Student Lending Analytics Blog

7 of Top 10 FFEL Borrowers in AY08 Are Proprietary Schools

Proprietary schools make up seven of the top ten FFEL borrowers for the 2007-08 Academic Year, based on data that SLA has recently obtained through a FOIA request from the Department of Education.  Nova Southeastern, NYU and Penn State are the only three non-profit institutions among the Top 10.  Penn State recently shifted to Direct Lending for the 2008-09 academic year. 

Here is the list, which also shows dramatic year over year growth in the loan commitments at many of the proprietary schools:

Sallie Mae Reduces Credit Lines; Moodys Mulling Downgrade

In an 8-K filing with the SEC yesterday, Sallie Mae indicated that they are reducing commitments under their private education loan facility and FFEL loan facility by $2.2 billion and $4.1 billion respectively.  The company will receive a $17.1 million rebate from their bankers for these reductions.  The company stated that this move was made "after an analysis of its ongoing liquidity needs and following its acceptance and funding under the Department of Education’s Loan Participation Purchase Program. For the academic year 2008-2009, the Company expects to utilize the Participation Program to fund all eligible Stafford and PLUS loan originations."

Market Buzz for August 27, 2008

• Additional details from SF Chronicle regarding demise of Education Finance Partners
  • Financing deal collapsed 11 days prior to their closing the doors
  • Made $720 million in loans in 2007

• Chase notifies financial aid administrators today of a salesforce restructuring at the company.

• KBW analyst notes that Sallie Mae funding costs continue to rise indicating that credit markets continue to worsen. 
  
  • Recent $4.1 billion securitization of federally guaranteed loans priced at LIBOR + 160bp vs. LIBOR + 130bp earlier this month

• Interview with UC Berkeley Financial Aid Director

DTC Lender to Students: Prove to Me You Are in School

The Higher Education Opportunity Act recently signed into law by the President will require private student loans to be certified.  The wording in the bill is as follows:  "Before a private educational lender may consummate a private education loan with respect to a student attending an institution of higher education, the lender shall obtain from the applicant for the private education loan the form developed by the Secretary of Education under section 155 of the Higher Education Act of 1965, signed by the applicant, in written or electronic form." 

It could however be up to 18 months before this regulation takes effect, based on the effective date description (certification is in paragraph 3 of section 128(e)): "Not later than 365 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall issue regulations in final form to implement paragraphs (1), (2), (3), (4), (6), (7), and (8) of section 128(e) and section 140(c) of the Truth in Lending Act, as added by this title, which regulations shall become effective not later than 6 months after their date of issuance."

So, now back to what I heard today from a financial aid administrator. 

Federal Loan Programs Grew by 10.9% in 2007-2008, Based on SLA Analysis of Dept. of Education Data

Federal loan gross commitments of Stafford (subsidized and unsubsidized), PLUS and Grad PLUS loans, grew by 10.9% in 2007-08 to $77.6 billion, according to data received from the Department of Education (through a FOIA request made on August 25).  Federal loan commitments had grown by 6.6% in 2005-6 and 6.9% in 2006-2007, so the 2007-08 figures represent an acceleration in growth (Note:  A gross commitment is an origination with a signed Promissory Note).  Given that the 2007-08 data is current as of July 30, 2008 I am checking with the Department of Education to ensure that it is atypical to see major adjustments in these figures after the reporting dates.

Here are the highlights of our analysis:

• The Federal Family Education Loan Program (FFELP) increased market share in 2006-07 by 1.7% to 81.1% and saw just a slight increase to 81.2% in 2007-08.  The recent dislocation in the student loan market will is expected to increase the Direct Lending market share for 2008-09. 

      

Disclosing Your Lender Selection Process

Many of you can cite chapter and verse of the pre-HEOA Dept. of Education regulations regarding lender list disclosures (Attend the upcoming SLA webinar on the new HEOA legislation and its impact on lender lists to learn about changes.)  The pre-HEOA regulations require that schools with preferred lender lists "disclose to prospective borrowers, as part of the list, the method and criteria used by the school in selecting any lender that it recommends or suggests."   This clearly provides a lot of latitude on how schools choose to disclose this information. 

 

Inside the FAFSA Figures: Public/Private and 2 Year/4 Year Trends

OK, we all have seen (and many have experienced!) the sharp rise in FAFSA applications during the first six months of 2008 (see earlier SLA post).  I wanted to dive deeper into the numbers to see if there were any discernible trends between public/private and 2 year/4 year school categories and the increase in FAFSA applications.  So, let's cut to the chase...the answer is surprisingly NO.  There are remarkable similarities in the rate of increase across all school types.  Let's go to the numbers..

This analysis, unlike the earlier SLA post on FAFSA applications, focused strictly on those schools that received more than 1,000 FAFSA applications for first six months of 2008.  All of the analyses below compare the first six months of 2007 to the corresponding period for 2008. 

Here are the highlights:

A Trip to Lender List Nirvana? Nope, Just Out of Date Lender Lists

I thought I entered a time warp today.  While reviewing school lender lists, I came across the following benefits for Stafford loans:

Lender 1:

• No Origination Fee
• No Default Fee
• 0.25% interest rate reduction with automatic withdrawal option
• 3.00% in principal reductions when making on-time payments during the first 36 months in repayment (A.  1.00% principal reduction is applied to the loan for each 12-month on-time payment cycle)

Number of Direct Lending Colleges Rose 35.8% in Past Year, Dept. of Education

Direct lending colleges rose from 851 last August to 1,156 as of August 8, 2008, a 35.8% increase, according to the U.S. Department of Education.  This data was provided in an article by Marisa Schultz of the Detroit News.  In a follow-up call, Marisa mentioned that she had received this information through the press group at the Department of Education.  Many had expected this figure to rise more significantly given concerns over the number of FFEL lenders leaving the marketplace earlier this year. 

Register for Free SLA Webinar on Impact of HEOA Legislation on Preferred Lender Lists

Please join Tim Ranzetta of Student Lending Analytics on Thursday, September 4, 2008 at 1:30 Eastern Time to learn more about how this recent legislation will affect your preferred lender list selection process and the disclosure of private and federal loan programs.   Register for this free webinar by clicking here. 

 Here are just a few of the questions that will be answered about the impact of the Higher Education Opportunity Act on your preferred lender lists: