Student Lending Analytics Blog

I'm Back......What's Happening With Financial Literacy?

This weekly (or perhaps more frequent) compilation of tips, trends and news is intended to help readers improve their level of financial literacy.  Have any ideas for stories or topics feel free to send them along to me at tranzetta@studentlendinganalytics.com.  I hope you enjoy it!

SmartMoney provides a top ten list of what student loan companies won't tell you including "you may be in over your head" as default rates on loans increase:

"Nearly 10% of federal student-loan borrowers defaulted during the two years ended Sept. 30, 2010, according to the Department of Education, up from 7% in 2008. Private student loan defaults are rising also: Around 5.4% of private student loans defaulted during the second quarter of this year, up from 4.5% a year ago, according to Moody's Investors Service Private Student Loan Indices, which tracks loans."

On the subject of increasing student loan defaults, Penn State is considering bolstering their financial literacy offerings:

This Week in Financial Literacy

• National Foundation for Credit Counseling releases video focused on credit issues facing college students:  ""College Credit for Life," a nine-minute video that introduces students to lessons surrounding the temptations and responsible use of credit cards. Much of the video features young people talking about the mistakes they themselves made in college. The video also features other voices, in the form of an apartment rental agent, a car salesman, and a human resources executive, all discussing the implications that both responsible or irresponsible use of credit can have as students prepare to move on from college and into the real world."

SLA 2010 Financial Literacy Survey Finds 49% Of Colleges Offer Financial Literacy Program; Budgeting, Credit Cards, Loan Repayment Are Top Subject Areas

Full results for the SLA 2010 Financial Literacy Survey are available here (view 2009 results here). 

Here are the highlights:

• Prevalence of programs:  48% of the 230 respondents indicated that their school is currently offering a financial literacy program.  For those schools that don't currently offer a program, 51% expect to start one over the next 12-18 months.
  • 66% of schools with a financial program did not have any budget monies set aside for this purpose; 16% had a budget less than $5,000.

Just When You Thought The News Could Not Get Any Worse...

GAO investigations, lawsuits, regulatory scrutiny, well, add disgruntled investors to the list now.  Investors are taking most companies in the for-profit education sector to the woodshed again today.  I thought it might be useful to see how we got here by focusing on events over the past three weeks, which included a slew of earnings announcements, new Dept. of Education rules and new investigations/reviews from state, Dept. of Education and the SEC. 

Before taking apart the events of the few weeks, I thought it was instructive to see how the stock prices of the leading companies in the industry had performed over the past three months (hint:  it ain't pretty):

U.S. Bank Lowers Rates On Private Student Loans

U.S. Bank has lowered the interest rate ranges on their private student loans effective as of November 1, 2010.  The new range of interest rates offered by U.S. Bank now stands at 3.45% to 10.95%, compared to their previous range of 4.20% to 12.20%.  As a result of this change, SLA has upgraded the rating on the U.S. Bank product to 3 1/2 stars.  U.S. Bank's last pricing change occured in April when they lowered their minimum rate from 5.20% to 4.20% while leaving their maximum rate unchanged. 

Here are the details provided in a recent email:

Financial Literacy In The News

• SLA is the midst of their 2010 Financial Literacy Survey which closes on Friday.  Ping me at tranzetta@studentlendinganalytics.com if you would like to participate.  We have almost 200 responses already. 

• Elizabeth Warren, director of the Consumer Financial Protection Bureau, spoke to student journalists earlier this week about financial literacy:  

What's New With Lender Lists?

Knee-deep into my annual analysis of school lender lists and the prevalence of lenders on those lists, I thought I would come up for air and highlight some interesting observations:

• Western Michigan University used results from a student survey to rate their alternative lenders.  The five survey questions focused on application process, value, customer service, would student recommend to friend and overall satisfaction.  Almost 20% of their student borrowers responded to the survey.  With a top possible score of 20, the scores for the seven lenders varied from 12.97 to 15.85. 
  
  • Please contact me at tranzetta@studentlendinganalytics.com if you are interested in implementing a similar survey tool at your school (at no cost!)

College Board Report on Student Aid: Federal Aid and Federal Loans Up , Private Loans Down

The College Board released their Trends in Student Aid 2010 today.  Here were their key findings:

• First to provide some context, here are the six top sources of student aid in 2009-10 representing over 90% of student aid (includes graduate and undergraduate aid sources which in total amounted to $199.2 billion for 2009-10):
  
  • Federal loans ($96.8 billion) or 49% of total aid
  • Institutional grants ($33.4 billion) or 17% of total aid
  • Pell grants ($28.2 billion) or 14% of total aid
  • Federal grants other than Pell ($13.1 billion) or 7% of total aid
  • Private and employer grants ($10.6 billion) or 5% of total aid
  • State grants ($8.7 billion) or 4% of total aid

Federal Student Loans Rise To $95.7 Billion in 2009-10

Federal Student Aid has posted an update to their website today (thanks to Mark Kantrowitz for the heads-up).  The total disbursements for Stafford, Parent PLUS and GradPLUS loans for the 2009-10 academic year came to almost $96 billion [this figure excludes Perkins Loans which are typically about $1 billion].  When comparing them to the 2008-09 data now up on the FSA Data Center site, this amounts to a 12.5% increase (or almost $11 billion).  Please note that these numbers are updated frequently, which might explain why $75 billion was the number announced for 2008-09 last year by the Dept. of Education and is close to the $77 billion listed in the FSA Strategic Plan vs. the $85.1 billion that SLA calculated for 2008-09 on the FSA site this evening.

A few highlights:

Growth in FAFSA Filings Slows To 1.3% In 3Q

Thanks to Mark Kantrowitz for making me aware of his analysis, which is available here on FinAid.org. It shows that the growth in FAFSA (Free Application for Student Aid) filings has decelerated this year to 1.3%, having grown 17.5% in the first quarter and 12.3% in the second quarter.  Since this is a seasonally slow quarter,(the first quarter is typically the strongest with volumes dropping each quarter thereafter), the year-to-date FAFSA filings are still up 11.8%.  FAFSA filings by independent students only grew by 0.3%, while filings for independent students grew by 1.7%. 

Wondering about growth on a state-by-state basis?  Here are the FAFSA filed through the first three quarters of 2010 with states in the western US (Nevada, Arizona, Utah and Idaho) having the top four spots: