Student Lending Analytics Blog

Wondering How To Boost Savings Rates? Think Texting!

Here is the summary of this interesting article from the Wall Street Journal:

A new study by a group of economists looking at why people save money found that simply sending out cellphone reminders increased savings balances by 6%.

The study challenges the idea that people don't have enough self-control to save. Instead, the problem may be that they just aren't paying attention, said Dartmouth University economics professor Jonathan Zinman, one of the study's four authors.

"Savings isn't at the top of their mind," said Mr. Zinman. "Basically all we did was remind them."

Dept. of Education Provides Update on Direct Loan Transition

First, I applaud the Department for providing some additional insights on the direct loan transition in their recent newsletter, as I had called for in this post last month.

From the Department of Education November edition of Direct Loan Source:

There has been much discussion about the risk of transitioning thousands of schools into the Direct Loan Program by the beginning of the next academic year. Most of the schools that have already made the transition to Direct Lending report having done so with few, if any, issues. The Department has ample capacity to transition all remaining schools before July 1. There is minimal transition risk if schools begin the process in the next few months.

• Over 5,000 domestic schools currently make disbursements in either the Direct Loan or the FFEL Program. Of those, over 2000 schools currently participate in the Direct Loan Program.
  
  
• Of the approximately 3000 schools currently participating in the FFEL Program, more than 2,800 currently participate in the Pell Grant Program and thus are familiar with the Common Origination and Disbursement (COD) System. This is the same system used to originate Direct Loans, and existing familiarity with the system greatly simplifies the transition process. In addition, more than 600 of these schools have officially notified the Department of their intent to participate in the Direct Loan Program and over half have registered for Direct Loan training in the coming month.
  
  
• Of the less than 200 domestic schools not currently using COD, 36% have begun the transition process by registering for Direct Loan training.

MEFA Has Private Loan Capacity

With all the news about the contracting private loan market, it was interesting to see in this announcement that the Massachusetts Educational Financing Authority had $262 million available to lend as of September 30th [$375.3 million less $113 million outstanding loan balance]:

"At closing, the trust was 100% prefunded, structured with an acquisition account that contained $375.3 million to be used to acquire private student loans until Sept. 1, 2009. On Aug. 31, 2009, with written consent of Assured, the acquisition period was extended to Oct. 1, 2009. On Oct. 1, with written consent of Assured, the acquisition period for the bonds was extended to Dec. 15, 2009, subject to MEFA meeting certain conditions, and further extended to Jan. 22, 2010, subject to MEFA meeting certain additional conditions. As of the Sept. 30, 2009 reporting period, the outstanding loan balance was approximately $113 million, indicating that the majority of the funds in the acquisition account have not yet been utilized to acquire loans."

Servicing on Student Loan Xpress Loans Not Expected To Be Impacted by CIT Bankruptcy Filing

In case you get questions from recent Student Loan Xpress borrowers...

Here is the announcement from Fitch today:

"Fitch spoke with XLS regarding the potential implications of the CIT bankruptcy filing to XLS' operations and its capacity as servicer of the above mentioned transactions. XLS stated that it is 'business as usual' and that they continue to fill open positions as turnover occurs. Fitch believes that if XLS becomes part of the bankruptcy proceedings, a bankruptcy judge would consider the servicing operations necessary to protect trust assets and the total value of the estate. Therefore, the servicing operations would be maintained and expenses, including payroll, would continue to be funded. Additionally, the servicing platform itself is an asset and could be acquired by a third-party in a bankruptcy proceeding."

Thought For the Day...

"There is no way to escape being a slave to the quarterly report.  Quality education and higher education are two masters.  You can't serve both."

School president quoted in 1991 Report "Abuses in Federal Student Aid Programs" made by the Permanent Subcomittee on Investigations of the Committee on Governmental Affairs

Chase's Participation In FFELP Program (Updated With Clarification)

From an email that I received from a financial aid director this morning: 

Time for Some Good News...

Someone's been feeling generous lately!: 

• 2 anonymous donors give $125 million to Amherst College
• Engineering college given $3 million by corporation
• Clarke College receives $10 million donation
• Colorado College puts $2.3 million gift toward unrestricted financial aid
• Anonymous $2 million donation to Culver-Stockton College earmarked for study
• Cazenovia College receives its largest gift:  $2 million
• Pappajohns commit $26.4 million to new projects at IU

House Bill To Create Roosevelt Scholars Program

I received this email this morning from Congresswoman Anna Eshoo (CA-14):

"I just signed on as a cosponsor of H.R. 3510, the Roosevelt Scholars Act of 2009. The bill would create a new, elite scholarship program to fund graduate level study in exchange for a civil service commitment to areas across the federal government. H.R. 3510 would also establish a foundation to administer the application process, selection of scholars, and ongoing support activities associated with these scholarships. The scholarship would provide full tuition, support for room and board, and a stipend for graduate study. In exchange, the scholars will complete an internship with a federal agency and, upon graduation, complete a minimum of three years of civil service.

H.R. 3510 would provide the much needed pipeline of professional talent for the federal government which is facing a workforce crisis.  The Government Accountability Office (GAO) estimates that in approximately five years, the government's top scientists, engineers, physicians, mathematicians, economists, and other highly specialized professionals will be retiring.  The bill will initiate a major recruitment effort that utilizes our nation's expansive network of colleges to meet vital government staffing needs and serve the American public."

Here is a summary of the bill provided by CRS:

The Problem With Corporate Support of Financial Literacy Efforts

A cautionary tale from a recent Washington Independent article "Financial Literacy Coalition Teams Up with Subprime Lender."

Here is the crux of the article:

"The JumpStart Coalition for Personal Financial Literacy, a national nonprofit advocacy group that aims to improve the financial management skills of America’s youth, draws lots of attention for its surveys measuring how much kids really understand money...The 180 corporations, government agencies and nonprofits that are partners and provide financial support to the coalition get prominent billing on JumpStart’s Website, and share in the prestige of a group that promotes national standards for financial literacy education in the country’s classrooms.

But also included in the coalition is CompuCredit, an Atlanta subprime lender that specializes in high-rate credit cards, payday loans, auto financing and debt collection, focusing on customers with poor credit scores. In December of last year, CompuCredit reached a $114 million settlement with the Federal Deposit Insurance Corporation and the Federal Trade Commission, which had charged CompuCredit and two partner banks with deceiving hundreds of thousands of customers by failing to properly disclose upfront fees and credit limits on their cards, thereby sinking borrowers further in debt. In addition, JumpStart’s Southeast regional director, a paid consultant who serves as a liaison to the group’s state affiliates, also counts CompuCredit as a client of his private consulting firm."

Fitch's 3Q Student Loan Report Card Chronicles Key Events Of Last Three Months

It was a busy quarter, which I was reminded of while reading this summary to the Fitch report (and SLA Blog was there for you chronicling the key events of the last three months as indicated by the number of links listed below): 

Student Loan Industry Review
The student loan industry continued to endure stress in the third quarter of 2009. On
Sept. 17, 2009, the House of Representatives passed the Student Aid and Fiscal Responsibility
Act (SAFRA), which would terminate the Federal Family Education Loan Program (FFELP) by
July 1, 2010. The Senate is expected to introduce its own version of the bill later this year.
More schools switched to the Federal District Loan program in the quarter, which could be in
anticipation of the FFELP termination if SAFRA is enacted. As a result, FFELP disbursements
dropped by 17% from the same quarter last year, according to data provided by the Department
of Education (ED). Fitch Ratings expects the FFELP market to continue to shrink as more
schools make the switch.