Student Lending Analytics Blog

Selecting a Career College: Top 10 Questions To Ask

I was thinking more about the need for greater transparency in the college selection process this morning.  Rather than rely on external forces to force this issue upon schools, there is always the power of the consumer to make things happen.  If consumers demand more information than institutions eventually have to accede to these demands or lag behind their competition.  So, with that spirit in mind, I have developed a Top 10 list of questions that consumers should ask prior to selecting a career college.  This list was developed having spent hours scanning complaint boards to see what items came up most frequently.  If a school is not comfortable answering many of these questions, claims not to have the information available, or won't provide answers in writing you may want to look elsewhere.  Remember that you are making a significant investment of both dollars and time so do the legwork to make the best choice.  Good luck!

Top 10 Questions To Ask Before Choosing a Career College

This Week In Financial Literacy News

• Multiple financial literacy resources mentioned in comments to NY Times Blog on the topic "Financial Illiteracy Among the Young:"
  • BizKids, a public TV series where kids teach kids about money and business.
  • WeSeed whose mission is to empower real people to get a better understanding of the stock market through the things they already know and love — the clothes they wear, the cars they drive (or the bikes they ride), and the burgers they eat.
    • Remember the JumpStart research which showed that those who played stock market simulation games tended to score better on financial literacy tests.
  • For those looking for more formal coursework, here is a Utah State Family Finance course available on OpenCourseWare.  
  • Here is a link to a documentary Ten9Eight described as "a thought provoking film which tells the inspirational stories of several inner city teens (of differing race, religion and ethnicity) from Harlem to Compton and all points in between, as they compete in an annual business plan competition run by the Network for Teaching Entrepreneurship (NFTE)."

Gulliver and The Lilliputians

One trend that seems to have escaped most people's attention is Sallie Mae's market share gains in the FFELP program and its implications in the recently announced servicing contract.  For the just-completed 3Q 2009, Sallie Mae and their lender partners originated $7.83 billion in FFELP loans (according to this Earnings Supplement).  Meanwhile analysis of the FSA Data Center information for Total FFELP disbursements over that same period yields a figure of $13.4 billion, giving Sallie Mae a 58% share.  As one other data point, Sallie recently announced on their 3Q conference call that they had $18 billion of loans they were servicing and Secy. Duncan in his recent letter to schools indicated that $46.3 million in loans were sold to the Department under ECASLA, indicating that SLM is servicing approximately 39% of the total. 

Here are their loan origination figures and market share for the last three years:

For-Profits' Business Practices In The Spotlight

The articles just keep on coming...

• Admissions reps. at Westwood College, based on information from a suit being brought against Westwood College (from Counterpunch "A Neo-Liberal Arts Eduation":  By way of example, one Admissions Representative promised a potential student that Westwood College credits would be transferable to the University of Florida or Florida State University if the student ultimately got an offer from a “classier, shinier school”, as long as the course descriptions were the same.  However, representatives from both Florida colleges said they would not accept credits from Westwood College under any circumstance because Westwood is not regionally-accredited.

Meanwhile in Canada, Ontario Officials Clamping Down on Career Colleges

Here is what the Globe and Mail had to say:

"Faced with scathing criticism of its failure to protect students from fly-by-night operators, Ontario is promising to increase its regulation of private career colleges with new fines, better information for the public and more inspectors.

The measures, to take effect Nov. 1, follow a blistering report by the provincial Ombudsman this summer that examined the inspection of Ontario's more than 500 private colleges, calling its approach to enforcement an "unmitigated disaster."

The new powers will allow inspectors to levy fines for the first time against bogus operators, with penalties ranging from $250 to $250,000. The province also renewed its pledge to increase to 12 the number of inspectors by year's end, up from four in 2004."

