Student Lending Analytics Blog

WSJ: Sallie Mae Marketing $1.1 Billion Private Loan-Backed Deal

Here is the short snippet found in the Journal's Credit Markets section today:

"SLM Corp. (SLM), better known as Sallie Mae, is in the market with a $1.1 billion student loan-backed deal that is eligible for funding under a Federal Reserve program, according to a person familiar with the matter.  Investors can get loans at attractive rates through the central bank's Term Asset-Backed Securities Loan Facility, or TALF, to purchase the bond. The Fed set up the facility in March this year to help rejuvenate the securitization market."

This would be the third SLM private loan-backed deal this year and the second TALF-eligible deal.  For details on the first two deals, click here (2009-1) and here (2009-2).  I will look for pricing details in the week ahead. 

Department of Education Posts Contract Pricing For Four Companies Awarded Title IV Servicing Business (Updated)

Update (6/29/09):  SLA has valued the contract at $1.3 to $1.5 billion over the initial 5 years (details posted here).

Here are the contract awards:

• Great Lakes
• Nelnet
• PHEAA
• Sallie Mae

Here is the common pricing for all four servicers that the Government has set for the contract (unit prices are based on number of borrowers by status per monthly billing period):

Status	Volume Low	Volume High	Unit Price
Borrowers In In-School Status	N/A	N/A	$1.05
Borrowers in Grace or Current Repayment Status	1	3,000,000	$2.11
	3,000,001	Up	$1.90
Borrowers in Deferment or Forbearance	1	1,600,000	$2.07
	1,600,001	UP	$1.73
Borrowers 31-90 Days Delinquent	N/A	N/A	$1.62
Borrowers 91-150 Days Delinquent	N/A	N/A	$1.50
Borrowers 151-270 Days Delinquent	N/A	N/A	$1.37
Borrowers 270+ Days Delinquent	N/A	N/A	$0.50

Other contract terms disclosed in these contracts include:

Point/Counterpoint: Are Changes Necessary To Ensure Integrity of Title IV Programs?

Transcripts are now available for two of the three recent public hearings to discuss issues related to the proposed Negotiated Rulemaking committees, which will be established this fall.  In their Federal Register announcement, the Department of Education indicated that one committee would focus on the integrity of Title IV programs, including: 

• Satisfactory academic progress
• Incentive compensation paid by institutions to persons or entities engaged in student recruiting or admission activities
• Gainful employment in a recognized occupation
• State authorization as a component of institutional eligibility
• Definition of a credit hour, for purposes of determining program eligibility status, particularly in the context of awarding Pell Grants
• Verification of information included on student aid applications
• Definition of a high school diploma as a condition of receiving Federal student aid

I have provided two viewpoints on the proposed issues to be covered through negreg committees, one from the largest for-profit educational institution, Apollo Group, and the other from Florida Community College.  

Here are some snippets from the hearing held on June 15, 2009 at the Community College of Denver in Denver, Colorado:

Recent MELA Bond Offering To Provide Funds For Maine Alternative Loan Program

Since I had recently written about the HESAA $450 million bond offering for the NJCLASS alternative loan program, I did some digging to see if any other state programs had been successful in their fundraising efforts.  Given the loss of capacity in the alternative (or private) loan market, many of these state alternative loan programs have witnessed significant growth in the past few years.  

Here is what I found about the Maine Loan program:

With Servicing Contract For FFELP Loans Awarded, What Next? (Update)

As I recently posted here, last week the Department of Education formally announced the four servicers, Sallie Mae, Great Lakes, Nelnet and AES/PHEAA who would be responsible for servicing FFELP loans sold to the Dept. through the ECASLA program.  As Sallie Mae noted on their call today, as of August 2010, these four servicers would also be responsible for servicing all newly originated federal student loans after that date.  Yes, you read that right, ALL federal student loans originated after August 2010 would be serviced by one of these four servicers if the Obama federal student loan reform proposal to shift to a Direct Lending model passes the Congress.

For financial aid administrators in the FFELP program wondering what this means to their student borrowers, here are a few points to keep in mind:

Highlights of Sallie Mae National Straight Talk Conference Call Held Today

Sallie Mae held a conference call to discuss the current state of the student loan reform legislation.  Sallie Mae speakers included:  Jack Remondi, Vice Chairman and Chief Financial Officer and Barry Feierstein,  Executive Vice President, Sales and Marketing.  The call was originally expected to provide "an in-depth analysis of the House Education and Labor Committee’s review or “mark up” of the President’s student loan proposal."  However this "mark up" did not occur as expected, so much of the call was focused on discussing differences between the Obama Administration's proposal and Sallie Mae's recommended "enhancements" to that proposal.

Here were some of the highlights from the call: 

Streamlined FAFSA On Its Way! (Update)

Here is a link to the CNN article. 

Here are some of the details in the article about the impact of the changes: 

"The Department of Education plans to unveil a shorter FAFSA on Wednesday, cutting out more than a quarter of the questions and slashing the online version from 30 screens down to just 10."

The FAFSA process may become even easier too:

"And in a partnership with the Internal Revenue Service, many families will be able to automatically download their tax data into online FAFSA forms starting in January."

I will provide more details following Arne Duncan's briefing today.
-------------------------------

Here are the details provided in a Fact Sheet that accompanied the Department of Education's press release on simplifying the FAFSA:

Secretary Duncan described a three step process to simplify FAFSA:

Conference Call Transcripts Available Explaining Upcoming Neg/Reg Committees

I came across these transcripts recently on the Department of Education's website for conference calls that were made to analysts and career colleges in late May following a notice placed in the Federal Register regarding negotiated rulemaking this summer/fall.  The committee that attracted the attention of the investing community would focus on the these issues:

"...to maintain or improve program integrity in the Title IV, HEA programs, relating to topics such as the following:

• Satisfactory academic progress.
• Incentive compensation paid by institutions to persons or entities engaged in student recruiting or admission activities.
• Gainful employment in a recognized occupation. 
• State authorization as a component of institutional eligibility.  
• Definition of a credit hour, for purposes of determining program eligibility status, particularly in the context of awarding Pell Grants. 
• Verification of information included on student aid applications.  
• Definition of a high school diploma as a condition of receiving Federal student aid."

These conference calls were reported on by the Chronicle of Higher Education, how noted that over 657 callers were on the line and Dow Jones Newswires, which provided this summary of one analyst's opinion about investor concern over incentive compensation:

Discover Discusses Impact of Credit Card Legislation on Conference Call

Here were the comments from the CEO on the 2Q conference call last week regarding the credit card legislation and its impact on Discover:

Regression Models and College Tuition

I came across this article, "College Tuition:  Explaining the Increases" on Seeking Alpha, an investor site, which explored the reasons behind increases in college tuition rates over the past 22 years

This chart shows how Tuition and Fees have grown at faster annual rates (6.8%), compared to healthcare costs (4.9%) and house prices (4.0%) since 1987. 

click to enlarge

Figure 1. College tuition and fees (Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers), US house prices (S&P/Case-Shiller Home Price Composite-10 Index), and medical care costs (Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers). We start at 1987 since this is the first year in the house price index.