Student Lending Analytics Blog

Jobs, Jobs, Jobs

A flurry of articles recently about student loan reform bills and the "jobs" issue:

• Chronicle of Higher Education (subscription required) highlighted the jobs issue last week in "Sallie Mae Fights for Student Loan Role in a Campaign That's All About Jobs."

• The Hill's "Private Lenders Focus On Jobs in Student Loan Fight" mentioned the standard talking points regarding job losses industry-wide and at Sallie Mae specifically, although the Sallie Mae figures in the article need to be corrected (Sallie had previously stated on a conference call that 2,000 jobs were at risk and perhaps more, not 5,200 as the article implies):

Time To Help Struggling Student Loan Borrowers

I couldn't help but think about struggling student loan borrowers (see posts here and here and here for details) when I saw this story in the NY Times today "Treasury Pushes Mortgage Firms For Loan Relief."

Here is the lead in the story:

"The Obama administration disclosed a plan on Monday intended to increase pressure on mortgage companies to permanently reduce monthly payments for troubled homeowners. Under the guidelines, the government will fine lenders that fail to find ways to increase the number of homeowners who are given relief on their mortgage bills."

So, what hope is there for struggling student loan borrowers?  In July of this year, with much fanfare, the Department of Education introduced the Income-Based Repayment option which would base a borrower's monthly payment on their student loan on their income.  Yet the program is off to a remarkably slow start with 4,500 approvals as of October due to some technical glitches mentioned here.  Note that the Project on Student Debt believes that as many as one million borrowers may be eligible for this repayment option. 

Chase To Reduce Interest Rate Margins By .25% For Select Loans Approved After December 4th

Here is their announcement:  Download E-Blast, Chase Select Pricing Update, 4Y, 11-20-09

The new margins on Chase's cosigned loans will range from LIBOR + 4.15% to LIBOR + 9.50% (or 4.45% to 9.80%). 

OIG Report Provides Insights Into Direct Lending Transition

The Department of Education's Office of Inspector General provided an audit report of the Department's Oversight of the Direct Loan Report.  Here are the highlights:

• Federal Student Aid (FSA) had anticipated and prepared for 50% of FFEL schools to transition to Direct Lending in the 2008-09 academic year.  This led to their prediction that DL would have 62% of borrowers and 57% of originations while actual figures for DL came in at 32% of borrowers and 28% of originations as of April 15, 2009 (see Attachment 1 on page 12). 

• Regarding the number of resources dedicated to onboarding schools, I have to admit being a bit underwhelmed and frankly concerned as FSA expects that they can get by with practically the same number of employees to assist schools during a peak that will be several multiples larger than what they experienced in 2008-09: 

When It Comes To Federal Student Loan Reform, Wall Street Analysts Suggest It's Anyone's Guess At This Point

While one investment analyst raised hopes last week that FFELP lenders might retain their origination function, another was less sanguine about the outlook for an ECASLA extension based on this story, "Education Loans Could Get Schooled", that ran in Barrons over the weekend.   

The note from Sandler O'Neill assigns a low probability on an extension of ECASLA for the following reasons:

Lively Commentary At NPR Over Recent Graduates Struggling with Student Loans

SLA currently estimates that 1/3 of borrowers are currently struggling with federal student loan repayment (see this post for details).  Here is a recent SLA post which showed that 56% of US counties had double digit delinquency rates (90 days +).  NPR picked up on this trend in a story yesterday titled "College Graduates Struggle to Repay Loans."

Here is how they characterized the situation:

"November brings a nerve-racking deadline for May's college graduates: It's time to make the first payment on their student loans.  With this year's tough job market, many graduates don't know how they'll come up with the money. Many are asking for deferments, and some may have to default."

This Man Don't Like Debt (And He Has Millions of Followers)

I had heard of Dave Ramsey after the SLA flash survey on financial literacy when a few respondents talked about his program in glowing terms.  I found out more about Dave Ramsey after reading this article in the Atlantic Monthly "Lead Us Not Into Debt":

Here is an excerpt:

State of Student Loan Delinquencies (Part 2): 56% of U.S. Counties Have Double-Digit Delinquencies

I couldn't resist crunching more numbers from the Federal Reserve's data set on student loan delinquencies that I had posted about here.  Before diving into the details, here are a few quick points:

Now That Will Buy A Lot of Textbooks...

Chegg.com, an online textbook rental company, secured a significant slug of equity and debt financing last week ($112 million to be exact).  Here are details from their press release:

"Chegg.com, the No. 1 online textbook rental company, announced today that it has successfully closed $57 million Series D equity funding, led by Insight Venture Partners. In addition, Insight Venture Partners also led a syndicate that has provided a $25 million credit facility, adding to the $30 million in debt facility recently secured from Pinnacle Ventures and TriplePoint Capital."

What U.S. County Has Highest Student Loan Delinquency Rate?

I came across this national map on the Federal Reserve Bank of NY's webpage that lists student loan delinquency rates (over 90 days) by county as of June 2009.  Note how widespread delinquencies are throughout the United States.  Based on the number of Congressional districts with rates over 15%, you would certainly think that someone would recognize this is as an issue (especially since these debts cannot usually be discharged in bankruptcy).  Now back to the original question.  The county with the dubious distinction of having the highest delinquency rate:  Quitman, Mississippi. 

Here are some counties with student loan delinquency rates over 30%: