Student Loan Summit

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Student Loan Summit

• Jackson, Mississippi
• May 22, 2008

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(No Transcript)
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Current Environment

• Recent History
• Impact
• Why?---The Perfect Storm
• Good Reading
• Recent Legislation
• The Last 24 Hours

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Recent History

• Exodus of Lenders from FFELP
• Exodus of Lenders from Consolidation Market
• Exodus of Lenders from Private Student Loan Market

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Impact

• Loss of Front-end Pricing Benefits
• Reduced or elimination of Back-end Borrower
  Benefits
• Reduced Service Levels
• Limited availability to certain sectors and
  students
• More restricted availability of Private Loans at
  higher prices

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Why?---The Perfect Storm

• College Cost Reduction and Access Act of
  2007Reduced Margins and Insurance
• Sub Prime Credit Crisis spreads to Student
  LoansNo liquidity for new loans
• Congress took away half the lender profits and
  the credit crisis took the other half.

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Good Reading

• NASFAAs The Student Loan Credit Crunch
  published 4/29/2008
• Mark Kantrowitzs Solving the Student Loan
  Credit Crunch published 3/10/1008 and updated
  4/30/2008
• Tim Ranzettas Student Lending Analytics

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Recent Legislation

• HR 5715 Ensuring Continued Access to Student
  Loans Act of 2008
• --DOE able to act as secondary market for
  FFELP
• --Increased Unsubsidized Stafford Loan
  Limits for Undergraduates
• --PLUS Loan Modifications
• --Lender of Last Resort Provisions
• HR 5914 HR 5723

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The last 24 Hours

• Dear Colleague Letter of May 21, 2008
• Sallie Maes Announcement of May 21, 2008

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Guarantors Respond To Survey Tool

• Survey Results
• May 22, 2008

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All Sectors FFEL Loans Originated Between
7/01/06 and 6/30/07 Current Guaranty Agencies
Ranked by Dollars Disbursed
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Guarantor 2008 Survey ResultsPricingTop 5
Guarantors for MS respond

• What pricing/repayment benefit changes have been
  made for FY 09?
• USA Funds for loans guaranteed on or after Feb
  1, 2008, USAF will subsidize from its non-federal
  resources, one half (1/2) of the 1 federal
  default fee, when the origination
• NSLP Has extended the ½ FDF through 6/30/09
• TSAC Has begun paying the 1 FDF on behalf of
  the borrowers for all institutions, all loan
  types, and all lenders.
• TG Will continue to subsidize the 1 FDF for
  Stafford and PLUS loans for student and parent
  borrowers for 08/09
• ASA Making no changes to pricing and repayment
  benefits for the upcoming year. ASA continues to
  charge the 1 FDF.

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Guarantor 2008 Survey ResultsChanges Top 5
Guarantors for MS respond

• What changes in terms of the type of schools,
  students and parents do you plan to serve in FY
  09?
• USA Funds None
• NSLP None
• TSAC None
• TG None
• ASA - None

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Guarantor 2008 Survey ResultsOutlook Top 5
Guarantors for MS respond

• What is the outlook in terms of capacity to
  guarantee Federal Student Loans in FY 09?
• USA Funds No limits or curtailments are planned
• NSLP No limits or curtailments are planned
• TSAC No limits or curtailments are planned
• TG No limits or curtailments are planned
• ASA No limits or curtailments are planned

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Guarantor 2008 Survey ResultsInternal Changes
Top 5 Guarantors for MS respond

• What internal changes have been made by your
  organization in terms of marketing, personnel,
  customer service representation and other support
  resources in light of the current student lending
  issues?
• USA Funds No staffing or organizational changes
• NSLP No Cutbacks
• TSAC Checking with schools to determine lender
  changes requiring systematic changes to the
  guarantor system
• TG No major internal changes are currently
  expected
• ASA No changes

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Guarantor 2008 Survey ResultsContinuing Top 5
Guarantors for MS respond

