dropping below the 4.0% level as the minimum or "as low as" interest rate on their loans):

• Discover reduced the minimum starting interest rate on their variable-rate private loans to 3.75% (from 4.25%).  This is Discover's first change to interest rate ranges since June 1st of last year.

• Chase will be reducing their minimum starting interest rate on their variable-rate private loans to 3.94% (from 4.14%).  Chase has changed their interest rate ranges on several occasions this year (note that some of the changes were driven by an increase in LIBOR during the year):
• • Pre-March 1st:  4.40% to 9.75%
  • March 1st:  4.15% to 8.75%
  • July 1st:  4.14% to 9.79%
  • As of August 6th:  3.94% to 9.79%

And in other news...

In late July, the New York Post reported that Sallie Mae had hired Goldman Sachs to help it explore "options."  The company has made no secret that they are carefully evaluating their restructuring options (from New York Times):

"According to The New York Post the student lender hired Goldman Sachs to advise on a sale or spinoff of its student-loan servicing business and its $145 billion government-subsidized loan portfolio.  The company is also mulling the possibility of converting part if its platform into a traditional deposit-taking bank, The Post said."

Citibank's Student Loan Corporation reported a 40% decline in private loan originations in the quarter ending June 30, which is traditionally a seasonally slow quarter.  For 2009-10 academic year, Student Loan Corporation originated close to $900 million in private loans, a 47% reduction from the 2008-09 academic year.  I also came across an article citing a banking analyst, Dick Bove, who expressed this opinion of whether Student Loan Corp. would be sold:

"The ability to sell Student Loan at this time is nil," he said, noting that perhaps in two or three years, after the financial markets settle, a sale may occur."