Paying for College Blog

SLA Alert: MEFA To Test Capital Markets with $400 Million Offering

See Boston Herald article released less than an hour ago. 

SLA Provides Private Student Loan Options to Meet Need for Objective and Focused Set of Lenders

Student Lending Analytics is pleased to announce the release of SLA Private Student Loan Options today to meet the urgent need for an objective and focused group of private lenders.  SLA developed these lender options based on an analysis of 2008-09 private loan lists at over 700 2-year and 4-year institutions reflecting the collective decisions made by financial aid administrators across the country.  The lenders provided as options were those most frequently cited on these alternative loan lists.  SLA, an independent research and advisory firm, has NO affiliations with any student lenders.  SLA HAS RECEIVED NOR WILL IT RECEIVE ANY CONSIDERATION FROM ANY LENDERS FOR PLACEMENT ON THIS LIST NOR WILL SLA RECEIVE ANY REFERRAL FEES.

Market Buzz for August 21, 2008

• Savingsforcollege.com ranks best 529 plans.  Full results will be available on Friday (I guess that is only 5 minutes away).  

• Tuition Tree, a new idea from Lending Tree, has a website and indicated that they would be launching their service in late summer (which means shortly I guess). 

• The Deal chronicles the last 12-18 months in the student loan marketplace (not exactly a "upwards rollercoaster", as the swimmer Michael Phelps described his incredible week at the Olympics). 
  

Nelnet 2Q Earnings Call (8/12/08): "Large Disruption Going on in the Private Loan Market"

Sorry, it has taken more than a week for me to catch up with this Nelnet earnings call which was on August 12th.  My intent on providing these summaries of earnings calls is to focus on the color that the executives provide on the industry rather than provide too many details about individual company performance.  Here are the highlights of their conference call (transcript from Seeking Alpha):

• Outlook for private lending:  "That said, we do believe there is a large disruption going on in the private loan market that has not fully come to the forefront of the press. I know there is an article this week in the Wall Street Journal about that. We believe that there is a vacuum of private loans that are not there and that students are going to be struggling to try to replace them coming up in the months of August and September as they realize that they can’t get private loan financing due to the credit crisis."  (SLA:  Quite a prescient comment as 2 days later EFP left the market and Campus Door significantly curtailed their private loan activity.)

Customer Service, Borrower Benefits....: Other Selection Criteria for Lender Lists

Ask any financial aid administrator which criteria are most important in selecting lenders for their students and the first two responses you are likely to hear are customer service and borrower benefits. (Note:  While it may seem that no lenders are providing benefits today, as noted in an earlier post, there are two lenders still offering benefits beyond the 0.25% interest rate reduction for auto-debit.)  In reviewing disclosure statements accompanying preferred lender lists, it is clear that schools use a multitude of other criteria to select lenders.  I will plan on updating this post as I come across other examples.  Feel free to provide comments below if there are other criteria that you would like to share with the community.

• Boston College indicates that they seek to provide a variety of lenders (state authority, credit unions, national banks) as one of their lender selection criteria. 

• Stanford University also indicated this was a factor in lender selection. 

Financial Aid Office More Helpful Than Congress, According to Recent Survey

Market Buzz for August 20, 2008

• North Carolina state lending agency indicates that they are "confident we'll be able to meet the needs of our students"

• Last four graduating classes at Princeton University have been debt-free, according to the USA Today.

• Analysis from Inside Higher Ed of the recent Sallie Mae/Gallup survey on How Americans Pay for College

• Time Magazine analyzes the same Sallie Mae/Gallup survey.  

• Mississippi sees sharp increase in FAFSA applications received.  If you are interested in seeing how much your school's FAFSA filings increased in the first six months of 2008, click here.  

• Nelnet indicates in 8-K filing that they "completed its initial participation funding with the Department [of Education]."

• Fears continue to grow that two largest mortgage lenders, Fannie Mae and Freddie Mac, will require federal intervention. 

Parents and College Students: Who's Paying?

The Wall Street Journal's The Juggle Blog today asks the following questions of its readers: 

• Do you expect your kids to help pay for their college expenses?
• Are you worried about the impact of student loan debt on their post-college life?
• How will you decide how much they — and you — can afford to borrow?

Sallie Mae Gets Dept. of Ed. Funding; Expect $20 Billion in FFEL Originations

In a press release today, Sallie Mae announced that they "are the first company to receive funds under the U.S. Department of Education’s new program."  Edamerica and Nelnet both made announcements recently that they would be accessing the Department's program but Sallie Mae's announcement appears to the first example of a lender actually receiving funds.  The release indicated that they received the funds three business days after making the initial request.  The short turnaround time is critical for lenders seeking to manage their cash flow in this capital constrained environment. 

Sallie Mae Stock Drops 16%, Nearing 52 Week Low; Student Loan Sector Down Also

It is not clear that there was any company specific news driving down Sallie Mae's share price (based on the lack of any market moving press releases).  Investors continue to be nervous regarding the financials.  Other student loan companies also saw their share prices drop:

• Student Loan Corporation fell 6.0%
• Nelnet fell 5.0%
• My Rich Uncle fell 7.9%
• First Marblehead fell 26.2% (after rising over 70% the day before, lots of volatility)

Related posts:

• Obama budget envisions move to direct lending, Sallie Mae stock drops 30% (February 26, 2009)