First Place Resources

End of the Line

2010-12-16T12:57:00.000-08:00

To all my Friend and Colleagues:

Effective January 1, 2011, I will no longer maintain and/or update the First Place Resources Blog Site. I have truly enjoyed providing updates and articles to my industry peers, clients and partners, and have appreciated the positive feedback and exchanges of opinions and information. To be honest, it has become more and more challenging trying to find information and articles that are relevant given the state of our industry. Regardless, it's been a fun, challenging and rewarding experience.

Thanks for following!

Sincerely,

Lance A. Teinert
President
First Place Resources

Student Loan Growth Fuels M&A Growth

2010-12-01T03:59:00.000-08:00

The $160 billion U.S. student lending industry is set for more consolidation as big banks and others are drawn to the sector's renewed growth and as cheap valuations throw up attractive targets.

Others already in the business, but with shrinking Federal Family Education Loan Program (FFELP) portfolios, may look to monetize assets and get out.

Although private student lending and fees from processing government loans to students are growing, lenders such as Sallie Mae (SLM.N), Nelnet (NNI.N) and First Marblehead Corp (FMD.N) still trade at relatively cheap levels.

"You could buy Sallie Mae at mid-to-high teens (dollars per share) and you're still getting it at an attractive price," said Keefe, Bruyette and Woods analyst Sameer Gokhale. "I have a $16 share price target and it's trading at about $12."

Read More ...

Student Loans and Car Loans Spur Consumer Lending

2010-11-07T07:45:00.000-08:00

Student loans and new car loans spur consumer spending increase in September. The largest increase in consumer borrowing in over two years highlighted a report issued today by the Federal Reserve.

In the report, the month of September saw an increase in consumer borrowing of $2.1 billion, a number that contradicted analyst estimates of a $3 billion decrease.

Read More ...

First Marblehead Shoulders Student Loans

2010-11-07T07:43:00.000-08:00

First Marblehead Corp. (NYSE: FMD) said overall equity encountered a nearly $1 billion swing in the fiscal first quarter, after the Boston-based company consolidated billions of dollars of student loans onto its balance sheet, creating a $708 million deficit.

First Marblehead reported $8.3 billion in assets at the end of September, with most of that ($7.4 billion) in the form of student loans. Liabilities were $9 billion, mostly in the form of long-term borrowings.

First Marblehead said non-controlling interests have a $1.03 billion equity deficit. In contrast, First Marblehead shareholders’ equity is a positive $322 million, for a total equity deficit of $707.8 million.

Before the credit crisis, First Marblehead packaged student loans into securities for big banks such as Bank of America Corp. The loans were bundled together into various trusts that resided off First Marblehead’s balance sheet.

Read Article ...

"Safe Harbor" Being Removed On For-Profit College Recruiting

2010-10-29T06:55:00.000-07:00

From New America Foundation's Higher Ed Watch ...

On Thursday, the Obama administration took decisive action to try and stop for-profit colleges from continuing to engage in illegal recruiting practices by eliminating, once and for all, the "safe harbors" that Bush administration officials had put in place to help these institutions skirt a federal law that prohibits colleges from compensating recruiters based on their success in enrolling students. The U.S. Department of Education included this change as part of a broader set of regulations it finalized this week that aim to improve the integrity of the federal student aid programs.

Read Article ...

From Kiplinger: Business Costs

2010-09-06T12:51:00.000-07:00

From The Kiplinger Letter dated September 3, 2010 ...

With economic growth next year only slightly better than this year, businesses can plan on moderate price increases for most products and services, and in some cases, decreases. Moreover, the cost of borrowing money is at rock bottom.

Expect just a modest bump in inflation, given much slack in the economy. Measuring Dec. over Dec., the Consumer Price Index should climb about 1.5% in 2011, vs. just under 1% this year. Wholesale prices will go up about 4%...on par with this year’s pace.

Supplies of commodities are more than ample to meet demand. Corporate profits will wane after posting a strong gain of 29% this year. Figure on an increase of about 8%, partly because firms plan to add more workers.

Health care cost increases for employers…about 8%-9% next year, compared with an average hike of 7% this year. As much as 20% of the rise will be due to the health care law enacted by Congress earlier this year. Most employers are planning to pass on some of the increases to their employees by raising deductibles, out-of-pocket maximums and copayment amounts.

Prescription drug cost hikes will be under 10% for the third straight year… vs. a 20% increase a decade earlier. Greater use of generics makes a big difference.

Base salary increases…2%-2.5%, vs. an average hike of 1.5% in 2010. Top performers will do best as employers offer more cash incentives to stop them from jumping ship. More and more firms will also use stock options to keep key execs on board popular because a vesting period is usually required.

