Student Lending Analytics Blog

Dept. Provides Guidance on How Schools Can Access Technical Assistance For DL Transition

Blog readers might recall this earlier post almost two weeks ago about how schools could access the $50 million provided for technical assistance in the Health Care and Education Reconciliation Act.  Today, the Department has posted a Dear Colleague Letter on the topic which mirrors those comments made by David Bergeron at the TG Conference. 

Here are the relevant excerpts:

The rationale on how best to assist schools in the implementation process:

Questions For Sallie Mae Ahead Of 1Q Earnings

Sallie Mae reports earnings on Wednesday after the close with a conference call on Thursday morning at 8am EDT.  Here are the details on the call: 

• To participate in the call on April 22, please dial (877) 356-5689 (USA and Canada) or dial (706) 679-0623 (International) and use access code 63277857 starting at 7:45 a.m. EDT. The conference call will be replayed continuously beginning at 11:30 a.m. EDT on Thursday, April 22, 2010, and concluding at midnight EDT on May 6, 2010. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 63277857.

  In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.SallieMae.com.

Here are a few questions that I will be looking for answers to in their 1Q earnings report and conference call later this week: 

Adjusting To A Post-FFELP World: Another Update

It as been a little more than two weeks since President Obama signed into the law the Health Care and Education Reconciliation Act of 2010.  I have posted here, here and here information about how companies are addressing the fact that no new federal loans under the FFELP program will be originated after July 1, 2010. 

Here are some updates based on recent news stories:

What Role Will Guarantors Play In Post-FFELP World?

From Lincoln Journal-Star: 

"Heesacker [Randy Heesacker, president of NSLP] said it will be up to the federal Department of Education what, if any, role guaranty agencies have in the direct lending program going forward.

NSLP and similar agencies do have one ally in California Democratic Rep. George Miller, who is chairman of the House Committee on Education and Labor.

Miller has suggested the Education Department contract with guaranty agencies to provide the kinds of services to borrowers that they currently provide in the FFEL program.

"As more students become increasingly dependent on loans, we have a responsibility to ensure students have the assistance, information and repayment tools they need," said Melissa Salmanowitz, a spokeswoman for the Education and Labor Committee, "State and non-profit guaranty agencies have provided these services in many areas and could continue to do so in working with the Department of Education."

Outlook for FFELP and Private Student Loan Markets: Consolidation

Fitch Ratings had U.S. Consumer ABS Conference today in New York (link to their presentation).  Slides 53-61 provide data about the state of the consumer and had these headlines:

• U.S. unemployment expected to remain elevated
• Job creation arrives in recent periods
• Initial jobless claims still high
• Layoffs subside to pre-crisis levels
• Personal income stagnant
• Consumer confidence still troublesome
• Retail sales rebound despite confidence levels
• Debt burdens decline from historical highs

Slides 71-74 focused on the student loan ABS market.  If you listen in on the webcast, the student loan section begins about 2:31 into the presentation.  The most interesting comments came from Jonathan Clarke, EVP & Treasurer of Sallie Mae (my paraphrasing below):

Dept. of Education: 90% of FFEL Schools In DL or Transitioning To DL

The Department of Education's COO William Taggart was out with a letter recently to update the financial aid community on the passage of the Health Care and Education Reconciliation Act of 2010 which terminates new loan originations under the FFEL program as of July 1, 2010 (see this earlier post for additional details about this).  Mr. Taggart also highlighted efforts made by the Department to date in transitioning schools to the DL program:

How Can Schools Transitioning To Direct Lending Access Resources To Assist In the Process?

The Health Care and Education Reconciliation Act of 2010, passed in late March, appropriated $50 million for the following purpose:

"The Secretary [of Education] shall provide institutions of higher education participating, or seeking to participate, in the loan programs under this part with technical assistance in establishing and administering such programs."

A question arose during the Federal Update session, delivered by David Bergeron of the Department of Education today at the TG Annual Training Conference, as to how these monies could be accessed by schools. 

Mr. Bergeron indicated that the Department has a contractor tasked to meet the needs of schools during the transition period.  If schools have a need for resources, they should contact their Point of Contact (POC) that is assigned to them as part of the On Boarding process.  It is the POC's role to work with the contractor to ensure that the schools get the resources they need to make their implementation a success.  As for why grants are not being made directly to schools, Mr. Bergeron indicated that time is of the essence and the grant making process wouldn't deliver funds to schools soon enough. 

FFELP Lenders Contacting Schools About Transition Period

With Federal Direct Lending becoming the only source of federal student loans after July 1, 2010, FFELP lenders are writing to their school customers to describe the transition process over the next three months:

Sallie Mae (which also had a Straight Talk call earlier today) posted this letter on their website today which had this transition summary:

What's In The Dear Colleague Letter About New Student Loan Legislation?

Department of Education posted this on Friday to provide a high level description of several provisions of the Health Care and Education Reconciliation Act of 2010: 

CBO Report On Federal Student Loan Program Yields Useful Insights

Rushing to get this post out before the 1am deadline (look for updates on the blog tomorrow).  Skimming recent CBO report "Costs and Policy Options For Federal Student Loan Programs."  Useful reading for anyone seeking a better understanding of how the programs operate and the cost implications using two different methodologies (FCRA and "fair value").  The FFEL vs. Direct debate is somewhat old news given recent events but the impact of using "fair value" estimates calls into question whether CBO scoring methodologies should be reformed. 

Here is an excerpt from the report summary (which you will see does provide another CBO estimate showing that the move to Direct Lending will increase the deficit by $52 billion on a fair-value basis):