Student Loan Webinar

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Student Loan Webinar
A Webinar for the Financial Aid
Community February 26, 2009 / 100 200 P.M. EDT
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Todays Moderator

• Michael McFarlane
• Chair, Consumer Bankers Association Education
  Funding Committee
• and
• Senior Vice President for Education Finance
  Citizens Bank

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About the Sponsor

• Americas Student Loan Providers
• 7-year-old, 75 member coalition
• Private, non-profit and state-based
• Lenders, guarantors and secondary market
  organizations

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Introduction

• Goal of webinar
• Todays participants
• Overview of session

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• Daniel T. Madzelan
• Director of Forecasting and Policy Analysis
  Staff, U.S. Dept. of Educations
  Office of Postsecondary Education
• and
• Acting Assistant Secretary for Postsecondary
  Education

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• Federal Student Lending Update
• February 26, 2009

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Agenda

• Budget (High Level)
• Challenges
• Response
• PLUS Auction Pilot
• HEAO Rulemaking
• Stimulus

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The Federal Budget

• Defence Domestic
• Mandatory Discretionary

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Subsidies

• 2006Higher Education Reconciliation Act
• 2007College Cost Reduction and Access Act

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Triple Threat to Student Loans

• Profitability
• Liquidity
• Capacity

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Governments Response

• 3. Capacity
• Lender of Last Resort
• Direct Loans

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Governments Response

• 2. LiquidityECASLA
• Purchase/Forward Commitments to Purchase
• Proceeds for New Loans
• No Net Cost to U.S.
• 2008-09 Put and Participation
• 2009-10 Replications
• 2007-08 Short Term
• Conduit

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Governments Response

• 1. Profitability
• Special Allowance Payments
• CP-LIBOR Fix

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Ongoing/Upcoming

• PLUS Auction Pilot
• HEAO Rulemaking
• Negotiated
• Ordinary
• American Recovery and Reinvestment Act of 2009

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More Information

• http//www.federalstudentaid.ed.gov/ffelp

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Comments, Questions, Feedback, and Contact
Information

• Dan Madzelan
• Director, Forecasting and Policy Analysis Staff,
• Office of Postsecondary Education
• Phone [phone]
• Email dan.madzelan_at_ed.gov

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• Hannah Smitterberg
• Managing Director
• Nelnet

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How NOT to Implement Plan B

• Taxpayer backlash regarding the failed rescue
  packages
• TARP I and TARP II Increased lending?
• AIG/Fannie/Freddie Money pits?
• Recent injections/loss guarantees for certain
  large institutions Still need more?
• Auto sector will it work?
• New Financial Stability Plan will it work?
• Student lending is the notable exception to this
  rule!
• Publicly heralded as the one instance where the
  intended consequence actually happened!

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How to Implement Plan B

• The fast motion response
• ECASLA signed into law May 2008
• August 2008 Put and Participation Programs up
  and running for 08/09 AY loans
• October 2008 Extended term to include 09/10 AY
  loans
• November 2008 Replicated Put and Participation
  Programs announced creation of longer term
  solution through ABCP facility TALF program
  announced
• December 2008 Initial structural details of
  TALF become available
• February 2009 Closed initial ABCP facility
  documents
• March 2009 ABCP projected to begin funding
  possible TALF funding

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Why has this worked so well?

• Proper focus on making sure students can get
  loans
• Back to what we know Federal backstop support
  for student lending is the norm, not the
  exception
• Recognition by all stakeholders of the benefits
  of a Public Private Partnership (PPP) that
  actually works
• Best interest of borrowers (servicing, choice,
  innovation)
• Reduces strain on exploding national debt burden
• Reduces systemic risk inherent in single-provider
  solutions
• What does the future hold?
• FFELP Loan availability is ensured
• The same old DL v. FFELP debate has become
  irrelevant

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• Terry Muilenburg
• Senior Vice President,
• Govt. and Industry Relations,
• USA Funds

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Default Prevention

• Guarantors' fundamental responsibility?
• Contact and counsel student loan borrowers to
  prevent delinquency and default

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Default Prevention Success

• More than 52 billion in potential loan defaults
  averted

Average success rate of 90 percent
Source NCHELP Survey of Guarantors, FY 2007
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Guarantor Initiatives

• Enhancing Student Retention Rates
• Consultations
• Workshops
• Best Practices
• Products and Services

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Guarantor Initiatives

• Peer Assistance Programs
• Student-to-student education
• Student assistants
• Provide default prevention and financial literacy
  information

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Guarantor Initiatives

• Using Social Media
• Default prevention information on My Space and
  Facebook
• High success rate with borrowers contacted
  through social networking pages

• Assistance to Withdrawing Students
• Encourage return to school
• Students who withdraw provided special loan
  counseling

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Guarantor Initiatives

• Default Aversion Symposia
• Symposia for campus staff
• Causes of default, help at-risk students
• Holistic approach to default prevention,
  financial literacy and student success

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Guarantor Initiatives

• Linking Participants to Prevent Default
• Conference call between borrower, default
  prevention counselor, lender/servicer staff
• Helps ensure resolution of loan delinquency

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Guarantor Initiatives

• Financial Literacy
• Print, online curricula
• Help students manage their budget, minimize debt,
  and prepare for repayment
• Guarantors support colleges in implementing
  financial literacy programs

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Guarantor Initiatives

• Promoting Payment Relief Options
• Media articles
• Outreach to unemployed
• Counseling at-risk borrowers
• Mailers, newsletters, Web information

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• QA

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• Kevin Bruns
• kevin_at_aslp.info
• 202 721-1190
• www.aslp.us