Slide 1© Student Lending Analytics, LLC
Student Lending AnalyticsFlash Survey: Private Loan Availability
June 11, 2009
Slide 2© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Background
Situation: The private student loan market continues to be strained by a lack of capacity. SLA estimates that the market has shrunk by 30% due to lenders dropping out of the market as well as cutbacks in originations by other lenders.
Survey Goals– Determine the level of concern in the financial aid community about
private student loans– Ascertain the methods that schools are using to select their private
lenders and characteristics of their lender list– Assess reasons that schools choose not to provide students with a
lender list– Enumerate the strategies that schools are employing to meet this
challenge
Slide 3© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans Methodology
Emailed flash survey on June 3, 2009 with due date of June 4, 2009
In addition to demographic questions, the survey asked respondents the following questions:– Is your institution planning to provide students with a lender list for private
loans for the 2009-10 school year?– Please describe your institution's process for developing a lender list for
private student loans. – How many lenders does your institution plan to have on your lender list for
private loans for the 2009-10 academic year? – Please describe the importance of these factors in determining why your
institution will not be providing students with a lender list for private student loans for the 2009-10 school year.
– How concerned are you about the availability of PRIVATE loans for your students for the 2009-10 academic year?
– What are your current strategies to help students find private, nonfederal loans for the 2009-10 school year?
Slide 4© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Methodology (Cont.)
Responses were normalized for following reasons:– Email addresses that did not correspond with an educational institution were
excluded– Several schools provided multiple responses; only one response was
analyzed– Responses that included demographic data but incomplete answers to main
survey questions were excluded
Overall, there were 187 survey responses analyzed
Slide 5© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
SummaryOverall, 56% of survey respondents indicated that they would provide their students with a lender list for private loans for the 2009-10 school year
– As expected, respondents at four year private institutions had the highest rate, with 69% indicating that they would be providing such a list
– 48% of respondents with lists indicated that they listed 4-5 lenders– While 35% of schools indicated that they would be completing a formal RFI process to
select their lenders, 32% indicated that they would be keeping their 2008-09 list– In terms of information provided on these lender lists, links to the lender sites (83%),
loan costs (69%) and interest rate ranges (65%) were most frequently cited. Only 23% provide specific interest rates on their lender lists.
The top four reasons given by schools NOT putting together a lender list for private loans were:
– Do not want to encourage usage of private loans– Too much time required to complete RFI process– Too much time required to maintain lender list– Concern over regulations
Slide 6© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Summary (Cont.)
The top three third-party sites provided by schools offering links to private loan information are Finaid.org (64%), Student Lending Analytics (38%) and Simple Tuition (31%)
53% of respondents believe that lenders’ approval rates on private loans are either much lower (7%) or lower (46%) than last year – A large percentage, 21%, indicated that they were not sure about approval
rates for their students
Overall, 58% of financial aid administrators are either Very Concerned (14%) or Somewhat Concerned (44%) about the availability of private student loans for the 2009-10 academic year– 4-year private institutions demonstrated the highest level of concern with
69% either Very Concerned (17%) or Concerned (52%)
Slide 7© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Summary (Cont.)
Top three strategies cited by financial aid administrators to address private loan availability issues were:– Encourage usage of Parent Plus loans before applying for private loan– Highlight the importance of using a cosigner to improve interest rate on the
loan – Make students/families aware of tuition repayment options
Check out SLA’s new Private Student Loan Ratings service– Independent, objective source of information about leading private loans– Featured in NY Times as “a service to improve transparency”– Provides comprehensive details on loans gleaned from promissory notes– Updated immediately to reflect lender changes– In addition to not being affiliated with any lenders, SLA:
• Does not receive any referral fees from lenders
• Does receive accept compensation for advertising any lender products
Slide 8© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Profile of Survey Participants
School Type
0%
20%
40%
60%
4-Year Private 4-Year Public 2-Year Public Other
School Ownership
0%10%20%30%40%50%60%
Private Public Other
School Region
0.0%
10.0%
20.0%
30.0%
40.0%
Northeast Midwest South West
Cost of Attendance
0%10%20%30%
Slide 9© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Prevalence of Lender Lists for Private Loans
56%
34%
10%
69%
21%
10%
42%
54%
4%
12%
65%
23%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Yes No Not Sure
Per
cen
tage
of
Tot
al R
esp
ond
ents
Overall
4-year private
4-year public
2-year public
Survey question: Is your institution planning to provide students with a lender list for private loans for the 2009-10 school year?Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 10© Student Lending Analytics, LLC
What Schools and Families Want Lenders On Private Loan Lists
0%
17%
48%
24%
12%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
1 2 to 3 4 to 5 5 to 7 Over 8
Per
cen
tage
of
Res
pon
den
ts W
ith
Len
der
Lis
t fo
r 20
09-1
0
