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Finance Roundup August 20, 2009
One third of college-possible consumers have changed their college plans. College prices and a sluggish economy are proving to be too much for one-third of the people surveyed by Money Management International. Among those who are changing their plans, 38 percent expect to attend a less expensive school, 35 percent expect to attend a community college for basic courses, and 31 percent will attend school closer to home. Eight percent have decided not to attend anywhere. Other survey results show that students are shouldering more of the financial burden and parents less.
Direct-to-consumer student loans may be default-prone. First Marblehead is the largest issuer of securities backed by private student loans ($8.1 Billion) originated 'direct-to-consumer.' According to Moody's Investor Service, which rates securities issued by student loan companies, those loans are more default-prone than loans which require 'school certification' by the financial aid office. For a copy of the Moody's report visit their web site. Or call Tom Lemmon at 212.553.7287.
A Smart FAFSA might serve state student financial aid interests as well as federal. According to NASSGAP, 3.9 million student financial awards totaling $8 billion were issued in the U.S. by states. Most of them were need-based, and they used the 'expected family contribution' computed on the federal application for student financial aid (FAFSA). Therefore, any federal effort to streamline the FAFSA should take state needs into account, say many observers. Since each state needs just a few additional questions, a Smart FAFSA should be designed to acommodate them. Perhaps a more dicey topic awaits - a legal definition of a highly mobile student's 'state of residence.'
Student loan risk is typically calculated looking from the present into the past. Present earnings. Present indebtedness. Past payment history. For many college students, the credit present is fresh, and the past is not at all meaningful. So People Capital is promoting usage of a Human Capital Score built on research developed at UPenn's Wharton School. It calculates future income potential based on variables such as GPA, standardized test scores, college attended and major chosen.
Worst-case student loan scenario. Emerson College will pay more than $780,000 to some 4,000 students and graduates under an order emanating from an investigation by New York Attorney General Andrew Cuomo. In an investigation conducted jointly with the Massachusetts Attorney General, Cuomo found that Emerson’s financial aid office and its former Director of Student Financial Services were engaged in conflicts of interest and deceptive practices.
 
Q & A with Jeff Wendt and Rob Hollister
An interesting three-legged stool has been created at Tufts University involving student loan repayment: (1) academic oversight (2) a finance application (3) alumni/ae.
Rob Hollister is the program's design leader.
Overheard.
"Indeed, the 'private' market for student loans is inefficient in dozens of ways precisely because of the government’s involvement. That is a reason to fully privatize student lending, not to increase the government’s role."
Steven Spruil
National Review Online
Overheard.
"From a simple student loan guarantee program to a 'public option' to a union-staffed, government-run monopoly in 44 years: This is sort of a long progression that shows you how the federal government can take over an economy. We’ve pushed out private lenders who had a legitimate interest in making sure someone has the ability to succeed in college, graduate, and pay back the loan, and we’ve made this just pure welfare."
Neal McCluskey
associate director
Cato Institute Center for Educational Freedom
Other resources
Sallie Mae offers comprehensive information and resources to assist students, parents, and guidance professionals with the financial aid process. It owns or manages student loans for 10 million customers and, through its Upromise affiliates, the company also manages more than $17.5 billion in 529 college-savings plans, and is a major, private source of college funding contributions.
Student Lending Analytics (SLA) is an independent research and advisory firm providing an independent, analytical and objective source of information to increase the transparency of the student lending market. SLA advises financial aid administrators on lender selection by employing a comprehensive process augmented by proprietary customer research on lender performance.
The National Council of Higher Education Loan Programs (NCHELP) represents a nationwide network of guaranty agencies, secondary markets, lenders, loan servicers, collection agencies, schools, and other organizations involved in the administration of the Federal Family Education Loan Program (FFELP). NCHELP members promote student access and choice for post-secondary education and training. Since its inception in 1965, the FFEL program has provided over $467 billion in loans to postsecondary students and their parents.
The Education Finance Council (EFC) is an association of nonprofit and state-based student loan providers. These public purpose organizations are dedicated to the single purpose of making college more affordable.
USA Funds is a nonprofit corporation that works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services. USA Funds links colleges, universities, private career schools, private lenders, students and parents to promote financial access to higher learning.
American Student Assistance (ASA) is a non-profit, federally funded student loan guarantor that assists the U.S. Department of Education (ED) to insure private lenders against the risk of default on college loans. ASA helps borrowers manage their higher education debt by providing counseling and education throughout their entire loan experience.
The National Student Loan Program (NSLP) is a private, non-profit, national student loan guaranty agency in the Federal Family Education Loan Program. NSLP assists students and families with higher education access and choice by providing loan guarantee and student loan related services to the financial aid community and student loan industry.
TOPICS: Enrollment Management, Finance, Student Services
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