Many firms are restoring pay cuts made during the depths of the recession, though, again, some employers are limiting the restorations to their star performers.

Figure on paying slightly more for energy overall next year as demand rises. Wide price swings seen this year are sure to continue as investors jump in and out of futures markets, though large supplies mean that price spikes will be short-lived.

Oil prices will average around $80 a barrel next year, after falling to $70 or so at the end of 2010. This year’s average: Around $75 a barrel. Gasoline prices in 2011: About $2.85 a gallon…10¢ more than this year... with a summer high of about $3, on average, also 10¢ higher than this year’s peak. Diesel prices are in for a modest increase, too…an average of 15¢ a gallon
over this year, to around $3.10. Summertime prices will peak at about $3.25.

New Rules on Student Debt Shouldn't Be Limited to For-Profit Colleges

2010-08-18T18:34:00.001-07:00

Under the administration's proposed rules, if a program graduated a large share of students with excessive debt compared with potential earnings in their chosen fields, it would be required to disclose this information to current and prospective students.

I love this idea, but why don't we take it further and require every college that receives federal financial aid to discuss with incoming students who are applying for loans how much they can expect to earn in the degree areas they are pursuing?

Career counselors or financial aid personnel would show students data on the average starting salary for certain fields. Then the counselor would calculate -- based on the total amount of money the student planned on borrowing -- how much projected monthly income would be needed to service the student loans.

Read Entire Article ...

US News and World Report College Rankings 2011 Are Out

2010-08-18T18:31:00.000-07:00

2011 US News and World Report College Rankings have been released this week. These 2011 US News and World Report College Rankings take a look at all of the universities around the country, and come up with a list of the best colleges that the country has to offer. All of the schools are ranked on a scale of 100, going face-to-face not just with colleges in their vicinity, but against the best that the United States has to offer. The Ivy League schools are pretty dominant on the list, but there are also quite a few schools in the Pac-10 that have made the list a very relevant scale for new students to measure institutions they are considering attending in the 2010-11 school year.

For More Information ...

Nelnet Agrees to $55 Million Settlement on Oberg Case

2010-08-14T06:27:00.000-07:00

Nelnet Inc. said in a statement that it agreed to the settlement to eliminate “the uncertainty, distraction and expense of a trial.”

The proposed agreement is subject to approval of the U.S. Department of Justice and a final agreement signed by both parties. The agreement would settle the matter without Nelnet admitting liability or wrongdoing.

“We are pleased to have reached an agreement to successfully resolve this outstanding matter,” Nelnet said, adding that pre-trial evidence “corroborated and strengthened Nelnet’s already strong position in the matter.”

Nelnet said it believes that the lawsuit was “without merit and that we would have prevailed at trial.”

The only reason for settling is “to eliminate all uncertainties, irrespective of the company’s confidence that it would have ultimately prevailed,” the company said.

Read More ...

Bank Regulators Perplexed On How To Implement New Financial Regulations

2010-08-13T04:09:00.000-07:00

The restrictions against the credit agencies were based on their failure to properly rate the risk of mortgage securities which was a major contributing cause of the financial crisis. Nonetheless, it would have been more efficient to reform the credit rating agencies instead of prohibiting the use of their reports, especially since there is no viable alternative to their services.

The rating agency ban is equivalent to the FAA banning airlines from future purchases of Boeing or Airbus jets after a plane crash - it may sound like it makes sense until you need to buy the next plane and find out that there are no other major airline manufacturers. A ban on purchasing Boeing and Airbus jetliners would soon close down the airline industry and right now the ban on credit rating agencies is shutting down the essential task of determining proper capital levels in the banking industry. The result will be a reduction in lending by banks as they struggle to comply with confusing regulations that are subject to constant change.

Read Article ...

Kiplinger's Take on Taxation (from Kiplinger Letter dated August 6, 2010)

2010-08-11T03:45:00.000-07:00

Caught between a rock and a hard place…
That’s where lawmakers are on taxes. The decision whether to extend the Bush tax cuts… due to expire at year-end…is fraught with danger.

Our judgment: A one-year extension… But not for upper incomers. Their rates would return to 39.6% from 35% now. On dividends and capital gains, they’d pay 20%, up from 15% now. Here’s why that’s the most likely option:

Letting all rates rise hurts the economy, shaving at least six-tenths of a percentage point off GDP gains in 2011 and crimping job creation. Considering the still-wobbly state of the economy, that’s a hit Obama and Congress won’t want to take.

Because wealthier taxpayers spend a smaller share of their income, the economic sting is much less if they alone lose the benefit of today’s lower rates. Extending all the cuts drives up the deficit. If all taxpayers get to hold on to the Bush rate cuts…
an additional $3 trillion in budget deficits by 2020 and public debt at 82% of GDP, up from 60% now.

Even Obama’s proposal would be costly. Permanently keeping lower rates… if only for individuals with taxable incomes under $200,000 a year and for couples under $250,000…would pile an additional $2.3 trillion onto the national debt. Plus, a short-term, partial extension plays out better for the Democrats, and it’s what that party’s leaders in the House and Senate hope to arrange as the only option voted on.

That’d put Republicans, who want to extend the cuts to all taxpayers, in an awkward position: Vote yes on holding down the tax rates only for middle and lower incomers or be painted as favoring higher taxes for all.

But here’s why that option is iffy. Even a temporary partial extension costs. Deficit hawks will balk, pointing to Europe’s recent woes as an object lesson in the need for U.S. policymakers to impose fiscal austerity sooner, rather than later. Republicans may hold out for an extension for all taxpayers. Among their arguments: Raising taxes on high incomers punishes small businesses.

So lawmakers may duck, putting off the tough decision ’til next year. That would keep the lower Bush-era tax rates in force at least through 2011. There’s no such punt possible on estate taxes, though. Even liberals don’t want to see the top rate soar to 55%, with the $1-million exemption returning.

Odds of resurrecting 2009 rules for 2010 estates get shakier as time passes. Those estates may get a choice: Use 2009’s $3.5-million exemption and 45% top rate or enjoy no estate tax this year but be stuck with carryover basis rules.

Then, starting in 2011…a phase-in of lower rates and higher exemptions.

Student Loan Debt Surpasses Credit Cards

2010-08-09T19:00:00.000-07:00

Consumers now owe more on their student loans than their credit cards.

Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today — both federal and private — total some $829.785 billion, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com.

“The growth in education debt outstanding is like cooking a lobster,” Mr. Kantrowitz says. “The increase in total student debt occurs slowly but steadily, so by the time you notice that the water is boiling, you’re already cooked.”

By his math, there is $605.6 billion in federal student loans outstanding and $167.8 billion in private student loans outstanding. He estimates that $300 billion in federal student loan debts have been incurred in the last four years.

Partially, this is a story about Americans paying down credit card debt. Some are seeking a new frugality, but many credit card companies are raising minimum monthly payments or cutting off new and existing lines that consumers in the past may have turned to during tough times. Revolving credit, the majority of which is credit card debt, reached a high in September 2008 of $975.7 billion, according to Fed data. A consumer who juggles both credit-card and student-loan debt is likely to pay of the credit-card first, as that debt tends to carry a higher interest rate.

Read More ...

Nelnet in Settlement Talks on Oberg Case ... Brazos Settles

2010-08-08T13:19:00.000-07:00

A federal judge ordered eight student loan companies - including Nelnet in Lincoln - to a settlement conference Wednesday, after two of their fellow defendants announced they have settled with former Nebraskan Jon Oberg, in his whistleblower lawsuit.
Oberg's lawsuit claims that collectively the companies defrauded the federal government out of at least $1 billion in their collection of interest-rate subsidies on student loans.

U.S. District Judge John F. Anderson issued his order Friday, at a hearing in the U.S. District Court for the Eastern District of Virginia, where defense attorneys had asked the judge to dismiss the case. They have charged Oberg with withholding information he knew was unfavorable to his claims.

In a strong message urging settlement, Anderson called on the remaining defendants to "have the wisdom to follows Brazos' lead," referring to the Brazos Higher Education Service Corp. and Brazos Higher Education Authority in Texas, whose undisclosed settlement terms are now before the U.S. Department of Justice. "And I don't want to suggest that you have to wait until next Wednesday," the judge said. A federal magistrate judge will run the conference.

In court, Oberg's attorney Bert Rein said his firm has had some settlement discussions with most of the remaining eight, including Nelnet and subsidiary Nelnet Education Loan Funding. Rein promised to contact the rest before next Wednesday.
Nelnet spokesman Ben Kiser said the company will comply with the court's direction and participate in Wednesday's conference. "Importantly, we believe that we have strong defenses against the claims, and are confident in our ability to achieve a successful outcome," Kiser said.

Read Entire Article ...

Does This Sound Familiar?

2010-08-07T03:53:00.000-07:00

For those former FFELP lenders who lived through the Cuomo-Kennedy experience, this excerpt from The Apollo Group's recent 8K filing should come as no surprise. What started out as an investigation on student recruiting and the effects of education loan debt levels has turned into an overarching investigation that obviously intends to crack down on a sector that has helped so many people achieve their educational dreams when traditional colleges and universities were unable to do so.

