Student Lending Analytics Blog

Sallie Mae 10-K Details Potential Impact of Student Aid Reform Legislation

From their 10-K:

Summarized impact on their business of proposed legislation:

• Would no longer originate, fund or hold new FFELP loans to earn net interest margin:  "Under both SAFRA and the Community Proposal, the Company would no longer originate, fund or hold new FFELP loans to earn a net interest margin. However, the Company would continue to earn net interest income from our portfolio of existing FFELP loans as the portfolio runs off over a period of time."

Sallie Mae In Market With $1.55 Billion TALF-Eligible Deal

From Dow Jones Newswire:

"SLM Corp. (SLM), better known as Sallie Mae, is in the market with a $1.55 billion bond that is eligible for funding under a Federal Reserve program, according to a term sheet.

The deal, jointly led by Barclays Capital, Banc of America Securities and J.P. Morgan Chase & Co. (JPM), will price ahead of the final loan application deadline for the central bank's Term Asset-Backed Securities Loan Facility, TALF."

This will bring the total private student loan financings that Sallie Mae has completed through TALF to $7.55 billion. 

Student Loan Corporation's 10-K Telegraphs Challenging Year For Company in 2010

Here are the highlights from their 10-K, released on Friday:

Expects challenging business environment in 2010:  "A dynamic regulatory environment and ongoing uncertainty in the capital markets are expected to make 2010 another challenging year."

On their ability to continue to originate FFEL loans in absence of ECASLA:  As a result of the capital market dislocation experienced in 2008 and into 2009, these programs offered by ECASLA have been vital for lenders of FFEL Program loans who want to continue to offer these products.  If continued disruption is experienced in the markets and these programs are not extended or similar programs are not made available, student lenders, including the Company, may find it difficult to remain in this segment of the industry."

S&P Ratings: Student Loan Legislation Not Likely To Impact 2010-11 School Year

As reported by the Wall Street Journal:

"Standard & Poor's Ratings Services somewhat lessened the threat of moving student-loan companies SLM Corp. (SLM) and Nelnet Inc. (NNI) into junk territory, saying U.S. legislation overhauling student lending likely won't pass in time to affect the 2010-2011 school year.

A bill, backed by the White House, to end private lenders originating federally guaranteed student loans passed in the House, but S&P said Friday it is increasingly unclear whether the Senate will vote on the legislation in the next few months.

Analyst Adom Rosengarten said it is likely both Nelnet and SLM, also known as Sallie Mae, may still be involved in the origination of federal student loans for at least another year, limiting the immediate impact that legislative changes would have on the companies."

Meanwhile Rep. George Miller, chairman of the House Education and Labor Committee appeared on CSPAN Newsmakers (at 15 minute mark of video) today and had this to say about the status of student loan reform (paraphrase below).  As you will see, the legislation is still tied in with health care which means we still have weeks for this to play out.  Rep. Miller did say he anticipated that the bill would be part of the same reconciliation package as health care:

SLA Webinar (Thursday, March 4th): What's New In Private Student Loan Land?

Join me for this informative webinar to be held on Thursday, March 4th at 1:30 p.m. Eastern Time.  This 90-minute webinar will focus on the current state of the private (non-federal) student loan market as well as provide an outlook for the future.  This webinar will be extremely helpful to financial aid professionals and others interested in learning more about this dynamic market. 

Register for this webinar, which has a $99 registration fee, here.

Among the questions to be answered:

What Incentives Do Collectors Of Defaulted Federal Student Loans Have To Satisfy Customers?

Hmmm, bet you can guess the answer to that question.  Still, you might be surprised to know that the Dept. doesn't independently survey any borrowers to measure satisfaction levels, which I think is dangerous.  The 2008 RFQ for collectors of defaulted federal student loans were to have the allocation of accounts determined by how they stack up against these criteria:

(1)     PERFORMANCE INDICATOR #1:  DOLLARS COLLECTED PERCENTAGE - 70 Points.

One Year Later: The Talking Points Are Getting Stale

February 26, 2009:  Obama Budget Envisions Move To Direct Lending in 2010

One year later:

• Wednesday:  Sallie Mae Vice-Chair and CFO Jack Remondi (Roll Call):  "Congress Must Back Student Loan Reform"

• Thursday:  Secretary of Education Arne Duncan (Washington Post):  "Direct Student Loans:  A Better Way To Invest In Education."  This piece makes similar points to the conference call held with the press last week. 
  • Here is a link to his testimony to the House Budget Committee earlier today

How about a student aid summit to hash this out in public? 

Time For A Student Aid Summit

I couldn't help, but think, as I watched the Health Care summit this morning, that it was time for a similar confab on student aid reform.  Why?  Given what many describe as a "once in a generation opportunity", it would seem to be worth a day to get a roomful of experts (ground rules:  no prepared statements, question and answer format with professional facilitator, students and parents provide some questions, seating chart set up so opponents sit next to each other) to tackle issues greater than who should be originating federal student loans:

Another Day, Another Dire Student Loan Story...Time for a Higher Education Financial Plan (HEFP)

This feature story revolves around private student loans and was posted on WalletPop this afternoon.  Commenters to posts like this usually fall into one of two camps.  One camp is the blamers, who usually start with something like this:  "I do do not feel sorry for the situation you placed yourself in. borrowing 40 some odd thousand dollars for an ENGLISH degree!!!!."  The other camp are what I might call the empathetic types who open their comment with:  "I am in a similar situation to the author..."  My interest in stories like this is twofold; what lessons can be learned to assist others and what are their longer-term solutions that can be implemented to minimize cases like this in the future. 

Sensing A Pattern With State Grant Program For Higher Education...

• Oregon (from The Register-Guard):  "College students applying for the state’s main financial aid program will get far more rejection letters this spring than in the past as the state changes how it awards grants.

  The changes are driven by a surge in enrollment over the past two years caused by more people seeking refuge from hard economic times by going to college. That threw a wrench into the old formula for how many grants to award and caused the state to promise students $10 million more in aid than was in the budget for the current school year."