Student Lending Analytics Blog

Next Gen Personal Finance: November 2014 Newsletter

Check out our November 2014 Newsletter...

Welcome to Next Gen Personal Finance's November 2014 Newsletter Next Gen Personal Finance (NGPF) is a non-profit organization that believes that all young people deserve a free, quality education to develop their financial capability.   Four years ago, I started teaching personal finance at an East Palo Alto, California high school and spent dozens of frustrating hours doing Google searches to find that "perfect" resource for my students.  At NGPF, we spend hundreds of hours finding those "perfect" resources for YOU, package them into engaging lessons and create rich performance tasks to ensure students can apply their learning.  Check out our FREE Lesson Library, which now has over 50 easy to implement lessons.   My hope with this newsletter:  You will find a few ideas that you can implement immediately in the classroom.  We love your feedback so please let us know how we can continue to serve the personal finance educator community.   Regards, Tim Ranzetta [email protected]   Top 5 Questions of the Day (from NGPF Blog).  Voted on by personal finance educators like yourself, these five questions proved most popular in engaging your students: What do High School Students Spend Most of Their Money On? What is the Lifetime Value of a College Education (By Major)? What is the Highest Interest Rate I Can Earn on a Standard Savings Account? What is the Preferred Method of Payment for Consumers? What is the S&P500? Top 5 Lessons.  These Next Gen Personal Finance lessons proved most popular to educators visiting the NGPF Blog.   We build our free lessons by curating web content, including videos, articles and calculators and creating our own performance tasks.   Checking Basics Should I Get A Credit Card? Budgeting: Needs vs. Wants Define Your Savings Goal Purchasing a Used Car Featured NGPF Lessons:  We are constantly adding to the NGPF Lesson Library so let us know if there are specific lessons that we can develop for you. Here are some of the new additions: Investment Basics Family and Money Scams, Fraud and Identity Theft Chart of the Month:  They say a picture tells a thousand words.  How about one picture showing 500 companies?  Check out the chart in this post(larger image appears in blog post) which provides a graphical representation of the S&P500 while also reinforcing investing concepts such as diversification and return on investment.   Interpreting Data:  We hear from many educators about the need for students to hone their analytical abilities. Here are a few charts for them to interpret that also serve as great discussion starters: Why Are Young People Saving Less?   How Do Consumers Pick Checking Accounts? What's the Relationship Between Risk and Return?  On The Couch: The Psychology of Money Understanding the psychological factors behind many financial decisions serves as a critical first step behind making better ones.  Here are a few resources that address the behavioral aspects of personal finance: The Psychology Behind Our Money Decisions (Video) Psychology of Budgeting and Managing Your Finances Three research studies at the top of this postdescribe the psychology behind credit card usage.   Is There Balance In Your Life? On The Couch: The Psychology of Money Understanding the psychological factors behind many financial decisions serves as a critical first step behind making better ones.  Here are a few resources that address the behavioral aspects of personal finance: The Psychology Behind Our Money Decisions (Video) Psychology of Budgeting and Managing Your Finances Three research studies at the top of this postdescribe the psychology behind credit card usage.   Is There Balance In Your Life? What's New?: Current Event Ideas For teachers looking to incorporate current events into their lessons, you are in luck.  We scan the financial news everyday looking for topics that will engage your students and develop lesson ideas or activities.  Here are a few from the past month: Evaluating Apple Pay As A Payment Choice With So Many Retailers Being Hacked, How To Protect Against Fraud How Did One NBA Star Lose $110 Million While Another Earned Hundreds of Millions After His Playing Career Ended (Video)? Should You Get a Credit Card? Investing Trends: Here Come the Robo-Advisors Trends:  The one constant in the personal finance world is change.  We meet that challenge head-on with timely updates on new developments.  Here are some examples of what we have been tracking:   Credit Cards: Here are some of the trends we noted in our last credit card update: Millennials using credit cards less than older generations What are new credit cards going to look like? Apple Pay had a million credit cards entered in first three day. Checking Accounts:   Yes, even in the staid world of checking accounts, lots of new developments:   Recent research shows how consumers choose a checking account and why they keep overdrawing their accounts; Banks now offering checking accounts without checks (?); Online banks and credit unions have better terms on checking accounts; Debit cards have hidden dangers that your students should be aware of. We also provide regular updates on credit scores, student loans and investing.   Recent and Upcoming Events:   October 18, 2014: FBLA Conference (Santa Clara, California): NGPF provided a workshop for FBLA Advisers and students November 8-10:  JumpStart Conference (Los Angeles, CA):  NGPF participated as exhibitor November 15th:  CBEA State Conference (Monterey, CA):  Exhibitor and workshop for personal finance educators Follow Us on Social Media Facebook Twitter Website Share this Newsletter Share Tweet Forward Copyright © *|CURRENT_YEAR|* *|LIST:COMPANY|*, All rights reserved. *|IFNOT:ARCHIVE_PAGE|* *|LIST:DESCRIPTION|* Our mailing address is: *|HTML:LIST_ADDRESS_HTML|* *|END:IF|* unsubscribe from this list    update subscription preferences  *|IF:REWARDS|* *|HTML:REWARDS|* *|END:IF|*

