Student Lending Analytics Blog

Financial Literacy Efforts Gathering Steam in California

This Guardian (U.K.) article ("Bankers teach U.S. students how to avoid financial pitfalls") highlights efforts to improve financial literacy skills for high schoolers: 

Bad news:  "Only Missouri, Tennessee and Utah require high school students to have a semester of personal finance, according to the Jumpstart Coalition, a national group that promotes youth financial literacy."

Good news:  California is making progress towards a comprehensive financial literacy program:

"Last week, California assemblyman Ted Lieu, a longtime proponent of financial literacy in schools, got some traction with his bill to establish a "one-stop shop" for financial literacy curriculum - in several languages. It would concentrate financial literacy resources for teachers, parents and consumers - under the state controller's office. It will be taken up by the full assembly in May."

Colleges Adapt to Difficult Economic Times With "Value" Options

Christian Science Monitor article ("Colleges offer no-frills degrees") describes how several colleges are offering no-frills education to keep the costs of attendance to a minimum:

Kaileen Crane was hardly interested in the hefty price tag that comes with the traditional college experience. So she's paying $10,000 a year for the Advantage Program offered by Southern New Hampshire University (SNHU), a private college.  Forget about campus housing. Or a meal plan, or a gym with a climbing wall. This program is about the basics – core courses at a bare-bones satellite campus. But the price is less than one-third of what it costs for tuition and room and board at the main campus in Manchester. "It's close to where I live, it's close to where I work, and the cost is just so much cheaper than a lot of other places," says Ms. Crane during a break from classes in an office building in Salem.

The Future of Federal Student Loan Program: Daily Round-Up

Lots of action today to report:

• NASFAA President, Dr. Phil Day, in a letter to the membership today urged financial aid administrators to focus on the historic opportunity to make the Pell Grant a "true entitlement" and to come together to develop a new student loan model:

"If we simply oppose FFELP elimination without offering alternatives or including ourselves in the debate, schools will be forced to move to the Direct Loan program, either because the Obama budget will have been accepted or because ECASLA expires in 2010.

We must move forward in good faith and help design a system that works best for borrowers, taxpayers and institutions. In addition to the importance of providing a workable alternative to the abrupt elimination of FFELP, we must also remember the historic opportunity we have to make the Pell Grant a true entitlement. This is a goal that NASFAA has worked toward for decades, and there are many who never believed we would be so close to seeing this essential change enacted."

A Sign of the Times: SimpleTuition Adds Debt Settlement and Savings Account Partners

Given the challenges in the private loan markets and the uncertainty surrounding the future of FFEL, it should not be surprising to see SimpleTuition seeking to diversify the services they offer.  With student loan defaults accelerating and the savings rates in the U.S. jumping in recent months, these partners seem to make sense but I was still surprised to see them on a student loan site. 

• Debt Rescue USA provides the following marketing pitch about their services:

"In just minutes, Debt Rescue USA will match you up with trustworthy & experienced debt settlement professionals who have helped thousands of people in your exact situation. If you have $10,000 in credit card debt or higher, find out how you can actually settle for less than you owe and get debt relief in as little as 12 to 36 months!"

As Expected, Sallie Mae Extends ABCP Facility For FFEL Loans; Pays Off Private Education Facility

Here is the announcement from Sallie Mae:

RESTON, Va., April 27, 2009—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, announced today that it has extended the term of its $21.8 billion asset-backed commercial paper (ABCP) facility that provides funding for the company’s federally guaranteed student loans from April 28, 2009 to April 23, 2010. The company’s private education loan ABCP conduit facility with $2.7 billion outstanding was paid in full.

The extension of this facility provides liquidity for the company while the U.S. Department of Education finalizes its plans to implement the ABCP conduit it developed and as the company evaluates several other funding opportunities.

Maimonides In Our Time: The Donor Strikes Again

It was Maimonides who developed a hierarchy of giving.  To Maimonides, the second highest form of giving came from giving anonymously to unknown recipients.  The highest form came from giving the gift of self-reliance.  The anonymous donor(s) that has now showered close to $70 million on college campuses across America seems be adhering to both of these beliefs of Maimonides.  In case you missed it, here is a summary of the mystery donor's recent activities, from the Associated Press:

"The gifts, ranging from $1 million to perhaps $10 million, and totaling up to $68.5 million so far, have arrived over the past seven weeks in similarly secretive fashion at colleges around the country, including Purdue in Indiana, Montclair State in New Jersey, and the University of Southern Mississippi. All were contacted by a law firm or other intermediary and given a highly unusual condition: College officials had to promise — in writing, in some cases — not to try to find out the donor's identity."

As for the link that connects all of the recipients to date:  "So far, all the colleges are led by women."  Where will the mystery donor strike next?  Anyone care to guess? 

Financial Aid Directors: In Their Own Words

This week's quotes focus on the state of the economy and its implications for the financial aid office:

• "CSN [College of Southern Nevada] Financial Aid Director Peter Hurley says their applications are up 82-percent from this same time last year.  If this trend continues, they're expecting 35,000 students to apply for help for next year putting a strain on their work study programs and grants.  "It can only go to so many people and make a difference. I can't give everybody $5 and expect to have a positive impact on enrollment," said Hurley."

2009 SLA Private Loan Series: Borrower Benefits

Borrower benefits provide opportunities for borrowers to reduce the cost of their loan.  These benefits for private student loans generally fall into one of three categories:

• Interest rate reductions for students who sign up to have funds transferred from their bank account to cover their monthly student loan payment. 
  
  • Citibank, Chase, Discover, PNC, Sallie Mae, SunTrust and Wells Fargo all offer a 0.25% interest rate reduction for auto-debit.  U.S. Bank offers a benefit of 0.50%.  Borrowers can contact the lender to sign up for this program or typically can complete a form that accompanies the account statement.  Why sign up for the program?
    • Saves money.  A 0.25% interest rate reduction on a $10,000 loan with interest rate of 10% could yields close to $1,000 in savings over a 20 year repayment period
    • Setting up your account for automatic payments eliminates the potential for late payment fees, which can be quite significant.  
      • In case you were wondering how significant, Sallie Mae reported late fees and forbearance fee income of $143 million in 2008 (page 37 of 2008 10-K). 

2009 SLA Private Loan Series: What Ingredients Go Into the "Secret Sauce"?

One of the big challenges facing borrowers seeking private student loans is figuring out two things:

• Will my application be approved?
• If it is approved, what interest rate will I pay on the loan?  

For those looking for clarity on lender websites to question #1, here is a sampling of what's out there:

• Sallie Mae Smart Option Loan:  "You must meet current credit and other eligibility criteria."
• Wells Fargo Collegiate Loan:  "Have an established, positive credit history, an acceptable debt-to-income ratio, and a minimum income of $12,000 — or a cosigner who does."
• Chase Select Student Loan:  "Chase Select loans are subject to credit approval..."

Interest Rates on British Student Loans Likely to Fall to Zero (Or Lower)!

How is this possible? 

From the myfinances.co.uk site: 

"The interest rates on student loans are usually tied to inflation on the retail prices index (RPI) in March for the coming year.  RPI for March, in data released this week by the Office for National Statistics, was negative at -0.4 per cent.  The Department for Innovation, Universities and Skills (DUIS) has confirmed it is in discussions with the Treasury over what the rate from September should be – and a decision is expected soon."