Transcript Document

NCHELP Spring Convention
What Schools And Families Want
This presentation does not constitute formal policy or legal
advice and should not be relied upon as such.
© Student Lending Analytics, LLC
Slide 1
What Schools and Families Want
Agenda
Federal Student Loans
– Trends in projected market share for FFEL and Direct Lending
programs
– Schools rate the strengths and weaknesses of the programs
– Updated information on “Who’s Going Direct?”
Private Student Loans
– Cutback in private loan availability leading to sharp increase in federal loans
– Schools remains concerned about availability of private loans for 2009-10
– Schools utilizing variety of strategies to deal with expected shortfall
Financial Literacy programs
– Recent research suggests significant room for improving financial literacy of
students
– Schools recognize importance of programs but suffer from resource
constraints when it comes to implementation
– $500 million fund likely to lead to explosion of on-line offerings catering to
college population
© Student Lending Analytics, LLC
Slide 2
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Current Plans for FFELP Participants (Overall) - Respondents
60.0%
56%
49%
Percentage of Total
50.0%
40.0%
Respondents
30.0%
Loan Volume
18%
20.0%
18%
19%
15%
15%
11%
10.0%
0.0%
Committed to
FFELP
Considered DL,
Expect Stay in
FFELP
Considering DL
Decided to go DL
for 09-10
Survey question: Which description most accurately describes your school's federal student loan plans for the 2009-10 school year?
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 3
Percentage of Total FFELP Respondents
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Current Plans for FFELP Participants (By School Type]
70.0%
64%
60.0%
52%
54%
50.0%
4-Year Private
4-Year Public
2-Year Public
40.0%
30.0%
23%
19%
20.0%
13%
8%
10.0%
20%
15%
13%
13%
8%
0.0%
Committed to
FFELP
Considered DL,
Expect Stay in
FFELP
Considering DL Decided to go DL
for 09-10
Survey question : Which description most accurately describes your school's federal student loan plans for the 2009-10 school year?
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 4
Importance (Most Important = 5.0)
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Reasons for Staying in FFELP
4.8
5.0
4.5
4.0
4.0
3.8
4.0
3.0
2.4
2.0
1.0
R
L
D
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Pr
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.D
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us
to
m
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Se
rv
ic
e
0.0
Survey question: Please indicate the importance of each factor in your school's decision to remain a participant in FFELP.
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 5
5.0
4.3
3.9
3.9
4.0
3.8
3.8
3.5
2.9
3.0
2.0
1.0
nd
er
s
eg
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0.0
th
Importance (Most Important = 5.0)
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Reasons Considering (or Switching To] DL Program
Survey question: Please indicate the relative importance of each factor in your decision to switch to Direct Lending (or to consider
making the switch)
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 6
What Schools and Families Want
Who’s Going Direct?
School
New York Institute of Tech.
Auburn University
University of Connecticut
University of Louisville
Middle Tennessee State
Stony Brook University
Azusa Pacific University
CSU-Sacramento
CSU-Long Beach
Lesley University
City, State
New York, NY
Auburn, AL
Storrs, CT
Louisville, KY
Murfreesboro, TN
Stony Brook, NY
Azusa, CA
Sacramento, CA
Long Beach, CA
Cambridge, MA
2007-08
FFEL Volume
$138,100,000
$110,564,411
$109,898,958
$90,847,216
$86,700,000
$86,632,833
$77,000,000
$69,702,474
$67,116,543
$64,193,033
Source: SLA research, May 2009
© Student Lending Analytics, LLC
Slide 7
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Impact of Obama Budget Blueprint on FFEL/DL Decision
Percentage of Total Respondents
Considering Move to Direct Lending
65%
32%
3%
0.0
No Impact on Decision
More Likely to Go To DL
Less Likely to Go DL
Survey question: To what extent has the Obama Administration's recent budget proposal to shift entirely to Direct Lending had an
impact on your school's decision-making process for 2009-10?
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 8
SLA Flash Survey: Lender Customer Service
Loan Processing Ratings
Rating Scale (Strongly Agree = 4.0)
4.0
3.5
3.4
3.3
3.3
3.3
3.2
3.2
3.1
3.0
2.9
3.0
1.8
2.0
1.0
11
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10
9
Le
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er
Le
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er
8
Le
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7
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6
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5
Le
nd
er
4
Le
nd
er
3
Le
nd
er
EC
T
IR
D
Le
nd
er
1
0.0
Survey statement: This lender processes transactions (cash & non-cash) in a timely manner after loans are certified.