Dept. of Education Asking Non-Profits For Info Regarding Servicing Capabilities

I came across this listing in the Federal Business Opportunities Website which was originally posted on April 29th and updated on May 6th.  It requests information from non-profits interested in servicing federal student loans as part of the set-aside in the Student Aid and Fiscal Responsibility Act.  Here is a link to the document. 

Here are the details of their notice which lists eligibility criteria to qualify for this servicing opportunity as well as the timing of a solicitation that will likely follow later in 2010: 

For purposes of this notice, the Government is requesting only documentation (not to exceed 25 pages in total) which could demonstrate your organization's eligibility against the criteria identified in HCERA. Please Note: An organization’s ability to meet the qualification criteria will be requested through a follow-on request, if needed. The eligibility criteria identified in HCERA are as follows:

“The term ‘eligible not-for-profit servicer’ means an entity—
(A)    that is not owned or controlled in whole or in part by—

(i)    a for-profit entity; or
(ii)    a nonprofit entity having its principal place of business in another State; and

(B)    that—

(i)    as of July 1, 2009—

(I)    meets the definition of an eligible not-for-profit holder under section 435(p), except that such term does not include eligible lenders described in paragraph (1)(D) of such section; and
(II)    was performing, or had entered into a contract with a third party servicer (as such term is defined in section 481(c)) who was performing, student loan servicing functions for loans made under part B of this title;

(ii)    notwithstanding clause (i), as of July 1, 2009—

(I)    is the sole beneficial owner of a loan for which the special allowance rate is calculated under section 438(b)(2)(I)(vi)(II) because the loan is held by an eligible lender trustee that is an eligible not-for-profit holder as defined under section 435(p)(1)(D); and
(II)    was performing, or had entered into a contract with a third party servicer (as such term is defined in section 481(c)) who was performing, student loan servicing functions for loans made under part B of this title; or

(iii)    is an affiliated entity of an eligible not-for profit servicer described in clause (i) or (ii) that—

(I)    directly employs, or will directly employ (on or before the date the entity begins servicing loans under a contract awarded by the Secretary pursuant to subsection (a)(3)(A)), the majority of individuals who perform borrower-specific student loan servicing functions; and
(II)    as of July 1, 2009, was performing, or had entered into a contract with a third party servicer (as such term is defined in section 481(c)) who was performing, student loan servicing functions for loans made under part B of this title.

(2)    AFFILIATED ENTITY.—For the purposes of paragraph (1), the term ‘affiliated entity’—
(A)    means an entity contracted to perform services for an eligible not-for-profit servicer that—

(i)    is a nonprofit entity or is wholly owned by a nonprofit entity; and
(ii)    is not owned or controlled, in whole or in part, by—

(I)    a for-profit entity; or
(II)    an entity having its principal place of business in another State; and

(B)    may include an affiliated entity that is established by an eligible not-for-profit servicer after the date of enactment of the SAFRA Act, if such affiliated entity is otherwise described in paragraph (1)(B)(iii)(I) and subparagraph (A) of this paragraph.”

The Department of Education (ED), Office of Federal Student Aid (FSA), contemplates issuing a solicitation later in 2010 to establish loan servicing contracts with eligible and qualified not-for-profit loan servicers. At this point, the Government expects that any solicitation issued will remain open continuously through March 1, 2014, with quarterly proposal submission due dates identified. Any solicitation issued will include criteria and qualification requirements.

Which State Agencies/Non-Profits Originate The Highest Percentage of In-State Federal Loans?

