Student Lending Analytics Blog

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:

Financial Literacy Round-Up

News from the world of financial literacy:

• Alliance for Investor Education posts top ten sites for teaching kids about saving and education (from PR Newswire):

SLA Flash Survey Finds 83% Of Schools Rate Implementation Process for Direct Lending As "Acceptable" Or Better

Here are the complete survey results:  Download DL_Transition_Survey_May2010

Here is a summary of the survey of over 200 financial aid administrators:

• Overall, 83% of respondents rated their level of satisfaction as “acceptable” or higher when it came to their direct lending implementation process to date.
  • 16% indicated they were "very satisfied", 31% were "satisfied" and 36% rated their experience to date as "acceptable"

SLA Flash Survey On Direct Lending Transition Going Out Today

With the July 1st deadline for Direct Lending looming, SLA is sending out a survey at 10AM Eastern today (Friday) to the financial aid community to gauge how the implementation process is proceeding.  If you are interested in participating in this flash survey and have not received a copy of the survey by mid-day, please contact me at tranzetta@studentlendinganalytics.com.  The survey will close on Monday, May 17th with results posted to SLA Blog by Wednesday, May 19th.  Thank you to Steve Biklen for proposing the idea for the survey and to Margaret Carothers of Pitzer College for her technical assistance in ensuring the right questions were asked. 

Sallie Mae Investor Presentation Chock Full of Industry and Company Data

Glancing through Sallie Mae's 83-page investor presentation filed with the SEC on Friday.  Here were some interesting insights/data (with page numbers):

• Total outstanding federal student loan market of $636 billion with $487 billion controlled by FFELP lenders (77% of total) as of 9/30/2009 (slide #13)
  
  • Sallie Mae is top holder of federal student loans with $154 billion or 37% of total FFELP volume.

• Highlighted three aspects of business model going forward (slide #14)
  • FFELP loan portfolio, guarantor collections and servicing
    • "Generating substantial income and cash flow"
  • Private education loan originations and servicing
  • Sallie Mae servicing - identified industry consolidation as opportunity

• While federal student loans have grown at compounded annual rate of 12% from 2002-2008, President's 2011 budget projects a 6% growth rate going forward which seems quite conservative (slide #15).

Fitch 1st Quarter Student Loan Report Card: Outlook For Private Loan ABS "More Precarious"

Fitch released their 1Q 2010 student loan report today (registration required):  Download Fitch_1Q_2010_Report

Here are the highlights:

• On impact of SAFRA on industry dynamics:  "The Student Aid and Fiscal Responsibility Act of 2009 (SAFRA) officially became law on March. 30, 2010, and beginning July 1, 2010, private lenders are no longer allowed to originate federal student loans, which will now be solely originated by the federal government. ”The termination of FFELP has been expected for some time, and in the coming months, Fitch Ratings expects to see many private lenders overhaul their business plans’, according to Managing Director Michael Dean. “Fitch will continue to closely monitor all FFELP ABS as some issuers are also the administrator, servicer, or master servicer on their ABS transactions.”
  • Here are some recent posts on industry consolidation here and here

Why Is Five And Six Years The New Normal For College Completion?

I was just having this conversation about this very topic and thought it was important enough to include "Finish in Four" as part of my 140-character tweet about advice on paying for college.  So, how does the NY Times Freakonomics blog answer the question "Why Does College Take So Long These Days?"

"American college students, particularly male students, have been slower and slower to finish college over the past 30 years.  A new working paper by John Bound, Michael F. Lovenheim, and Sarah Turner suggests the trend is due to rising costs of education.  Demographics and academic preparedness don’t explain the trend, but the authors found evidence in support of the increasing cost hypothesis: both increasing student-faculty ratios and cohort size are linked to increasing time-to-degree, particularly in “non-top 50 public sector” schools.  The authors also found that students are working more hours in response to rising costs.  Low-income students and students at less-selective institutions are particularly vulnerable to the trend."

Who Carries The Highest Student Loan Balances?

The College Board is out with a brief today:  "Who Borrows Most? Bachelor's Degree Recipients With High Levels of Student Debt?"

Here are key excerpts:

Pell Grants Surge 60% in Third Quarter; $11.4 Billion Quarter Highest on Record

Updated my Pell Grant table based on new data on the Federal Student Aid site this evening.  The growth in Pell Grants reached unprecedented levels in the quarter ending March 2010, with grants up over 60%. 

Highlights:

• Overall, Pell grants rose 60.4% to $11.4 billion driven by a 36% increase in recipients and a 17% increase in the size of the average grant.
• SLA is now estimating Pell Grants for the 2009-10 academic year at $29 billion, an $11 billion increase over 2008-09 levels.  Based on 2006-07 Pell Grant levels of $12.8 billion, these 2009-10 estimates represent a 127% increase over the past three years.  
  • Recall that $13.5 billion of the recently passed Health Care and Education Reconciliation Act was earmarked to cover a portion of the $19 billion shortfall in the Pell Grant program. 
• With NCES recently reporting the number of undergraduates at 2-year and 4-year institutions in fall 2008 numbering around 19 million, that would suggest that over 30% of college students received a Pell Grant in the most recent quarter. 

Who Are Top Holders of Federal Student Loans?

Observations:

• Reflecting the concentration in the industry, the top 10 loan holders comprise 70% of total FFELP loans oustanding and the top 50 loan holders comprise 96% of FFELP loans.  Overall, $421 billion in FFELP loans were outstanding as of September 2009, a 4% increase over FY2008. 
• Lenders that saw the largest increases  in loan holdings include:
  • Discover (877%):  Discover entered business over 2 years ago and was starting from a low base of $118 million
  • M&T Bank (370% increase)
    
  • PNC (136% increase):  PNC acquired National City and inherited their student loan business
  • Bank of America (48% increase)
• Growth in FFELP loan portfolios was subdued in 2009 as 75-80% of FFELP loans originated in 2008-09 were sold to the Dept. of Education through ECASLA financing programs
• As of September 2009, Sallie Mae held over $154 billion, or 37% of all FFELP loans outstanding.  Sallie Mae holds almost 5X more loans than its nearest rival, Citibank.  Sallie Mae executives have openly discussed selling their FFELP portfolio to shrink their balance sheet.