Student Lending Analytics Blog

Senate Bill Would Create Private Student Loan Ombudsman

Here is the press release.  Here is an excerpt:

U.S. Sen. Sherrod Brown (D-OH), joined by U.S. Sens. Michael Bennet (D-CO), Al Franken (D-MN) and Barbara Mikulski (D-MD), today announced new legislation to help streamline assistance to Americans struggling with private student loan issues. The Private Education Loan Ombudsman Act, to be housed in the U.S. Department of Treasury, would help private student loan borrows address complaints or challenges by working colleges and universities and private lenders.

NegReg And Ability-To-Benefit Tests: More Questions Than Answers

Thanks to NASFAA for their summary of the recent negotiated rulemaking sessions held this week focused on the integrity of the federal student loan programs.  Here are links to the summaries that they have provided with the issues discussed:

• Day 1:  Discussed protocol and subjects to be discussed 
• Day 2:  Definition of High School Diploma, Ability to Benefit, Misrepresentation of Information, Incentive Compensation
• Day 3:  State Authorization, Verification, Agreements Between Institutions of Higher Education

I wanted to focus my attention on the Ability-To-Benefit Tests, which I have blogged about here and here and was the subject of a GAO report that found fraudulent activity on the two occasions their investigators visited a school testing site. 

Here was NASFAA's blow-by-blow of the rulemaking session dealing with ATB tests:

On Unemployment and Private Student Loan Defaults

In case you missed the morning announcement from the US Bureau of Labor Statistics, the unemployment rate has now sits above 10% (10.2% to be precise) and the total number of jobs now lost since December 2007 is over 8 million.  This article from the blog Minyanville captures the loss of white-collar jobs that has occurred during this recession:

"The months since the collapse of Lehman Brothers have been disastrous for professionals, except those in the fields of health care and education. From August to April, there was an overall drop in employment of 4.3%. More significant, however, were the steep declines in highly skilled occupations: 9.3% in computer and math jobs, 10.3% in engineering and architecture occupations, and a whopping 11.5% in arts, design, entertainment, sports, and media occupations."

To get a sense of how bad it has been for recent graduates, here is what one expert had to say:

Parsing Student Loan Corporation's 10-Q For Clues on State of Student Loan Market

Student Loan Corporation filed their 10-Q this morning.  With year-end fast approaching, and their credit agreement with Citibank expiring on December 31, 2009, a key development to watch out for will be their ability to negotiate a new funding agreement.  Here are the highlights:

• Explained their 10% drop in federal student loan originations due to increasing shift toward Direct Lending (see post here) and new regulations about preferred lender lists:

"The Company’s FFEL Program loan originations decreased by 10% for the three months ended September 30, 2009 as compared to the same period in 2008.  This decrease is largely due to schools moving from the FFEL Program to the Department of Education’s Direct Lending Program and adding additional lenders to their preferred lender lists to comply with regulatory requirements and concerns.  The impact of these actions was partially absorbed by the withdrawal of many lenders from the FFEL Program and overall growth in the marketplace."

• Almost 20% (19.3%) of their loans in repayment that were originated after January 2008 are in forbearance (see this post which shows how Sallie Mae has reduced their use of forbearance):
  • Page 38 of 10-Q:  $267 million of average uninsured standard private loans in repayment and forbearance and $51.5 million of loans in forbearance
  • Might partially explain their 47% decrease in private loan originations in the 3Q as they continue the recent effort to originate higher quality private education loans."

Bank of America Exiting Federal Student Loan Program

Bank of America, the largest U.S. bank based on asset size, announced today that they will be exiting the Federal Family Education Loan Program, or FFELP, in December.  Here is a copy of their announcement to their school customers:  Download Bank of America Student Lending Announcement 11.6.09

Here are some details from their announcement:

Seven Questions With Paul Goebel, University of North Texas Money Management Center

I came across the University of North Texas Money Management Center through some financial literacy research that was passed along to me from a colleague.  The program had been cited as a model program whose comprehensive approach to financial literacy was worthy of emulation.  I thought I would check in with Paul Goebel, the founding and managing director of the program there to learn more about his award-winning center.  What follows is the result of an email exchange over the past week:

Question:  Paul, can you please describe the various elements of your program.

Answer:  The center provides four primary services to students to help them strengthen their financial literacy skills:

• Information:  Online resources
• Education:  Workshops, seminars, presentations
• Application:  Personal consultations
• Retention:  Emergency short-term loan programs

Question:  What are the main issues that students are concerned about today?

Answer:  The main money issues/concerns of students today include: 

• Understanding financial aid processes
• Building a livable budget
• Planning for transition (graduation, graduate school, new professional life, etc.)
• Building and repairing credit
• Financial goals setting and achieving

Financial Literacy In The News

• An improvisational play "Mad About Money" produced by the National Theatre for Children (Minneapolis) has proven effective at teaching children basic financial literacy concepts (here is a link to the four financial literacy programs currently being offered by NTC which seems geared to middle-schoolers):

"While student and teacher feedback has consistently indicated that the plays make an impact, a recent study by Dr. Lewis Mandell of the University of Washington provides empirical evidence that NTC's productions are influencing student attitudes on personal finance. Professor Mandell's research showed that watching the Mad About Money play - and using the student workbooks and Web site aligned with the program - significantly increased a student's knowledge of personal finance concepts. "The intervention increased knowledge by more than 13 percent, which was highly significant," writes Dr. Mandell in his report."

Participate in SLA's Flash Survey On Federal Student Loan Trends

A flash survey went out this afternoon to financial aid administrators to determine where they are in regards to their decision-making process in thinking about their federal student loan program.  With 250 responses in the first two hours this will prove to be a very popular survey.  Please drop me a line at tranzetta@studentlendinganalytics.com if you are interested in participating in it.  The survey closes next Tuesday, November 10th at 5 p.m. Pacific time. 

Now This Is An Interesting Pricing Model...

I was researching a new college search site called WiseChoice (slogan is "Your Personalized Path to College").  It looks like it is bringing the concept of a college consultant to the masses.  I will post a more detailed review of the site later but I was drawn to it because of its holistic approach to helping students select the right college while also incorporating a financial planning module to ensure they can afford it too.  When I went looking for the cost of this service, I came to this screen, which I wasn't able to replicate for you. 

Here is the gist of their pricing model:

Over 40% Of Corinthian College Institutions Could Have 2008 Cohort Default Rates Over 25%

Here is the disclosure in their recent 10-Q:

"Given the data the Company has received thus far, we expect ten to twelve of our “institutions” to exceed the 25% limitation for the 2008 Cohort, but we do not expect any of these institutions to exceed the threshold for three consecutive years. The preliminary data also show another five of our “institutions” could exceed this limitation, although the Company will not know the outcome for these institutions until draft rates are published in February 2010."