• Are you continuing to guarantee Federal
  Consolidation Loans?
• USA Funds Yes
• NSLP Yes
• TSAC Yes
• TG Yes
• ASA - Yes

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Guarantor 2008 Survey ResultsChanges to
Terms/Benefits Top 5 Guarantors for MS respond

• Have you made any changes in your requirements
  and/or terms/benefits? If so, what?
• USA Funds No
• NSLP No
• TSAC No
• TG No
• ASA - No

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Guarantor 2008 Survey ResultsContingency Plans
Top 5 Guarantors for MS respond

• What contingency plans do you have for FY 08/09
  given the current student loan environment?
• All Guarantors have a plan to address potential
  gaps and are working with the U.S. Department of
  Educations requirement to submit a LLR plan

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Guarantor 2008 Survey Results Top 5 Guarantors
for MS respondInformation

• What information do you expect to receive at the
  Summit?
• Hear of the concerns of the schools and how we
  can assist MS financial aid community and the
  students we serve
• A better understanding as to what schools are
  planning for 09/10
• A sense from the schools about concerns on
  preferred lender lists, LLR, funding shortfalls
  and HR 5715
• The many challenges in funding and access in
  higher education faced by schools in MS
• To reassure schools of our commitment to them and
  the students they serve and the availability of
  FFEL funds in the future

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Lenders Respond To Survey

• Survey Results
• May 22, 2008

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All Sectors Original Lender for student Attending
Schools in the State Top Ten (10) Lenders by
Dollars Disbursed between 7/01/06 and 6/30/07
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Lender 2008 Survey ResultsProducts Offered

• Loans products provided
• BancorpSouth Stafford, Undergraduate/Graduate
  PLUS
• Brazos Student Lending Stafford,
  Undergraduate/Graduate PLUS, Private
  (Alternative)
• CampusDoor Private (Alternative) only
• Citibank Stafford, Undergraduate/Graduate PLUS,
  Private (Alternative)
• Citizens Bank of Philadelphia Stafford,
  Undergraduate/Graduate PLUS
• Education Services Foundation Stafford,
  Undergraduate/Graduate PLUS
• First Tennessee Bank Stafford,
  Undergraduate/Graduate PLUS, Private
  (Alternative)
• Hancock Bank Stafford, Undergraduate/Graduate
  PLUS

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Lender 2008 Survey ResultsProducts Offered
Continued

• Regions Bank Stafford, Undergraduate/Graduate
  PLUS, Private (Alternative)
• Renasant Bank Stafford, Undergraduate/Graduate
  PLUS
• SallieMae/Sallie Mae Education Trust Stafford,
  Undergraduate/Graduate PLUS, Private
  (Alternative)
• Trustmark National Bank Stafford,
  Undergraduate/Graduate PLUS
• Wells Fargo Bank Stafford, Undergraduate/Graduat
  e PLUS, Private (Alternative)

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Lender 2008 Survey ResultsSources

• What is the source(s) of funding used to
  originate your loans?
• Premiums from sale of loans to secondary markets.
  Interest income less cost of funding and
  expenses.
• Commercial lines of credit Securitization
• Line of credit is funding source to originate
  loans which includes provision to sell loans
  within a specified timeline after the final
  disbursement of such loans.
• Banks own funds from lines of credit,
  shareholders, etc.
• Uses deposits from Consumer, Business and
  Commercial sources to create and originate
  funding for student loans.
• Asset backed securitizations
• Funding is based on bank sources

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Lender 2008 Survey ResultsPricing

• What pricing/repayment benefit changes have been
  made for 2008/2009?
• BancorpSouth No front end or back end benefits
  due to the programs being eliminated by our
  secondary markets
• Brazos Student Lending Elimination of benefits
  that allowed the lender to pay the federal and
  guarantor fees on behalf of the borrower
• Citibank Origination fee is now paid by
  Stafford Loan borrowers. The Federal Default Fee
  (FDF) is now paid by the borrower unless the
  borrower uses a guarantor who pays the fee
• Citizens Bank of Philadelphia No longer offer
  zero (0) fee loans and no longer offer 2
  interest rate reduction for auto debt
• Education Services Foundation No payment of
  upfront fees no repayment benefits
• First Tennessee Bank All borrower benefits have
  been eliminated for 2008-2009

