Breaking the Deadlock: Unifying Our Federal Student Loan Programs

1
Breaking the Deadlock Unifying Our Federal
Student Loan Programs
Paul Combe, President CEO American Student
Assistance
PESC 6th Annual Conference on Technology
Standards April 7, 2009
2
Change is in the Air

• New presidential administration and new Congress
• Drumbeat within Congress and industry for federal
  aid simplification
• Student debt has become a social issue

ASA Confidential and Proprietary Information
2
3
A Growing Social Issue
3
ASA Confidential and Proprietary Information
4

• Rare opportunity to take advantage of broad
  consensus for reform
• If we could rebuild the federal college loan
  program, what would it look like?

ASA Confidential and Proprietary Information
4
5
FFELP vs. DL

• Debate has missed the bigger issue Education
  Debt is now the problem
• The major focus of the debate has been about
  delivery systems and which program costs
  government less
• Loan processing systems have become a market tool
  that can be used to restrict the range of
  consumer choice
• Competition between FFELP and DL has produced
  many positives that should not be lost in the
  future

ASA Confidential and Proprietary Information
5
6
Break the Deadlock

• Time to move past FFELP versus DL
• Combine the best of both programs to create a
  single unified program that breaks the gridlock
• Create a single loan program with one delivery
  system that incorporates private and federal
  funding
• Greater focus on education debt management for
  ALL and a refocused role for GAsguaranteeing
  the borrowers success, not the lenders

ASA Confidential and Proprietary Information
6
7
Rebuilding with a Consumer Focus

• America has chosen debt as the primary method for
  funding higher education and therefore has a
  responsibility to help students manage their debt
• Federal student loan program should focus on
  borrower as consumer
• Consumer rights including
• Real Open Choice
• Effective Competition
• Debt Management Services
• Education Debt Management Entitlement

ASA Confidential and Proprietary Information
7
8
Building a Market-Based Future

• Loan programs should use public and private
  capital
• Federal capital used as benchmark or ceiling on
  loan rate
• Benchmark rate set by an analogous market
  rateFHA mortgage rates
• Federal guarantee only / No SAP
• Price / rate competition below benchmark
• Post Graduation Borrower Subsidies
• New GSC Under-treasury?

ASA Confidential and Proprietary Information
8
9
Single System

• Borrower should be able to choose any lender, at
  any school, with any guarantor, and have it
  processed just as efficiently
• DL mandatory on all schools lender list
• Low cost of entry more competitors
• Federal System (COD)?

ASA Confidential and Proprietary Information
9
10
What is Education Debt Management?

• Effective education debt management is not just
  due diligence with a prescribed amount of letters
  and phone calls
• Its about using federal college loans as
  teachable moments
• Use continuum of intervention / education
  activity (proactive and reactive) to target,
  engage, and impact the borrowers financial
  wellness
• It is proactive and focused on getting the right
  information to the right borrower at the right
  time
• It is individualized and personalized
• Uses CRM tools

ASA Confidential and Proprietary Information
10
11
Education Debt Management Services
Product Target Channel Channel Channel Channel
Product Target Print Email Phone Web
Journeys Student loan grace period
Transitions Withdrawn students
Consolidation Recently consolidated
DAAR Email Program Delinquent borrowers
After Cure Accounts current after delinquency
Bright Beginnings Defaulted borrowers
Post Rehab After complete loan rehab (BB) loan to ACS
ASA Confidential and Proprietary Information
11
12
ASA Borrower Wellness Key Success Measures
ASAs Cohort Default Rate has consistently been
among the lowest in the nation we believe our
focus on getting borrowers off to a good start
through our Journeys and other communications
programs helps drive this success.
ASA Confidential and Proprietary Information
12
13
61.33
60.84
54.99
54.42
56.98
59.72
49.81
13
ASA Confidential and Proprietary Information
14
To change the Guarantor role, we must change the
financing
In Good Standing In Trouble In Default
Old Model
32.6 5.6 61.8
New Model
ASA Confidential and Proprietary Information
14
15
Questions? Suggestions? More Information?

• We want to hear from you!
• Join the discussion on ASAs Policy Perspectives
  Blog http//www.amsa.com/blogs/policyperspective
  s
• Please contact me with questions, suggestions and
  feedback
• 
  combe_at_amsa.com

ASA Confidential and Proprietary Information
15
16
American Student Assistance 100 Cambridge
Street, Suite 1600 Boston, MA 02114
[phone] [phone] F A X (800)
999-0923 T D D
www.amsa.com