Student Lending Analytics Blog

Federal Student Loans Rise To $95.7 Billion in 2009-10

Federal Student Aid has posted an update to their website today (thanks to Mark Kantrowitz for the heads-up).  The total disbursements for Stafford, Parent PLUS and GradPLUS loans for the 2009-10 academic year came to almost $96 billion [this figure excludes Perkins Loans which are typically about $1 billion].  When comparing them to the 2008-09 data now up on the FSA Data Center site, this amounts to a 12.5% increase (or almost $11 billion).  Please note that these numbers are updated frequently, which might explain why $75 billion was the number announced for 2008-09 last year by the Dept. of Education and is close to the $77 billion listed in the FSA Strategic Plan vs. the $85.1 billion that SLA calculated for 2008-09 on the FSA site this evening.

A few highlights:

Growth in FAFSA Filings Slows To 1.3% In 3Q

Thanks to Mark Kantrowitz for making me aware of his analysis, which is available here on FinAid.org. It shows that the growth in FAFSA (Free Application for Student Aid) filings has decelerated this year to 1.3%, having grown 17.5% in the first quarter and 12.3% in the second quarter.  Since this is a seasonally slow quarter,(the first quarter is typically the strongest with volumes dropping each quarter thereafter), the year-to-date FAFSA filings are still up 11.8%.  FAFSA filings by independent students only grew by 0.3%, while filings for independent students grew by 1.7%. 

Wondering about growth on a state-by-state basis?  Here are the FAFSA filed through the first three quarters of 2010 with states in the western US (Nevada, Arizona, Utah and Idaho) having the top four spots:

There's Gold In Them Thar Financial Literacy Games

Or at least that is what one investor, New Enterprise Associates, seems to think.  They recently invested $11 million in EverFi in a Series A round of financing.  Here is what TechCrunch had to say in early September:

B of A Made $62 Million In Payments To Colleges For Credit Cards in 2009: Federal Reserve

Here is a link to the report released today by the Federal Reserve.  Here are the highlights:

Highlights Of Sallie Mae's 3Q Earnings Announcement

HIghlights from Sallie Mae's earnings announcement earlier this week (sources for this summary include 3Q earnings supplement and conference call transcript from Seeking Alpha):

• Company completed their strategic review which included evaluating whether or not to sell the FFELP portfolio (while retaining the servicing rights)...and the company chose to (drumroll, please)....keep the FFELP portfolio:  "So maybe there's another way of just saying that you are not going to see any dramatic balance sheet actions from the company at least anytime soon."  It seems that as long as they serviced the assets, they would need to keep them on their balance sheet.  

• Wondering how profitable it is to service FFELP loans?  Answer:  Very profitable, as in 90% cash flow margins.  "Our securitized FFELP portfolio generated $444 million in excess cash to the company in the third quarter and to put that into some perspective, our FFELP servicing costs in the quarter were $52 million." 

2009 College Grads Saw Student Debt Rise to $24,000; Unemployment Rate Spikes to 8.5%: Project on Student Debt Report

The Project on Student Debt released their Student Debt and Class of 2009 Report today.  Here are some of their key findings (go to report for footnotes):

• 2009 graduates saw 6% increase in overall student debt...:  "We estimate that college seniors who graduated in 2009 carried an average of $24,000 in student loan debt, up six percent from the previous year.1 The six percent increase in average debt at the national level is similar to the average annual increase over the past four years, despite the recent economic downturn. It is likely that the Class of 2009 took out the bulk of their student loans before the recession began. Additionally, many colleges made concerted efforts to increase or maintain need-based grant aid when the economy faltered, so that students could afford to stay in school.2

Only 1 in 7 Schools Created Preferred Lender List for Private Loans for 2010-11: SLA Flash Survey

Here are the highlights from the recent SLA Flash Survey on Private Loan Lender Lists, which had 170 respondents:

• In findings that mirrored the results of an SLA flash survey last December, only 1 in 7 survey respondents created a private loan lender list for 2010-11 through a formal selection process.  The most popular strategy:  listing all lenders that students have used in the last 3-5 years, which certainly will not make life easy for new entrants into the marketplace.  Almost 1 in 3 of the survey respondents are not providing a list to students. Here are various lender list strategies with the frequency they were selected by survey respondents:

Lender List Strategy
School is listing all private student loan lenders used by students in the last 3-5 years (that are still making loans)	34.1%
School is NOT providing a list of private loan lenders	30.6%
School created private loan lender list through a formal selection process	15.4%
School IS providing a list of private loan lenders by linking to a third party website	11.2%
School has not made a decision	2.9%
Other	5.9%

 

 

 

 

 

 

 

 

3Q Private Student Loan Trends: Wells Fargo Originations Surge 29%; Sallie Mae Sees 6% Drop

Here are some snippets from recent conference calls/earnings releases/supplementals regarding 3Q private student loan originations.  This quarter tends to be the most important from a seasonal perspective and provides a good sense of how academic year originations will unfold.  Reviewing past history indicates that 35-40% of a lender's originations come in this quarter.  Here are reports from the leading private student lenders: 

• Wells Fargo noted in their 3Q earnings supplemental released today (see page 8) that "private student lending (up 29% from 3Q09)" and also that they have had great success at growing loans in the Wachovia footprint (see slide #16), "Private student lending originations up 50% YTD in Wachovia footprint."  Wells Fargo doesn't publish annual private loan data but SLA now estimates that they are rapidly approaching Sallie Mae in terms of new private loan originations. 

Improving the Self-Certification Process For Private Student Loans

Here is some of the feedback provided by the financial aid community on the new regulations requiring students to complete a self-certification form prior to receiving a private student loan.  The original intent of the form was to inform students about federal loan options before they took out a private loan and to limit overborrowing by having the student complete information on their total cost of attendance and estimated financial assistance.  The form carries this warning should the student seek to borrow more than the difference between their COA and est. financial assistance:  "WARNING: If you borrow more than the amount on line C, you risk reducing your eligibility for free or lower-cost federal, state, or school financial aid."

The suggestions from the financial aid community about self-certification fit into a few buckets:

University of Phoenix Enrollment Growth Slows; Changing Business Strategy In Light of Regulatory Environment

Apollo Group's 4Q earnings announcement highlighted changes that the company is making to their business model in fiscal 2011: 

"The Company expects fiscal 2011 to be a year of continuing transition in its operations as it implements initiatives, primarily at University of Phoenix, aimed at enhancing the student experience, expanding student protections and shifting the mix of enrollment to more experienced students who have a greater likelihood of succeeding in the Company's programs. Some of these initiatives include:

Changes in the roles of the Company's admissions personnel and comprehensive changes in their evaluation and compensation systems, including the elimination of enrollment results as a component of compensation effective September 1, 2010; University Orientation, a free, three-week, non-credit bearing program which, beginning November 1, 2010, will be required for all new students enrolling at University of Phoenix with fewer than 24 transfer credits; and The continued reduction in emphasis on third-party affiliates for lead generation and other enhancements to the Company's marketing approach."