Source: SLA Flash Survey: Lender Customer Service Survey, October 2008
© Student Lending Analytics, LLC
Slide 9
SLA Flash Survey: Lender Customer Service
Lender Representative Ratings
Rating Scale (Strongly Agree = 4.0)
4.0
3.7
3.4
3.4
3.2
3.1
3.0
3.0
2.8
3.0
2.7
2.6
2.0
1.7
1.0
11
Le
nd
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10
9
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4
Le
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3
Le
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2
Le
nd
er
Le
nd
er
1
0.0
Survey statement: This lender's representatives are prompt and responsive in addressing questions and problems.
Source: SLA Flash Survey: Lender Customer Service Survey, October 2008
© Student Lending Analytics, LLC
Slide 10
SLA Flash Survey: Lender Customer Service
On-Line Application Ratings
Rating Scale (Strongly Agree = 4.0)
4.0
3.4
3.2
3.1
3.1
2.9
3.0
2.8
2.8
2.8
2.7
2.6
2.3
2.0
1.0
11
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4
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3
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2
Le
nd
er
Le
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er
1
0.0
Survey statement: This lender's on-line application process for borrowers is user-friendly.
Source: SLA Flash Survey: Lender Customer Service Survey, October 2008
© Student Lending Analytics, LLC
Slide 11
SLA Flash Survey: Lender Customer Service
Value-Added Services Ratings
Rating Scale (Strongly Agree = 4.0)
4.0
3.5
3.3
3.2
3.0
3.0
2.8
3.0
2.8
2.5
2.4
2.0
1.8
2.0
1.0
11
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1
0.0
Survey statement #3: This lender provides value-added services including default prevention, financial literacy and/or detailed
reporting on loan activity.
Source: SLA Flash Survey: Lender Customer Service Survey, October 2008
© Student Lending Analytics, LLC
Slide 12
4.8 4.7
5.0
4.6 4.6
4.5 4.4
4.4
4.6
4.5
4.1
4.1
3.7
4.0
3.0
New to DL
2.0
Experienced DL
1.0
.
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Rating Scale (Very Satisfied = 5.0)
SLA Flash Survey: Trends in FFEL and DIRECT Lending Programs
Satisfaction Ratings for Direct Lending
Survey question: Describe your level of satisfaction with the Direct Lending program for each of the factors described below.
Source: SLA Flash Survey: Trends in FFEL and Direct Lending, March 2009 (551 respondents)
© Student Lending Analytics, LLC
Slide 13
SLA Flash Survey: Lender Customer Service
Reasons for Selecting Lender As Best
Loan processing
– “Unlike other large national lenders, they don't seem to tell our students we have the
funds when we don't. We don't have very many issues, but they are very responsive
at fixing any issues.”
Value-added services
– “They have extensive Financial Literacy materials on their web site for students to
access when/where they want to.”
Customer service to borrowers
– “Students who have had reason to call this lender with questions or concerns routinely
stop back by to tell me how great the service was.”
Customer service to financial aid office
– “We rarely have issues that need to be resolved, and their customer service center is
the best we've worked with.”
Commitment and Consistency
– “In looking back 9 months to 1 year, this is our only lender who has maintained the
same level of contact with the school and kept the same lender rep as our contact.”
© Student Lending Analytics, LLC
Slide 14
What Schools and Families Want
The Geography of FFELP program
Thirteen states had at least 90% of the institutions within their state participating in
the FFEL Program in 2007-08:
–
West
• Alaska
• Hawaii
• Montana
• New Mexico
• Utah
• Wyoming
–
Midwest
• Nebraska
• North Dakota
• South Dakota
–
East
• Pennsylvania
• New Hampshire
• Vermont
–
South
• Mississippi
© Student Lending Analytics, LLC
Slide 15
What Schools and Families Want
Agenda
Federal Student Loans
– Trends in projected market share for FFEL and Direct Lending programs
– Schools rate the strengths and weaknesses of the programs
– Updated information on “Who’s Going Direct?”
Private Student Loans
– Cutback in private loan availability leading to sharp increase in federal loans
– Schools remains concerned about availability of private loans for 2009-10
– Schools utilizing variety of strategies to deal with expected shortfall
Financial Literacy programs
– Recent research suggests significant room for improving financial literacy of students
– Schools recognize importance of programs but suffer from resource constraints when
it comes to implementation
– $500 million fund likely to lead to explosion of on-line offerings catering to college
population
© Student Lending Analytics, LLC
Slide 16
What Schools and Families Want
Who’s Taking Out Those Private Student Loans?
From Project on Student Debt Analysis of NPSAS Data:
– Percentage of all undergraduate students who borrowed private student
loans jumped from 5 percent in 2003-04, to 14 percent in 2007-08.
– At proprietary (for-profit) colleges and universities, the percentage of
students who took out these loans skyrocketed from 13 percent in the 200304 school year, to 42 percent last year.
– One in four private student loan borrowers in 2007-08 didn’t take out any
federal Stafford loans that year
© Student Lending Analytics, LLC
Slide 17
What Schools and Families Want
How Has The Supply of Private Student Loans Been Impacted by Credit Crunch?
Supply of private loans declined rapidly in August-September 2008…
– Lenders representing over 30-35% of private loan market left the market
• Credit line pulled: College Loan Corp., Education Finance Partners
• Parent company afflicted by sub-prime issues: Wachovia, CampusDoor
• Inability to access ABS market: Key Bank, Bank of America (TERI)
While incumbents have not picked up the slack…
– Securitization markets have been relatively dormant since 2007
• Recent Sallie Mae deals have been done at extremely high prices
– Concerns over consumer credit quality has plagued student loans
• Sallie Mae expected to write-off $1 billion in private student loans in 2009
– Limited access to capital
And new entrants have added much new supply into market
– Discover entered market in 2007
– Credit unions starting to increase their market presence
– Peer-to-peer lenders, Fynanz and GreenNote, met with limited success
© Student Lending Analytics, LLC
Slide 18
What Schools And Families Want
How Have Students Adjusted To The Decline in Availability of Private Loans?
While traditional funding sources to finance a college education have
been whacked…
– Home equity has plummeted given nationwide declines in home prices
– 529 plans have suffered in the bear market which reduced equity values over
50%
Students turning to federal loans in record numbers
– According to the Department of Education, federal loans have seen 20.8%
growth through the end of February for the 2008-09 academic year
• Stafford unsubsidized loans increased by $2,000 in July 2008
• 10% increase above trend in federal loan borrowings amounts to about $7
billion in incremental borrowing
– Parent PLUS loan growth appears to be flat
• Sallie Mae, the largest FFELP lender, saw 57% growth in Stafford volume in
their internal brands for 2008 while Parent PLUS volume was flat over the
same timeframe
Leading indicator, FAFSA filings, are up 20.8% in first quarter, so
expect this trend of increased federal loan borrowings to continue
© Student Lending Analytics, LLC
Slide 19
What Schools and Families Want
Student Concern About Transparency
Selected comments from SLA Private Student Loan Ratings
survey:
“While the interest rate was not disclosed on the website after being
approved without a cosigner, I called the customer service line and they
were very helpful: they told me what my rate was, which was prime plus 2 or
3%. I asked if I could get a lower rate with a cosigner and they said I could
try, so I did and got a much lower rate.”
“They want you to sign the promissory note before you know what the
interest rate is. The interest rate is not part of the promissory note. I had to
call their customer service department to find out that my rate would be
prime + 1/2%. Why do they expect us to sign a promissory note before we
know what the interest rate is?”
© Student Lending Analytics, LLC
Slide 20
What Schools and Families Want
Transparent Disclosures
• University Credit Union (Maine)
• University of Southern California Credit Union
3-month LIBOR + Margin
= Interest Rate
© Student Lending Analytics, LLC
Borrower
(with Cosigner)
Borrower Only
(No Cosigner)
FICO Score
Margin
Margin
750 and above
2.00%
2.00%
730 to 749
2.50%
3.00%
700 to 729
3.00%
3.50%
680 to 699
4.00%
4.50%
660 to 679
5.50%
6.00%
Slide 21
What Schools and Families Want
Degree of Concern Regarding Private Student Loans
60.0%
Percentage of Total Respondents
52%
50.0%
44%
38%
40.0%
31%
30.0%
20.0%
14%
10.0%
Overall
4-year private
4-year public
2-year public
17%
6%
4%
0.0%
Very Concerned
Somewhat Concerned
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)
© Student Lending Analytics, LLC
Slide 22
What Schools and Families Want
Prevalence of Lender Lists for Private Loans
70.0%
Percentage of Total Respondents
60.0%
69%
65%
56%
54%
50.0%
42%
40.0%
34%
30.0%
23%
21%
Overall
4-year private
4-year public
2-year public
20.0%
12%
10%10%
10.0%
4%
0.0%
Yes
No
Not Sure
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)
© Student Lending Analytics, LLC
Slide 23
What Schools and Families Want
Lender Selection Process for 2009-10
Percentage of Respondents With Lender List for 2009-10
40.0%
35%
32%
30.0%
20.0%
14%
12%
8%
10.0%
0.0%
Formal RFI
Keep List from
08-09
All Lenders Last Informal Process
3-5 Yrs
Other
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)
© Student Lending Analytics, LLC
Slide 24
What Schools and Families Want
Selection Criteria for Private Lenders
Average Weighting
25.0%
23%
20.0%
18%
15%
13%
15.0%
10%
10.0%
8%
5%
5.0%
5%
4%
0.0%
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Source: Survey of SLA Clients, June 2009
© Student Lending Analytics, LLC
Slide 25
What Schools and Families Want
Lenders On Private Loan Lists
48%
Percentage of Respondents With Lender List for 2009-10
50.0%
40.0%
30.0%
24%
20.0%
17%
12%
10.0%
0%
0.0%
1
2 to 3
4 to 5
5 to 7
Over 8
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)
© Student Lending Analytics, LLC
Slide 26
78%
73%
80.0%
77%
73%
70.0%
60%
54%
60.0%
50% 51%
50.0%
Aug-08
Jun-09
40.0%
25%
30.0%
20.0%
19%
16% 15%
16%
3%
10.0%
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0.0%
S
Percentage of Total Respondents
What Schools and Families Want
Strategies For Challenging Times
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)
© Student Lending Analytics, LLC
Slide 27
What Schools and Families Want
Other Strategies/Observations
“Reach out to lenders who may be coming out with new loan
programs that have favorable terms.”
“We're only recommending private loans to foreign students who will
need to provide a co-signer. Although we're not recommending
PELs to other types of students, we are leaving it up to them
providing counseling on good and bad points of PELs vs federal
loans.”
“We package students with a PLUS or Grad/PLUS loan, those
seeking alternative loans [must] request [one] or are due to PLUS
denial.”
“The issue is not availability. the banks keep raising their interest
rates and fees. We are a grad business school only and even our
students who have excellent scores are getting high rates. If
students get co-signers, they get much better rates.”
© Student Lending Analytics, LLC
Slide 28
What Schools and Families Want
Agenda
Federal Student Loans
– Trends in projected market share for FFEL and Direct Lending programs
– Schools rate the strengths and weaknesses of the programs
– Updated information on “Who’s Going Direct?”
Private Student Loans
– Cutback in private loan availability leading to sharp increase in federal loans
– Schools remains concerned about availability of private loans for 2009-10
– Schools utilizing variety of strategies to deal with expected shortfall
Financial Literacy programs
– Recent research suggests significant room for improving financial
literacy of students
– $500 million fund likely to lead to explosion of on-line offerings
catering to high school/college populations
– Schools recognize importance of programs but suffer from resource
constraints when it comes to implementation
© Student Lending Analytics, LLC
Slide 29
What Schools and Families Want
Financial Literacy Research
Negative trends at the high school level
– The financial literacy of high school students has fallen to its lowest level
ever, with a score of just 48.3 percent.
College students score 30% higher than high school students
– Scores increase by each grade level in college
In terms of their topical strengths and weaknesses:
– Strengths: Income and Spending
– Weaknesses: Money Management and Saving
College student test results question efficacy of high school courses
in personal finance or money management
– May not be appropriate until students care (situation specific)
Simulations/Interactive exercises seem particularly effective
Source: The Financial Literacy of Young American Adults, by Lewis Mandell, Ph.D.
© Student Lending Analytics, LLC
Slide 30
What Schools and Families Want
$500 Million College Access and Completion Innovation Fund
Proposed in 2010 budget with $2.5 billion commitment over 5 years
To fund outreach and literacy programs on state-by-state basis
– Support federal/state partnerships to increase college completion rates
Recent credit card bill also may spur literacy programs
– Education/Treasury/Office of Financial Literacy to study current activities
– Looking into funding these programs through credit card transaction fees
Expect an explosion of online financial literacy programs
– College Foundation, Inc.