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Lender 2008 Survey ResultsPricing (Continued)

• Hancock Bank No longer offer zero (0) fee loans
  or the 2 interest rate reduction for auto debit
• Regions Bank Discontinuing subsidy of Stafford
  Loan origination fee for loans guaranteed after
  May 2, 2008
• Renasant Bank No longer subsidize default and
  origination fees nor offer repayment benefits
  (interest rate reduction for ACH payments
• SallieMae/Sallie Mae Education Trust Benefits
  and repayment incentives and the terms of private
  loan programs vary by school, servicer, guarantor
  (if applicable) and other factors
• Trustmark National Bank No longer offer 2 rate
  reduction in repayment benefit on all loan
  products
• Wells Fargo Bank interest reduction rate of
  .050 at repayment interest rate reduction
  during repayment (.025) for automatic
  withdrawals from a checking or saving account no
  longer paying FDF or origination fee for fedreral
  loans after July 1, 2008

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Lender 2008 Survey ResultsChanges

• As of this date what changes in terms of the
  types of schools, students and parents do you
  plane to serve in 2008-2009
• BancorpSouth Will lend to borrowers attending
  an eligible MS school, and will lend to MS
  residents attending out of state eligible school
• Brazos Student Lending None
• Citibank Will suspend lending at certain
  schools where loans with lower balances and
  shorter interest earning periods result in
  unsatisfactory financial returns. Citizens Bank
  of Philadelphia - None
• Education Services Foundation None
• First Tennessee Bank None

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Lender 2008 Survey ResultsChanges Terms/Types
(Continued)

• Hancock Bank - None
• Regions Bank None
• Renasant Bank borrowers must be attending an
  eligible MS school or a MS resident attending an
  eligible out of state school
• SallieMae/Sallie Mae Education Trust None
• Trustmark National Bank None
• Wells Fargo Bank - None

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Lender 2008 Survey ResultsOutlook

• As of this date what is the outlook in terms of
  capacity or originate Federal Student Loans in
  2008/09?
• BancorpSouth Will be originating loans for this
  loan period
• Brazos Student Lending - 0 funding suspended
  until portfolio can be securitized
• Citibank Continues to have the necessary
  funding available to originate student loans
• Citizens Bank of Philadelphia Continues to have
  funding available for student loan for FY 08/09
• Education Services Foundation Does not
  currently anticipate a lack of funding for the AY
  08/09
• First Tennessee Bank Outlook is still good

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Lender 2008 Survey ResultsOutlook (Continued)

• Hancock Bank Has available student loan funds
  for 08/09
• Regions Bank Not changing its capacity to
  originate Federal Student Loans in 08/09
• Renasant Bank If no further negative impact to
  the student loan industry, plans are to originate
  as in the past
• SallieMae/Sallie Mae Education Trust Has funds
  available for funding both student loans and
  general corporate purposes
• Trustmark National Bank Does not have a set
  capacity at this time and are still open for all
  originations at this point
• Wells Fargo Bank Has available student loan
  funds for 08/09

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Lender 2008 Survey ResultsPrivate/Alternative
Loans

• What is the Outlook in terms of capacity to
  originate Private (Alternative) Loans for
  applicants in 08/09?
• Brazos Student Lending 30 Some trading
  partners have abandoned their programs
• Campus Door Continues to have the necessary
  funding available
• Citibank Continues to have the necessary
  funding available
• First TN Outlook is good
• Renasant No plans to change
• Sallie Mae/Sallie Mae Education Trust Continues
  to have the necessary funding available
• Wells Fargo Continues to have necessary funding
  available

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Lender 2008 Survey ResultsInternal Changes

• What internal changes have been made by your
  organization in terms of marketing, personnel,
  customer service representation and other support
  resources in light of the current student lending
  environment?
• BancorpSouth Reduction in marketing as a result
  of the Sunshine Act, elimination of three (3)
  positions in other states as our policy changed
  on 1/08 only originate for MS schools and MS
  residents attending in or out of state
  institutions
• Brazos Student Lending 60 of workforce will be
  eliminated by 10/01/08
• Citibank Unable to determine their comment due
  to space on the site
• Education Services Foundation Decreased
  marketing and efforts and budget
• Sallie Mae/Sallie Mae Education Trust Currently
  making changes in response to the College Cost
  Reduction and Access Act of 2007

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Lender 2008 Survey ResultsInternal Changes
(Continued)

• Citizens Bank of Philadelphia None
• First Tennessee Bank To date no changes have
  been made in this area
• Hancock Bank - None
• Regions To date no changes
• Renasant Bank Personnel and customer service
  has not changed
• Wells Fargo - None at this time

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Lender 2008 Survey ResultsConsolidation Loans

• Are you continuing to originate Federal
  Consolidation Loans?
• All responses were no

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Lender 2008 Survey ResultsContingency Plan

• What contingency plan do you have for 2008/2009
  given the current student lending environment?
• BancorpSouth Lending in MS and MS residents
  attending an eligible out of state school
• Brazos Student Lending Diversify business in
  lines that are complimentary to our non-profit
  mission
• Citibank
• Citizens Bank of Philadelphia Continue to serve
  our students
• Education Services Foundation If no changes to
  the student loan environment occur over the next
  several months we will attempt to amend our line
  of credit to allow us to hold the loans for an
  extended period of time to work in conjunction
  with MHEAC
• First Tennessee Bank Other than eliminating
  borrower benefits FTB plans to operate basically
  has it has in past years

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Lender 2008 Survey ResultsContingency Plan
(Continued)

• Hancock Bank To continue to offer our
  commitment and involvement within our community
  and the student loan industry
• Regions Committed to student lending as one of
  the many services and products that are provided
  to its customers
• Renasant Bank Plans to continue originating
  student loans for 2008/2009. Any future plans
  will be dependent upon the U.S. Department of
  Education
• Sallie Mae/Sallie Mae Education Trust Secure
• Trustmark To move forward in the program
  utilizing low key marketing strategy, prepared to
  hold loans for a longer period of time until the
  market makes and turn and our loans can be
  purchased
• Wells Fargo Actively evaluating pending
  legislative changes and the evolving student
  lending environment

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Lender 2008 Survey ResultsInformation?

• What information do you expect to receive at the
  Student Loan Summit?
• To reassure Mississippi Universities and Colleges
  that they are committed to the loan industry, to
  students, parents and schools and to financing
  higher education
• To learn the reaction of schools of current
  market conditions and their plans for the future
• Other school and lender thoughts on the future of
  the student loan industry
• A hope that the majority of schools, lenders and
  guarantee agencies will be able to assist and
  support one another and continue to serve in the
  FFEL programs as in previous years
• To learn how to best work together

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Schools Respond to Survey
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School 2008 Survey ResultsFY 09 Plans

• Which description most accurately describes your
  schools federal student loan plans for 08/09
  school year?
• We remain committed to the FFEL program and never
  seriously considered a move to Direct Lending
• Wesley College A DIRECT Lending school but have
  decided to become a FFEL school for FY 08/09
• Alcorn State Will remain a DIRECT Lending
  school

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School 2008 Survey ResultsImportance and
Preferred Lender List

• Please indicate the single most important reason
  to remain or (become) a FFEL school?
• Insufficient time to make change (concerned about
  implementation time)
• Enhanced customer service to the Financial Aid
  Office
• Better borrower benefits for the student
  (Majority answered)
• Other systems/operational issues

