Student Lending Analytics Blog

Googling for Private Student Loans

I have listed the top 8 sponsors appearing under Sponsored Links for "private student loans" this evening.  Note that only the top 2 Sponsored Links have recognizable brand names:  SunTrust and Wells Fargo.  #3 on the list takes the searcher to the Ask.com search engine.  While disguised as a .org, #4 refers the searcher to Associatedstudentloans.com which provides more sponsored links.  #5 is another referral site.  #6 is a scholarship search site.  #7 provides assistance for students having trouble repaying their student loans.  Meanwhile, #8 provided this error message, "404-Not Found. 

Having Trouble Making Your Student Loan Payments: WSJ Blog, The Wallet, Weighs In

I have seen more articles recently about the best strategies for those struggling to repay their student loans (not surprising to see the plethora of stories on this topic given the weak jobs market and increasing loan default rates). 

Here are some of the options laid out in the Wall Street Journal's blog, The Wallet (posted by Melissa Korn): 

• Contact the lender to describe your situation and see what they can do for you but know that you may have the options described below. 
  • “It doesn’t hurt to talk to the lender, to lay out your situation, and ask them what they can do,” says Mark Kantrowitz, publisher of financial aid Web site finaid.org."

• Consider a deferment
  • While many may be aware of this option should a student decide to return to school at least half-time, deferment is also available for those who are unemployed or enduring another "economic hardship."  
    • Interest payments will be added to your loan so try to make at least interest-only payments while in deferment
    • You can calculate your hardship eligibility here

SLA Updates Private Student Loan Ratings Based on Lender Changes

There was a flurry of recent changes announced by lenders, leading to changes to the SLA Private Student Loan Ratings: 

Brookings Institution: Future of Student Financial Aid (May 26, 2009)

The Brookings Institution last week sponsored a panel discussion titled "The Future of Student Financial Aid."  Panelists included:

• MICHAEL MCPHERSON, President, The Spencer Foundation
• SANDY BAUM, Senior Policy Analyst, College Board; Professor of Economics, Skidmore College
• PHILIP DAY, CEO and President, National Association of Student Financial Aid Administrators
• CELIA SIMS, Legislative Assistant, Office of U.S. Senator Richard Burr (R-NC)
• ROBERT SHIREMAN, Deputy Undersecretary, U.S. Department of Education

Here were some of the more interesting comments from the transcript: 

NY Times Story On Cutbacks In Loan Forgiveness Programs Strikes A Chord

I have been watching the viral nature of this New York Times story that appeared yesterday "Recession imperils loan forgiveness programs."  The story notes how loan forgiveness programs, which are often set up to provide incentives for students to study in such high-need field as teaching and nursing, are threatened by budget cuts:

From Kentucky to Iowa to California, loan forgiveness programs are on the chopping block. Typically founded by their states to help students pay for college, the state agencies and nonprofit organizations that make student loans and sponsor these programs are getting less money from the federal government and are having difficulty raising money elsewhere as a result of the financial crisis.

Nelnet Completes Initial Placement of Over $600 Million Student Loans In Dept. of Education's Conduit

Here is the press release.  Nelnet joins Sallie Mae, Student Loan Corporation and Access Group who all have previously noted their participation in conduit financings earlier this month.  The conduit is described in the press release as:

"The Conduit provides five-year financing for federal Stafford and PLUS loans first disbursed from October 1, 2003 to June 30, 2009. The Conduit is supported by a liquidity facility provided by the Federal Financing Bank and an ultimate backstop purchase of the financed student loans by the Department of Education. The company expects the total cost of funding, on average, to be approximately equal to the 3-month LIBOR rate plus 0 to 10 basis points."

This conduit has been a major positive to student lenders by enabling lenders to reduce the size of their warehouse facilities with the lower-cost financing afforded by the conduit.  Access Group's CEO Christopher Chapman recently noted how using a conduit financing structure for FFELP going forward would ensure continued diversity of lenders, originators and servicers (comments paraphrased below):

With respect to maintaining private sector financing and a diversity of lenders, originators and servicers that exist today, schools would see continued value-added services that have been provided all these years.  Funding would be seamless and blind.  Lenders today finance loans in many different ways in the background.  There would be improvement if there was a consistent and viable source of financing out into the future.

As more lenders rely on the this conduit facility, it will be interesting to see if this creeps into the debate as a viable long-term private-sector funding structure to minimize federal debt levels. 

More Opinions Rolling In on Federal Student Loan Reform

• New York Times Op-Ed columnist Gail Collins entitled her piece "When Sallie Met Barack" and proceeds to note the trials and tribulations of one couple who saw their loan forgiveness program canceled:

"This week, Jonathan Glater of The Times reported the story of Travis and Stephanie Gay, a couple in Kentucky who had borrowed about $100,000 to become special education teachers, under the impression that they could pay their loans off in five years via a special state forgiveness program for people who worked in low-salary service professions. Right after they got married last summer, the Gays got a letter from the state agency that ran the program saying that due to tough economic times, it was canceling most of their assistance and good luck with that debt."

Financial Aid Administrators Focus Comments on Self-Certification and Institutional Loans

With the deadline for comments to the Federal Reserve's Proposed Amendments to Regulation Z that would revise disclosure rules for private student loans now upon us, a flood of comments has recently posted to the Fed website.  Note that there is a delay in getting these comments posted so we are likely to see more comments posted over the next week, even though the deadline of May 26th has passed. 

The focus of the comments seemed to be two issues:  the burdens of requiring a self-certification form and the appropriateness of including institutional loans in the regulations.  Here are the contents of the a form letter which appeared in several of the responses highlighting concerns about self-certification:

Quick Reminder: Subsidized Stafford Loan Interest Rates Change On July 1, 2009

Here is the notice from the Department of Education. 

The rates for subsidized Stafford loans drop to 5.6% for loans first disbursed on or after July 1, 2009.  I had visions that the interest rate discrepancy between FFEL PLUS loans (8.5%) and Direct PLUS loans (7.9%) would magically disappear but alas, it still exists costing FFEL borrowers of PLUS loans tens of millions a year, as I posted earlier.

New Neg. Reg. Committees To Focus on Foreign Schools and Title IV Program Integrity

Here is a link to the announcement in the Federal Register.

One committee would be tasked with dealing with foreign schools: 

"...to develop proposed regulations governing foreign schools, including the implementation of the change made to the HEA by the Higher Education Opportunity Act (HEOA), Public Law 110-315, that affect foreign schools."

Another would focus on program integrity issues related to Title IV, including: