HOW AMERICA PAYS FOR COLLEGE

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HOW AMERICA PAYS FOR COLLEGE
The Private Credit Marketplace Today

• Presented by
• Michael Arp
• VP, Sales
• November 2008

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Financial Markets

• Properly functioning credit markets Vital to
  the financial health of American consumers,
  including those in pursuit of a higher education.
  
• Current Climate All financial service companies,
  student loan providers and colleges, are
  experiencing tighter credit markets as a result
  of the sub-prime mortgage crisis.
• Ongoing turbulence makes for extraordinarily
  challenging times for student lenders and the
  entire higher education community.

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Financial Markets

• A total of 137 education lenders have exited or
  suspended their participation in all or part of
  the federally student loan program (According to
  FINAID.ORG).
• Hundreds of higher education institutions that
  regularly rely on the availability of reasonably
  priced credit to finance their day-to-day
  operations have also been unable to access
  critical funds.
• Not relative, however, to the strength or quality
  of the institution or company.

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Credit Markets

• The Situation
• Access to funds from which new private credit
  loans can be made is extremely limited for all
  financial services companies.
• Hundreds of higher education institutions that
  regularly rely on the availability of reasonably
  priced credit to finance their day-to-day
  operations have been unable to access critical
  short-term funds.
• The situation underscores how these difficulties
  are impacting institutions on multiple levels
  regardless of their financial soundness or
  quality.
• The Result
• Fewer private loans are being offered, and where
  they are being offered, credit criteria has
  become more stringent

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Private Education Loans Direct MailJune 2006
June 2008
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Thinking ahead, what worries families when
considering paying for college?
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Liquidity Solution Business As Usual

• The liquidity solution provides unlimited funding
  for student lenders to make loans through 2010.
• Guarantees that any student that needs a federal
  loan for college will get one.
• Lenders should have until 2010 to decide if they
  will sell loans to the Department (Awaiting
  implementation details of the extension from the
  Department).
• Thus far, only one lender has decided to sell
  only 61 million in loans to the Department.

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Emergency Economic Stabilization Act of 2008

• Broad 700 Billion economic rescue plan aimed at
  alleviating the prolonged credit market
  deterioration and its impact on all American
  consumers.
• Student loans, including private loans, could be
  part of the plan
• The definition of financial institutions
  asoutlined in the legislation does not limit
  participation of student loan companies.
• Legislation could potentially allow purchase of
  student loan assets, if Treasury determines it
  necessary to promote financial market stability.

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Secretary of Treasury

• Families, too, feel the credit crunch as it
  becomes more difficult to get car loans or a
  student loan.
• Treasury Secretary Henry Paulson

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FAFSA Application

• One-quarter (25) college families dont
  complete the FAFSA application
• Not surprisingly, application rates decline with
  household income
• One-in-four families with incomes between
  35,000 and 100,000 do not fill out an
  application

Completion of FAFSA by Annual Household Income
Applied
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Alternatives to Alternative Loans

• Scholarships and Grants
• Tuition Payment Plans
• Low-cost Federal Student Loans
• Graduate PLUS Loans may be an effective
  substitute for some private loan programs

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• PANEL DISCUSSION