– NSLP
– USA Funds
© Student Lending Analytics, LLC
Slide 31
What Schools and Families Want
Increased Interest in Financial Literacy Programs
80.0%
Percentage of Total Respondents
70.0%
63%
60.0%
50.0%
37%
40.0%
30.0%
20.0%
10.0%
0.0%
Yes
No
Survey question: Have you seen an increased interest in financial literacy by the students at your institution?
Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)
© Student Lending Analytics, LLC
Slide 32
What Schools and Families Want
Prevalence of Financial Literacy Programs
59%
Percentage of Total Respondents
60.0%
50.0%
40.0%
39%
33%
30.0%
26%
20.0%
10.0%
0.0%
Overall
4-year public
4-year private
2-year public
Survey question: Does your institution currently offer a financial literacy program beyond standard entrance and exit loan counseling
to your students?
Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)
© Student Lending Analytics, LLC
Slide 33
What Schools and Families Want
Financial Literacy Topics
88%
Percentage of Total Respondents
90.0%
74%
80.0%
73%
70.0%
57%
60.0%
53%
51%
50.0%
41%
40.0%
38%
35%
31%
30.0%
20.0%
10.0%
0.0%
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Survey question: What are the topic(s) covered by your financial literacy training?
Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)
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What Schools and Families Want
Content Delivery for Financial Literacy Programs
90.0%
82%
Percentage of Total Respondents
80.0%
70.0%
60.0%
46%
50.0%
43%
40.0%
30%
30.0%
18%
20.0%
10.0%
0.0%
In-person group
workshops
Handouts
Reference page on
website
Online tutorials
Other
Survey question: How does your institution administer the financial literacy program?
Source: SLA Flash Survey: Financial Literacy, September 2008 (200 respondents)
© Student Lending Analytics, LLC
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What Schools and Families Want
Recommended Financial Literacy Sources
Student groups
– Students in Free Enterprise (SIFE) association
Schools
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Brigham Young University
James Madison University
Midwestern University
Montgomery College
Texas Tech’s Red to Black Program
University of Georgia
University of Wisconsin-Madison
Virginia Tech
Media
– Magazines: Money, Kiplinger
– Online: Motley Fool, CNN Money
© Student Lending Analytics, LLC
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What Schools and Families Want
Recommended Financial Literacy Sources (continued)
Guarantors
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TGSLC – Positive Balance
NSLP – Financial Literacy Online
NY HESC
USA Funds Life Skills
EdFund
MGSLP
Non-Profits/Associations
– NASFAA
– National Endowment for Financial Education (NEFE) – Cashcourse.org
WASFAA Spring Training 2008 – Developing and Delivering
Financial Literacy Program
© Student Lending Analytics, LLC
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What Schools and Families Want
Questions
????
© Student Lending Analytics, LLC
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Student Lending Analytics
Background
Founded in 2007
Independent Research and Advisory Service with NO lender affiliations
Mission: Find best lenders for students through an analytically rigorous and
comprehensive process
Services
– SLA grades private loans with SLA Private Loan Ratings
– RFI Management of FFEL and Private Loans
– Research
Successes to Date
– Managed RFI process at institutions with over $850 million 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 2008 Alternative Loan Guide provides
students and financial aid offices with an objective and focused list of private lenders
© Student Lending Analytics, LLC
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The Student Lending Analytics Process
RFI Management
© Student Lending Analytics, LLC
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Student Lending Analytics
Research Services
Inform financial aid offices on industry developments (implications for their lender lists
and relationships)
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Student Lending Analytics Blog
• Timely insights to developments in student lending industry
Alerts
• Legislation, lender exits, earnings calls, industry insight
Monthly newsletter
• August – Tips for Lender Lists
Webinars
• April – Lessons Learned in Trenches of Lender Selection Process
• September – HEOA and Lender Lists
• December – Conversation about FFEL and Direct Lending Programs
Surveys (summaries available on our website)
• FFEL vs. Direct Lending
• RFI Practices
• Implementing increased Federal Stafford loan limits
• Alternative Loans
• Private Loans for International Students
Legislative and regulatory updates
White papers
Help Line to answer questions/resolve issues throughout the year
© Student Lending Analytics, LLC
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Student Lending Analytics
Contact Information
For more information about SLA contact us at:
Tim Ranzetta
Student Lending Analytics LLC
650-218-8408
[email protected]
www.studentlendinganalytics.com
© Student Lending Analytics, LLC
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