Survey question: How many lenders does your institution plan to have on your lender list for private loans for the 2009-10 academic year? Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 11© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Lender Selection Process for 2009-10
35%
32%
12%
8%
14%
0.0%
10.0%
20.0%
30.0%
40.0%
Formal RFI Keep List from08-09
All Lenders Last3-5 Yrs
Informal Process OtherPer
cen
tage
of
Res
pon
den
ts W
ith
Len
der
Lis
t fo
r 20
09-1
0
Survey question: Please describe your institution's process for developing a lender list for private student loans.Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 12© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Information Provided on Lender List
83%
69%65%
46%
23%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Links to LenderWebsite
Loan Fees General InterestRate
Link toApplication
Specific InterestRate
Per
cen
tage
of
Res
pon
den
ts W
ith
Len
der
Lis
t fo
r 20
09-1
0
Survey question: Describe the types of information that you will be providing about the lenders appearing on your institution's lender list for private loans. Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 13© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Other Information Provided About LendersServicing/servicer details pertaining to each lender
Lender’s inclusion on listing of FFELP lenders
Lender's relevant history in the student loan "industry“
Lender's source(s) of private loan capital/funding
Factors to consider in selecting a lender
Importance of keeping private loan indebtedness levels to a minimum
Enrollment requirements
Whether loan requires repaying interest while in school
Borrower benefits
Cosigner release option
Minimum/maximum loan levels
Cosigner requirement
Satisfactory academic progress requirement
Slide 14© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Reasons Given For Not Providing Lender List
3.9
3.5 3.53.3
2.9
2.3
0.0
1.0
2.0
3.0
4.0
5.0
Don't Want toEncourage
Private Loans
RFI Process ListMaintenance
Regulations Low Volumes Unable to FindLenders
Rel
ativ
e Im
por
tan
ce o
f F
acto
rs (
Mos
t Im
por
tan
t =
5.0
)
Survey question: Please describe the importance of these factors in determining why your institution will not be providing students with a lender list for private student loans for the 2009-10 school year. Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 15© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans Other Reasons Given For Not
Providing Lender List“Lenders have too many hidden costs and are constantly changing the terms of the loans. This makes it impossible for even professionals to explain all of the variations.”
“The fear of our students being able to receive so many loans and when they go into repayment I'm afraid they will pay private loans first and let there federal stafford loans fall behind causing defaults to go up. This will effect the schools cohort default rates to rise when our school rate is very low.”
“Concerned about high levels of indebtedness while attaining only a two year degree.”
“Graduate students are eligible for the Grad Plus loan so we are encouraging students to “Borrow Federal First.”
“This is partially captured with "time required to maintain list" but things seem to be changing so rapidly that we're afraid as soon as we publish something it will be out of date.”
“Over-regulation makes the process daunting.”
Slide 16© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Third-Party Websites
64%
38%
31%
13%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Finaid.org Student LendingAnalytics
SimpleTuition Greentree Gazette
Per
cen
tage
of
Tim
e T
hat
Com
pan
y W
as M
enti
oned
By
Sch
ools
L
ink
ing
to A
ny
Th
ird
-Par
ty S
ite
Survey question: Which third-party sites, if any, will you be directing students to, if they are interested in applying for a private student loan?. Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)Note: 34% of schools responding to the survey include a link to a third-party website on their financial aid site.
Slide 17© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Private Loan Approval Rates: Impressions From the Field
7%
46%
25%
1%
21%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Much LowerApproval Rates
Lower ApprovalRate
Same ApprovalRate
Higher ApprovalRates
Not Sure
Per
cen
tage
of
Tim
e T
hat
Com
pan
y W
as M
enti
oned
By
Sch
ools
L
ink
ing
to A
ny
Th
ird
-Par
ty S
ite
Survey question: Please describe your impressions regarding private loan approval rates for your students today, as compared to a year ago. Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 18© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Degree of Concern Regarding Private Student Loans
14%
44%
17%
52%
6%
38%
4%
31%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Very Concerned Somewhat Concerned
Per
cen
tage
of
Tot
al R
esp
ond
ents
Overall
4-year private
4-year public
2-year public
Survey question: How concerned are you about the availability of PRIVATE loans for your students for the 2009-10 academic year?Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 19© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Strategies For Challenging Times
73% 77%
60%
16%
78% 73%
54%
25%19%
3%
16%
50%
15%
51%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Paren
t PLUS
Co-sig
ner
Tuitio
n Rep
aym
ent P
lans
Couns
eling
State
pro
gram
s
Insti
tutio
nal L
oans
Multi
ple Len
ders
Credi
t Unio
ns
Per
cen
tage
of
Tot
al R
esp
ond
ents
Aug-08
Jun-09
Survey question: What are your current strategies to help students find private, nonfederal loans for the 2009-10 school year?Source: SLA Flash Survey: Private Student Loans, June 2009 (187 respondents)
Slide 20© Student Lending Analytics, LLC
SLA Flash Survey: Availability of Private Student Loans
Other Comments From Financial Aid Administrators
Two comments about specific lenders and approval or interest rates– “Citibank has a high approval rate for our students.”– “Our students think Discover has pretty good rates.”
• See SLA Blog post for details about Discover’s recent interest rate increase, effective June 1, 2009
Concern among community college administrators:– “No one wants to lend to community college students. Even our nursing, radiological, surgical techs,
and sonography students can not get private loans.”– “Very few lenders will work with 2 year schools.”
