Student Lending Analytics Blog

Senate HELP Committee To Hold Hearing At Temple University On Monday

The Senate Health, Education, Labor and Pensions (HELP) Committee which has been drafting student loan reform legislation has a hearing scheduled for Monday, October 6th.  Here is the information that I gleaned from the HELP website: 

Committee: Senate Committee on Health, Education, Labor, and Pensions

Title: Access and Affordability: How Expanding Pell Grants Will Offer Higher Education to More Americans

Date: Monday, October 5, 1:00 p.m.

Place: Temple University, Sullivan Hall 1330 W. Berks Street, Philadelphia, P

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No witnesses had been listed as of this evening. 

What Is The Most Important Unknown Statistic?

From CQ Politics:

"Said Clinton: "In the last eight years, we went from first to tenth in terms of the percentage of 25 to 34 year olds holding a bachelor's degree. That's the most important unknown statistic out there... We are headed into long-term economic decline if we don't do something about it."

Clinton noted that exploding tuition at college is driving the problem, as "higher education institutions are pricing themselves into America's decline." He argued that new, less-costly "delivery systems" for education were needed to reverse this trend."

On the rising cost of education, the Brown Daily Herald noted:

How Do I Cure A Defaulted Federal Student Loan?

With default rates on federal student loans rising, this information about rehabilitating your defaulted loans from Creditcards.com might come in handy for many: 

Sallie Mae's EVP of Sales and Marketing To Leave Company

Here is the 8-K filing that Sallie Mae made today announcing the change: 

"On September 29, 2009, Barry Feierstein, Executive Vice President of SLM Corporation (the "Company"), and a named executive officer for purposes of compensation disclosures in the most recent proxy statement filed with the Securities and Exchange Commission, reached a mutual agreement with the Company to voluntarily leave his employment with the Company effective November 1, 2009. Mr. Feierstein will continue as a consultant to the Company for a period of approximately eight months."

Mr. Feierstein hosted a "Straight Talk" conference call with the financial aid community just five days ago.  Just two weeks ago, Sallie Mae had reported that private loan originations for their Smart Option product were 25% below their "modest" expectations for the third quarter.  In a post-FFELP world, their private credit business will become even more crucial to the company's earnings growth. 

Financial Literacy In The News

Scanning the headlines for interesting news on financial literacy:

• Business Week highlights a start-up called HelloWallet which will go live in early 2010 and provide independent advice on checking, saving and investing and was recently featured at the Clinton Global Initiative due to its commitment to the working poor:

"It’s a simple self-service site without any business affiliation or hidden arrangement with established financial institutions that helps users identify their financial goals while providing real-time comparisons of virtually all available checking, savings, and loan products from 80,000 institutions—and at a relatively low cost to HR departments... That stems from HelloWallet's determination to donate one of every five subscriptions to the nation's working poor, who may benefit from its use at inner-city financial counseling centers."

• The Philadelphia Inquirer in an article titled "Financial Illiteracy is All Too Common" included this advice from Dartmouth economics professor, Annamaria Lusardi: 

Survey Finds 4 Out of 5 Colleges Hit Fall 2009 Enrollment Goals

Here is a link to the survey of 380 admissions officers from Maguire Associates.  The survey found that smaller, private institutions found the environment most challenging with almost 1/3 experiencing enrollment losses:

"While it turned out to be a surprisingly good year for many institutions, not all of them made it through the cycle unscathed. Twenty-two percent of respondents reported fall 2009 enrollment losses; which were felt particularly keenly at smaller, private institutions. The survey revealed that enrollment is down by more than 3 percent among a higher proportion of private schools (26 percent) than public schools (16 percent). Also, 30 percent of admission officials at small institutions (fewer than 2,000 students) reported enrollment losses, while only 18 percent of respondents at larger schools (more than 2,000 students) experienced similar drops."

Which Financial Literacy Programs Are Most Popular With The Financial Aid Community?

I thought I would provide a preview to the results of the recent SLA 2009 Flash Survey on Financial Literacy programs (should have it completed by tomorrow).  So, what you would expect if you asked almost 100 FAAs the following question?:

What source(s) would you recommend for a financial aid administrator interested in developing a financial literacy program for his/her institution?  Please include any educational institutions that you are aware of that have stellar programs.

NEFE's CashCourse stood out atop this list with 15 mentions, which isn't surprising since their website lists over 313 participating universities.   Given the small sample size, please don't extrapolate market shares based on the figures below.  I find the diversity of options the more interesting finding of this survey, with almost 50 recommended programs identified by the almost 100 respondents to this question.  The market has clearly not coalesced around two to three standard financial literacy programs but instead has relied on a rich array of non-profits, lenders, guarantors, universities and government as the primary sources of content.  The College Access and Completion Innovation Fund in SAFRA is expected to provide hundreds of millions of dollars to states and institutions to specifically fund financial literacy programs so this fragmentation may continue.  This information on the financial literacy providers will be helpful also as SLA develops a comprehensive list of financial literacy resources (click on link for more details about this project). 

Here are the providers mentioned by the respondents to the open-ended question in the SLA 2009 Flash Survey on Financial Literacy:  

What Does Education Management's IPO Prospectus Tell Us About Private Lending To For-Profit Schools?

With Education Management Corp. expected to go public, I thought I would spend some time reviewing their IPO prospectus to understand the current financing environment for the for-profit sector.  These prospectuses can be very valuable in getting background information about the industry, the company, the business model and the competition.  Education Management Corp.'s stable of schools include Art Institutes, Argosy University, Brown Mackie Colleges and South University.  Here is a more detailed description of their business: 

"We are among the largest providers of post-secondary education in North America, with approximately 110,800 enrolled students as of October 2008. We offer academic programs to our students through campus-based and online instruction, or through a combination of both... Each of our schools located in the United States is licensed in the state in which it is located, accredited by a national or regional accreditation agency and certified by the U.S. Department of Education, enabling students to access federal student loans, grants and other forms of public and private financial aid...Our net revenues for fiscal 2009 were $2,011.5 million."

Describes the historical growth and rationale for continued gains in enrollment at for-profit institutions:

Federal Reserve Proposes New Rules For Credit Cards

The Federal Reserve today provided proposed new credit card rules to "protect consumers who use credit cards from a number of potentially costly practices."  This is the second of three new sets of rules that will amend Regulation Z (Truth in Lending) for credit cards.  Here are the proposed changes in the regulations which incorporates the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009: 

Audit Identifies Shortcomings in CollegeInvest Scholarship and Loan Forgiveness Programs

Here is a link to the Performance Audit of the CollegeInvest Scholarship and Loan Forgiveness programs completed recently by the Office of the State Auditor in Colorado.  Among its findings were:

• A scholarship program whose policy was to disburse 5% of a Trust Funds's assets disbursed only 0.1% in its first year.
• Used $10 million of its Trust Fund assets to purchase its own loans, which the audit identified as raising "significant conflict of interest" concerns
• Failed to give out 58% of Service Scholarships and Opportunity Scholarships that had been advertised and budgeted.
• Out of $12 million in administrative expenses for 2008-09, 53% of expenses had "insufficient supporting documentation and inadequate approvals or authorizations" with two of the expenses representing a conflict of interest.