I thought it would be interesting to take a look at which state agencies and non-profits originate the highest percentage of federal loans made by educational institutions in their state.  The origination data for the state agencies only include those agencies that recently landed on the top 100 originators list for FY09.  I pulled total federal loan originations by state from the Dept. of Education Data Center site.  Note that there is a timing mismatch as Top 100 data is based on federal fiscal year (September year-end), while originations by state data is based on academic year (June year-end).  Note that many of the agencies on this list are also student loan secondary markets who have historically purchased many of the loans originated in their states.  

Here is how the various state agencies and non-profits stack up (in millions of dollars): 

Fitch Issues 2009 Student Loan Review and 2010 Outlook; Expects Continued Deterioration in Private Loan Performance

Fitch's Student Loan Industry Review: 2009 and Outlook for 2010 had the following highlights:

• Surprised by slowed momentum of student loan reform bill:  "The momentum around changes to the FFELP program slowed significantly, surprising many. The proposed abolition of FFELP was on a fast track to becoming a reality by the end of the year after easy passage of the Student Aid and Fiscal Responsibility Act (SAFRA) in the House of Representatives in the third quarter; however, the bill is having a more difficult time in the Senate. FFELP disbursements shrank as more schools switched to the Federal Direct Loan program."

• Debt swap proposal and any change to treatment of private loans in bankruptcy may impact ABS ratings:  "Also in 2009, Congress considered a proposal to give borrowers an opportunity to swap their private student loans with government loans, and held hearings on whether there should be more circumstances under which private student loans could be discharged. Both initiatives could have a material impact on ratings of private student loan ABS."

VSAC Running Low On Funds For Private Student Loans; May Run Out By End of Week

As I continued to work my way through the state alternative loan programs today, I came across this announcement on the Vermont Student Assistance Corporation (VSAC) website for their private (non-federal) loan product:

VSAC Advantage Loan – 2009-2010 Academic Year

For Loans Approved by 2/12/10*

*Funds for VSAC private loans are limited. All funds could be expended before 2/12/10. VSAC cannot guarantee availability of funds until final loan approval.

The Value of Mentoring In Improving College Access

Following my post yesterday which highlighted organizations that mentor first generation high school students and assist them in the college application process, I was ecstatic to be contacted by individuals passionate about the value of mentoring:

Joe Vladeck, Advancement Manager (I love that title), College Forward

I work for College Forward in Austin, Texas, and while we don’t officially use the word “mentor” (we “coach”), we provide essentially the same function.

Stanford Students Provide Advice For Low-Income, First Generation College Applicants

Featured in NY Times Blog "The Choice":  Nice story about a non-profit started by a few Stanford University undergraduates called SEE College Prep, which delivers "its 5-week, 42-hour SAT preparation program and curriculum to 360 deserving low-income students who lack the resources to fully prepare for college." 

Here was some advice that the two founders, Garrett Neiman and Jessica Perez, provided at a recent conference:

SLA's Webinar Central: Your Main Source For Webinars Of Interest To The Financial Aid Community

Given all the changes going on in industry, I thought it would be helpful to provide a central resource to post webinars of interest to the financial aid community.  Please note that inclusion on this list does not constitute endorsement of the webinars or any organizations by Student Lending Analytics nor does SLA charge for placement on this list (yes, another free service!).  I will plan on keeping this listing on the front page of the blog, so it will be readily accessible to readers. 

Since ASA contacted me with this idea, here are the upcoming webinars they have listed on their website.  As I add additional webinars, I will sort the webinars by date and subject area to make it easier for readers to navigate:

Do Default Aversion Activities Translate Into Long-Term Borrower Success?

I was reading through the news of the day and came across this press release from USA Funds with the headline "USA Funds Prevents $23.7 Billion in Defaults."  Here was the lead paragraph:

"USA Funds®, the nation's leading education loan guarantor, reports that it prevented $23.7 billion in defaults on more than 1.5 million past-due federal student loan accounts during the fiscal year ending Sept. 30. USA Funds' default prevention efforts were successful in averting default on more than 93 percent of loan accounts on which payments were reported by the lender as being 60 days or more past due."

Senator Leahy Supports Role For Non-Profits In Student Aid Bill

With the Senate not expected to move on a student aid bill for at least another month, one prominent Senator threw his weight behind the continued involvement of non-profits in the federal loan program.  According to the Salt Lake Tribune:

"Vermont's Sen. Patrick Leahy said on the Senate floor Wednesday. "I will be working hard to ensure a role for nonprofit financial aid agencies." 

The SAFRA bill that passed the House earlier this summer provided a servicing set-aside for the non-profit/ state agency servicers.  To see what that could mean on a state-by-state basis, see this earlier analysis by SLA Blog.