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School 2008 Survey ResultsPreferred Lender List

• Do you have separate Preferred Lender lists for
  Stafford, Undergrad PLUS, Graduate Plus, and/or
  Private (Alternative) Loans?
• 7 out of the 10 who do provide a Preferred Lender
  List offers a separate listing for other loan
  types

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School 2008 Survey ResultsPreferred Lender List
(Continued)

• What criteria is used in the selection process
  for your PLL?
• Knowledge, customer and quality of service
• Availability
• Calls and visits from representatives from the
  various lenders
• RFI with formal Lender, Review meetings
• Electronic capability
• Volume
• An assessment tool used by those in the office
  with direct student contact

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Best Practices for Constructing a Lender List

• Determine your selection criteria
• Develop a list of factors to evaluate when
  deciding which lenders to recommend to borrowers
• Do all the candidates meet the chosen criteria
• Are certain factors of greater significance than
  others
• Borrowers needs and expectations
• Borrower benefits
• Customer Service
• Customer satisfaction
• Lifetime service and repayment support
• Lender experience and reputation
• Schools processing needs
• Lender processing standards
• Interest rates, fees and loan benefits
• Estimated costs, savings, sample payment charts

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Preferred Lender Lists

• Remember schools are required to document the
  process and
• Must disclose to prospective borrowers your
  method and criteria used to select lenders
• Must provide comparative information on interest
  rates and other benefits
• Must provide prominent statement that prospective
  borrowers are not limited to lenders on list
• May not assign lender to first-time borrowers
• Must update list and comparison information at
  least annually

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Preferred Lender Lists Things to Remember

• What are the Conditions
• Must contain a minimum of 3 lenders willing to
  make loans to students at the institution
• All lenders listed must not be affiliated
• May not include lenders that have offered
  financial or other benefits to the school in
  exchange for inclusion on the list
• If you do not use the term Preferred with your
  lender list then you do not have a Preferred
  Lender List

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Affiliated Lender

• Is defined as one that
• Is under the ownership or control of the same
  entity or individuals
• Is a wholly or partly owned subsidiary of the
  same parent company
• Has director, trustees, or general partners of
  one of the lenders that constitute a majority of
  the persons holding similar positions with the
  other lender

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Preferred Lender Lists Things to Remember (Cont.)

• Consider carefully the placement of each lender
  on your list since some borrowers will simply
  choose the first lender
• Determine which criteria to use in order to sort
  the list and make it clear how the list is sorted
  (by alpha or by a score assigned by the school
  based on the selection process or maybe your
  listing is based upon customer service ratings or
  on the lowest cost to the borrower based on the
  mix of borrower benefits offered by the lender)

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Preferred Lender Lists

• The U.S. Department of Education stated that
  plans are in place to provide a model format for
  schools to use when designing and publishing a
  list of recommended or suggested lender

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School 2008 Survey ResultsOne or More Guarantor

• Do you utilize more than one Guarantor?
• Of the 17 schools which responded only 3 answered
  No
• Do you require school certification of Private
  Loans?
• Of the 13 schools which participate in the
  Private Loan Programs all responded Yes
• What platform do you use to electronically
  communicate with lenders?
• 2 - participants use Open Net
• 1 - other
• 14 - use ELM

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School 2008 Survey ResultsContingency Plans

• Given the current student lending environment
  what contingency plans do you have for 2008/2009?
• Field Co-Op
• Lender of Last Resort
• No plans at the time (majority responded)
• Exploring Direct Lending

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School 2008 Survey ResultsTodays Meeting

• What do you expect to learn here today?
• The advantages of Direct Lending from a
  Non-Lender or Guarantor
• What are other financial aid offices doing
• Candid exchange of information
• To stay as informed as possible
• Receive updates as to what is going on in the
  industry
• Determine how current and possible future changes
  will impact the students
• Commitment from lenders and will be there for our
  students
• Plans/strategies others are using
• How current and future changes within the
  industry may impact our students