slide 1© student lending analytics, llc student lending analytics flash survey: private loan...

© Student Lending Analytics, LLC

Student Lending AnalyticsFlash Survey: Private Loan Availability

June 11, 2009


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


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?



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



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



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%)



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



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%



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)


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)



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)



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)



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



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)


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.”



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.



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)



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)



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)



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


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


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


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



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



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


The Student Lending Analytics ProcessRFI Management


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

slide 1© student lending analytics, llc student lending analytics flash survey: private loan...

Documents

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private student loan

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