Financial Market Turmoil and the Impact on Student Aid

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Financial Market Turmoil and the Impact on
Student Aid
A Webinar for the Financial Aid Community October
17, 2008 / 100 230 EDT
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Todays Moderator

• Kevin Bruns
• Executive Director
• Americas Student Loan Providers

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What Is ASLP?

• 6-year-old, 75 member coalition
• private, non-profit and state-based
• Lenders, guaranty agencies and secondary market
  organizations
• Tell the positive FFELP story
• Congress and the media
• Schools, students and parents

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Introduction

• Goal of webinar
• Todays participants
• Overview of session

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• Brett Lief
• President
• National Council of Higher Education Loan Programs

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• Americas Student Loan Providers shares your
  commitment to ensure that all eligible students
  have a reliable source of funding and services
  that begin with college access and financial
  literacy and continue through delinquency
  prevention and default aversion.

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Background

• In November 2007, the higher education loan
  community met with Secretary Spellings and other
  senior officials.
• ASLP members ? the canaries in the mineshaft ?
  were witnessing the early effects of troubles in
  the financial markets.
• The Secretary committed to working with the White
  House, the Treasury Secretary, Congress and
  anyone else that could help to ensure that all
  eligible students would receive needed loans.
• The Secretary has been unwavering. This
  commitment began with the establishment of a
  floor ? a Lender of Last Resort (LLR) program
  that would be implemented only as a last resort.

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Current Times

• Insatiable demand for student aid
• Postsecondary education and training costs rising
• Federal and state grant and scholarship funding
  losing purchasing power
• Market constriction limiting availability of
  private loans
• Less available home equity and higher financing
  costs are preventing families from using equity
  as a resource

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Current Times (cont.)

• All recent increases in federal student aid
  occurred without one new dollar
• Increased loan limits
• Increased Pell Grant maximum to 5,400
• New grant programs

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• We appreciate your cooperation.
• We believe that FFELP offers
• Choice
• Competition
• Community-based services
• Public-private partnership that has provided over
  750 billion in student loans since 1965

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• Mark Weadick
• Managing Director
• Student Loan Capital Strategies LLC

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Capital Markets Update

• Since August 2007 capital markets for FFELP as
  with other consumer assets have been dislocated
• The Education Departments new funding programs
  authorized by ECASLA are working and will result
  in the reliable delivery of loan funds through
  September 2010
• 700B Financial Rescue Package and related
  programs should begin stabilizing FFELP capital
  markets

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• Will Shaffner
• Director, Business Development
• MOHELA

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Responding to Market Challenges

• Exceptionally challenging times
• Response was swift from many areas
• Many organizations, including state-based
  entities, refocused
• MOHELA remains focused on many things but three
  primary areas stand out
• Missouris 154 education institutions and the
  families they serve
• Our partnerships
• Reinforcing customer service

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• Robert L. Moran
• Senior Advisor
• Office of the Under SecretaryU.S. Department of
  Education

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HR 5715 - Ensuring Continued Access to Student
Loans Act (ECASLA)

• Strengthened the GA Lender of Last Resort
  Program
• Provided Secretary with authority to purchase
  FFELP loans
• Ensured no net-cost to the federal government

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Guiding Principles

• Ensure that eligible students and parents receive
  federal student loans for 2008-09 academic year
• Support FFELP as a successful private/public
  partnership
• Protect the taxpayer interest

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Administrations Plan

• Use of Secretarys Authority to Purchase Loans
• Loan Purchase Commitment Program
• Loan Participation Purchase Program
• Continue commitment to ensure FFELP serves
  students and taxpayers
• Ensure the availability of the Direct Lending
  Program to any school
• Enhance the Lender-of-Last-Resort Program to
  ensure continued access to FFELP loans, if needed

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Loan Purchase Commitment Program

• Commitment by ED to purchase eligible 2008-09
  FFELP loans through 09/30/09, extended through
  09/30/10
• Called put
• Any FFELP lender/holder
• Loans must be fully disbursed to be purchased
• 45 day advance notice of loans to be sold
• EDs commitment has value in financial markets

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Loan Participation Purchase Program

• Commitment by ED to purchase participation
  interests in eligible 2008-09 FFEL loans
  through 09/30/09 extended through 09/30/10
• EDs purchase will provide immediate liquidity
• To terminate EDs participation interest lender
  repays ED with defined yield
• Loans can be re-purchased by lender
• Loans can be sold (put) to ED

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• Janet Dodson
• Vice President, Policy, Research and Education
• National Student Loan Program

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Partners Before

• Before Students Arrive on Campus
• College awareness programs (e.g., College Access
  Initiative)
• Information on college and career planning, and
  paying for college
• College nights
• Financial literacy and financial aid seminars
• Loan forgiveness

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Partners During

• Helping Schools Serve Students
• Higher education loan community know you and your
  processes
• Help manage, improve flow and process
• Proactive prevent issues from becoming problems
• More flexible with changes
• Reconciliation

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Partners During (cont.)

• Flexibility (e.g., the 5th disbursement)
• Exit counseling/entire repayment process
• Continuous innovation
• Problem solvers ? Its Bill on line 2.

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Partners Beyond
Life-of-Loan Servicing Enhanced Default
Prevention

• Debt management services unique to FFELP
• Keeping borrowers on track through forbearance
  and deferments
• Rising defaults, heightened attention and concern
• Premium on continuity and service quality
• Guarantors, lenders, schools, and students have a
  shared interest in preventing defaults

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The Numbers
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FFELP in Summary

• Personalized Service
• Designated sales/support reps and regional
  service centers
• Training opportunities
• Life-of-loan servicing with enhanced default
  prevention
• MPN is lender responsibility
• Less liability for school
• Paperless eSign available
• No reconciliation
• Superior technology continuous, market-driven,
  customer-focused
• Public services including college awareness,
  financial aid, financial literacy, and loan
  forgiveness.

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• QA

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