Sallie Mae's New Rates on Smart Option Loans

I have heard from a few sources that the new terms of Sallie Mae's Smart Option Loan are:

	Previous	New
Maximum Int. Rate	LIBOR + 14.0%	LIBOR + 12.5%
Fees	0% to 5%	0% to 3%
Int. Rate Reduction for Electronic Comm.	0.25%	None

As of this evening, their website shows the fee change and the elimination of the interest rate reduction for electronic communication but the maximum interest rates remain at:

• LIBOR + 12.5% at 4-year non-profits
• LIBOR + 14% at a school other than a four-year not-for-profit institution

It will be interesting to see if they have collapsed the two pricing structures into one or whether they will continue to differentiate between 4-year nonprofits and all others.  The puzzle will be complete once that information is available. 

Final HEOA Regs Discuss Third-Party Loan Websites

After receiving multiple questions from FAAs regarding third-party websites, I posted a comment recently asking the Department of Education to clarify their position on these sites.  Here is what showed up in the Final HEOA Regulations in the Federal Register notice earlier this week:

Comment: One commenter noted that many institutions are no longer providing students and their families with a preferred lender list for private education loans. Instead, many institutions are referring borrowers to Web sites developed by third party entities that contain neutral lists of private education lenders and the loan products they offer. The commenter requested that the Department clarify its position on the use of these private education lender lists by institutions of higher education in helping students and their families explore their higher education financing options.
   
Discussion: The Department does not consider an institution that refers its students to a third party entity that maintains a comprehensive, neutral listing of private education lenders to be participating in a preferred lender arrangement as long as the institution ensures that the listing is broad in scope, does not endorse or recommend any of the lenders on the list and the lenders on the list do not pay the third party entity to be placed on the list or pay the third party entity a fee based on any loan volume generated.  However, if an institution retains a third party entity to develop a customized lender list for the institution to provide to its students as a resource, either through a Request for Information or some other process, the Department does consider the institution to be participating in, and subject to the requirements of, a preferred lender arrangement under part 601.

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Implications:

Since I have been told that a ratings system represents an endorsement or recommendation of lenders, I have recommended that schools who now link directly to SLA Private Lender Ratings change the link over to the SLA Private Loan Options webpage.  The Private Loan Options webpage, which provides a comparison table of relevant terms and conditions, meets all of the criteria laid out in the discussion above as it "is broad in scope, does not endorse or recommend any of the lenders on the list and the lenders on the list do not pay the third party entity to be placed on the list or pay the third party entity a fee based on any loan volume generated." 

I will continue to maintain and update the SLA Lender Ratings site but find it disappointing that more students and families will not benefit from having a direct link (from a school's website) to an independent and analytical ratings system to help them make more informed choices. 

Someone's Thinking About Preferred Lender Lists...

Yes, I know if seems early, but I saw this news on NASFAA News earlier this week, which came from a Harvard release:

Graduate & Professional Student Loan Programs Request for Proposal (RFP) from Lenders Offering Non-Federal Student Loans

BOSTON, October 27, 2009 -- Harvard University is seeking proposals from lenders offering non-federal student educational loans for the 2010-2011 academic year through a Request for Proposal (RFP) process. This request seeks one loan product for all our domestic and international graduate and professional students enrolled at least half-time. It does not concern Federal Stafford or PLUS loans.

With more than ten years of private lending experience and a total portfolio in excess of $350 million, Harvard's domestic and international graduate and professional student borrowers have shown an exceptionally low private loan default rate.

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If you are interested in discussing what changes are in store for 2009-10 for preferred lender lists, drop me a line at [email protected] and we can schedule a time. 

The Early Bird Gets The ...

Financial Aid.  A cautionary tale in Oregon about the importance of knowing the deadlines to apply for federal or state grants. 

Let's Keep An Eye On This Development...

What may have been lost in the Apollo Group's (parent of University of Phoenix) conference call today were these statements from senior management about how they are looking to improve their completion rate and getting a better handle on the commitment of students prior to having them take on Title IV loans (note that SLA Blog had called for banning ATB tests in an earlier post):