Several comments about the new Sallie Mae product– “Eager to see if Sallie Mae's change to in-school interest payments will be accepted.”– “Too early in the 09-10 academic year to determine this, but the new Sallie Mae loan will not be
popular with our students and I am sure they will look else where. If a student falls behind on their interest payments than there will be no second disbursement and it is unclear (per our rep) if Sallie Mae will even be notifying the schools!”
• See SLA Blog post for additional details
“Parents are declining the PLUS loan in favor of the private loan in the student's name with the intention of paying the loan back themselves.”
“Bank of America opted not to respond to RFI.”– See SLA Blog post for additional details
Slide 21© Student Lending Analytics, LLC
Thank You
Thank you again for your participation!
Please contact Tim Ranzetta if you have any additional comments or questions regarding this survey– Send email to [email protected] – Phone: 650-218-8408
Look for more upcoming SLA Flash Surveys in the future
For more information on Student Lending Analytics, proceed to the final three slides
Slide 22© Student Lending Analytics, LLC
Student Lending AnalyticsBackground
Founded in 2007
Independent Research and Advisory Service with NO lender affiliations
Mission: Find best lenders for students through an analytically rigorous, unbiased and comprehensive process
Services– RFI Management of FFEL and Private Loans– Research
Successes to Date– Managed RFI process at institutions with over one billion dollars in loan volume– Inside Student Lending, our monthly newsletter, reaches over 5,000 financial aid
administrators– Student Lending Analytics Blog has become the go-to source for breaking
developments and analysis on the student lending industry– SLA Flash Surveys have included the insights from over 1,500 financial aid
professionals on a variety of timely topics– Private Loan Options and the SLA’s 2009 Alternative Loan Guide provides
students and financial aid offices with an objective and focused list of private lenders– SLA Student Satisfaction Surveys measures student satisfaction with lenders
Slide 23© Student Lending Analytics, LLC
Unlocking the Mysteries of Private Student Loans
Student Lending Analytics: Resources Available
SLA Private Student Loan Ratings
2009 SLA Private Loan Series – 2009 SLA Private Loan Guide
Paying For College Blog
Student Satisfaction Surveys
Coming Soon: Private Loan Quiz
Slide 24© Student Lending Analytics, LLC
Unlocking the Mysteries of Private Student Loans
Private Student Loan RatingsAvailable at http://www.studentlendinganalytics.com/ratings.html
Featured on front page of New York Times Business
Focused on evaluating eight lenders that appeared most frequently on over 700 school lender lists that SLA researched
Includes the following factors in ratings:– Expected loan cost– Borrower benefit savings– Fee structure – Flexibility of repayment options– Customer service – Financial stability
SLA receives no compensation from any lenders on this list
New Service: Student Loan Forum to capture real-time information about interest rates and approvals
Slide 25© Student Lending Analytics, LLC
Unlocking the Mysteries of Private Student Loans
2009 SLA Private Loan SeriesMost popular post: Shopping for Private Student Loans Makes a Difference!
– Results from 6 student loan applications yields interest rates between 7% - 12%
Before You Apply for a Private Student Loan– Provides checklist of items to complete prior to considering a private student loan
What About Credit Unions?– Explores the increasing role that credit unions are providing in the private student loan market
"Miss A Payment On Your Private Student Loan, You Could See Your Interest Rate Rise"– Highlights two lenders that have clauses in promissory notes which could result in 2% increases in interest
rates triggered by one late payment
Borrower Benefits on Private Student Loans– Provides examples of savings opportunities available to private loan borrowers
What Ingredients Go Into the "Secret Sauce"?– Insights into the factors that lenders consider in making their credit decisions
Does It Make Sense To Shop Around For Private Student Loans?– Provides details on new Fair-Isaac policy about the impact of applying for multiple student loans on your
credit score (hint: it helps student borrowers)
The Promissory Note– Highlights the key terms to be aware of when evaluating lender promissory notes
What is the Meaning of "Instant Credit Response"?– Reviews the on-line application process and analyzes the speed of lender credit reviews
Private Loan Fee Structure– Benchmarks most common fees assessed by private lenders for both origination and servicing of loans
Slide 27© Student Lending Analytics, LLC
Student Lending AnalyticsResearch Services
Inform financial aid offices on industry developments (implications for their lender lists and relationships)
– Student Lending Analytics Blog• Key resource for thousands of professionals in the student lending industry• Timely insights to developments in student lending industry
– Alerts• Legislation, lender exits, earnings calls, industry insight
– Monthly newsletters– Webinars
• December 2008 – A Conversation about FFELP and Direct Lending• May 2009 – Unlocking the Mysteries of Private Student Loans
– Surveys (summaries available on our website)• FFEL vs. Direct Lending• RFI Practices• Implementing Increased Federal Stafford loan limits• Availability of Alternative Loans
– Legislative and regulatory updates– White papers– Help Line to answer questions/resolve issues throughout the year
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