Student Lending Analytics Blog

For Private Student Loans, Chase No Longer Offering Non-School Certified Product, Continuing to Offer Certified Product

Found this on Chase's website this morning (which had been announced in March apparently so I guess you could say I missed this one!):

"Chase is no longer accepting applications for its non-certified private student loan.  However, the school-certified Chase Select Private Student Loan is still available."

Federal Reserve regulations (to take effect in mid-February) regarding private student loans will require students to complete a self-certification form, with schools providing financial aid information to facilitate this process.  This regulation would appear to make non-certified loans obsolete in the future. 

With Chase discontinuing their non-certified product, the Wells Fargo Education Connection Loan is one of the few private loans that I am aware of that doesn't require school certification.  Wells also offers a school-certified product too, the Collegiate Loan. 

Citizens Bank Eliminates Origination Fees on TruFit Loan

Continuing a recent trend among purveyors of private student loans, Citizen's Bank announced that they would be eliminating origination fees on their TruFit private student loan effective .  Here is the link to their announcement which took effect on November 25, 2009.  The current rates on the TruFit loan are LIBOR + 3.00% to LIBOR + 13.00% or 3.24% to 13.24%, although the maximum rate on their loan with a creditworthy cosigner is 11.49%. 

Previously, Citizens TruFit loan charged origination fees of up to 5%.  SunTrust eliminated their repayments fees of up to 6% in October (their margins did increase 50bp however), while Sallie Mae cut their maximum disbursement fee from 5% to 3%, while also eliminating their 0.25% interest rate reduction for EFT payments and reducing their maximum margin from LIBOR + 14% to LIBOR +12.5%. 

FFELP Servicer Consolidation Begins: Chase To Sell Business To ACS

Here is the announcement:  Download E-Blast, Selling FFELP Servicing Ops, 12-2-09

Here are highlights from the announcement:

• Chase will continue to originate FFELP loans for 2009-10; will announce FFELP strategy for 2010-11 after legislative outcome is determined
• Transition from Chase's platform to the ACS servicing platform for FFELP loans will occur in 2010
• Chase will continue to service and originate private student loans on their own platform

I suspect that there will be a wave of M&A in the FFELP servicer space as it would appear that the lion's share of future federal student loan servicing will go to the four servicers (AES/PHEAA, Nelnet, Great Lakes and Sallie Mae) selected by the Department of Education to service the FFELP loans sold to the department as well as all new Direct Loans starting in the 2010-11 academic year.  Other FFELP servicers will likely see their loan portfolios decline over time as they enter runoff mode and may may want to capture that future servicing income stream today by selling off their servicing portfolio (I had posted about this impending consolidation back in February). 

Chase To Reduce Interest Rate Margins By .25% For Select Loans Approved After December 4th

Here is their announcement:  Download E-Blast, Chase Select Pricing Update, 4Y, 11-20-09

The new margins on Chase's cosigned loans will range from LIBOR + 4.15% to LIBOR + 9.50% (or 4.45% to 9.80%). 

Sallie Mae's New Rates on Smart Option Loans

I have heard from a few sources that the new terms of Sallie Mae's Smart Option Loan are:

	Previous	New
Maximum Int. Rate	LIBOR + 14.0%	LIBOR + 12.5%
Fees	0% to 5%	0% to 3%
Int. Rate Reduction for Electronic Comm.	0.25%	None

As of this evening, their website shows the fee change and the elimination of the interest rate reduction for electronic communication but the maximum interest rates remain at:

• LIBOR + 12.5% at 4-year non-profits
• LIBOR + 14% at a school other than a four-year not-for-profit institution

It will be interesting to see if they have collapsed the two pricing structures into one or whether they will continue to differentiate between 4-year nonprofits and all others.  The puzzle will be complete once that information is available. 

Key Bank Exiting FFELP Business

Here are some facts regarding Key Bank's student loan activities:

• Key Bank was the #20 originator of FFELP loans in 2007-08 with $488.7 million in guarantees, according to Dept. of Education data
• Key Bank exited the private student loan market in October of 2008 given their inability to tap the securitization markets
• Key Bank is the second major FFELP lender to exit in the last month.  U.S. Bank, the 7th largest FFELP originator in FY08, ceased originations of FFELP loans in late September. 
• Key Bank is one of three leading players in the tuition payment plan business.  Here is a link to an interview with Craig Lockwood, an executive at Key Education Resources.  

Here is the press release, which provides further details about the timing of their exit: 

Sallie Mae's EVP of Sales and Marketing To Leave Company

Here is the 8-K filing that Sallie Mae made today announcing the change: 

"On September 29, 2009, Barry Feierstein, Executive Vice President of SLM Corporation (the "Company"), and a named executive officer for purposes of compensation disclosures in the most recent proxy statement filed with the Securities and Exchange Commission, reached a mutual agreement with the Company to voluntarily leave his employment with the Company effective November 1, 2009. Mr. Feierstein will continue as a consultant to the Company for a period of approximately eight months."

Mr. Feierstein hosted a "Straight Talk" conference call with the financial aid community just five days ago.  Just two weeks ago, Sallie Mae had reported that private loan originations for their Smart Option product were 25% below their "modest" expectations for the third quarter.  In a post-FFELP world, their private credit business will become even more crucial to the company's earnings growth. 

SunTrust Delays Private Loan Pricing Change To October 15th

This change in their Academic Answer product was originally scheduled to be implemented on October 1st.  Check out this earlier post for details.

Wells Fargo Reduces Floor Rate On Private Loans; Rates Decline By 1.50%

I came across this note on the Wells Fargo Collegiate Loan website this afternoon:

"The Prime Rate (as published in the Wall Street Journal) may change monthly on the first day of each month, subject to a contractual minimum of 3.25% (the Variable Floor Rate)."

Previously, Wells had a variable floor rate of 4.75%, which they had announced at the end of December of 2008.   So, what is the net effect of this change?  A drop of 150 basis points.  Here is the impact of this change:

• Current range of interest rates:   4.25% to 11.24%
• Previous range of interest rates:  5.75% to 12.74%

As a result of this change, Wells Fargo Collegiate Loan has been upgraded to 3 stars on the SLA Private Student Loan Ratings joining Discover Student Loans atop the list. 

U.S. Bank Notifies Schools Of Plans to Suspend FFELP Lending

Here is a copy of the letter that U.S. Bank recently mailed to financial aid administrators:

Dear Financial Aid Officer,