"The request seeks information to more accurately understand how the Company uses Federal resources, including how it recruits and enrolls students, sets program price or tuition, determines financial aid including private or institutional loans, tracks attendance, handles withdrawal of students and return of Title IV dollars and manages compliance with the requirement that no more than 90% of revenues come from Title IV dollars. The request also seeks an understanding of the number of students who complete or graduate from programs offered by the Company, how many of those students find new work in their educational area, the debt levels of students enrolling and completing programs and how the Company tracks and manages the number of students who risk default within the cohort default rate window. In furtherance of this, the Committee has requested that the Company provide information about a broad spectrum of the Company's business, including detailed information relating to financial results, management, operations, personnel, recruiting, enrollment, graduation, student withdrawals, receipt of Title IV funds, institutional accreditation, regulatory compliance and other matters. The Company intends to cooperate with the Committee and to work with the Committee to provide the requested information in a manner that does not compromise the Company's sensitive proprietary operating and other information."

What contributions have the For-Profit Colleges brought to higher education?

(1) Night courses and online courses have given undergraduate and graduate students the ability to earn degrees without impacting their work days.

(2) Proximity campuses have made it easier for commuting students to attend classes.

(3) Technical and business certifications have enabled students to complete a curriculum that is typically not offered through traditional colleges and universities.

(4) Many traditional colleges and universities have established online courses as well as proximity campuses in direct response to what the for-profits have done.

Kaplan University has suspended enrollment at some of its campuses as a result of the investigation. Stock prices are falling at publicly traded corporate universities.

In my humble opinion, this investigation needs to center upon the recruiting aspects, and then quickly move on with the penalties before more campuses are shut down. If this investigation continues to drag on, the losers will not only be the shareholders ... but also the students and families.

Kaplan Suspends Enrollment at Campus Where Federal Investigators Found Recruiting Abuses

2010-08-06T13:23:00.000-07:00

Days after recruiting abuses at two of its campuses were highlighted at a Congressional hearing, Kaplan Inc. has taken the unusual step of suspending enrollment of new students at one of them, and perhaps the second.

Kaplan spokeswoman Melissa Mack confirmed that the suspension had been put into effect at the Pembroke Pines, Fla., campus of Kaplan College.

That's the campus where undercover government investigators posing as applicants encountered admissions officers who lied about the college's accreditation and admissions-test proctors who coached the investigators on the answers. The investigators also encountered recruiters who scolded and mocked them for being hesitant to take out government-subsidized loans to pay the tuition. Scenes from those encounters were videotaped and played at a U.S. Senate hearing earlier this week.

Read More ...

In Student Loan Case, Court Rules Borrowers Have Rights Too

2010-08-03T04:27:00.000-07:00

When Joshua Fensterstock, a 2003 law school graduate living and working in New York, consolidated his student loans by borrowing from Education Finance Partners, which is serviced by Affiliated Computer Services, Inc., he agreed to the terms of the contract they sent him. In fact, he had no choice.

Loan applicants don't generally read the terms set out in standard mortgages, loans and credit card agreements. They are usually in very small font, in legal language and, in any case, non-negotiable. That is, an applicant for a loan or a credit card, cannot negotiate the interest rates, fees, or any other terms. It's a take-it-or-leave-it document.

Those procedures, though, could change. A three-judge bench of the federal appeals court for the New York region has determined that two significant clauses of Edison's agreement with its borrowers are unconscionable and unenforceable under the applicable law. The contract, which requires disputes be resolved by arbitration rather than court action, was stricken in July as being an unbalanced, unfair take-it-or-leave-it document in which consumers had no bargaining power. The court also struck a clause that required borrowers to give up their right to participate in class actions.

Read Article ...

New Mexico Educational Assistance Foundation Victim of Computer Banking Heist

2010-08-01T05:22:00.000-07:00

Someone accessed the bank account of the New Mexico Educational Assistance Foundation earlier this month, making off with as much as $700,000.

The nonprofit foundation manages federal student loans worth $1.3 billion for 94,000 New Mexicans, said the organization's president, Elwood "Woody" Farber. Farber said only the foundation's bank account, not any personal client data such as names or Social Security numbers, was accessed in the break-in.

Farber said the matter has been turned over to the FBI. An FBI spokesman declined to comment Friday.

Experts say that, in cases like this, it is more likely that an account was accessed with a user password rather than by a breach of the bank's firewalls.

Farber would not comment in detail on the incident. An e-mail sent to members of the foundation's board of directors said the money, taken from an account at Bank of the West, amounted to "around" $700,000, according to board member Richard Carpenter.

A Bank of the West spokesman confirmed that an investigation is under way.

Read Entire Article ...

Feds block Schwarzenegger's plan to sell EdFund

2010-07-30T23:43:00.000-07:00

Federal officials are blocking Gov. Arnold Schwarzenegger's plan to sell the state's student loan guarantee operation to help address California's $19 billion deficit.

Schwarzenegger had initially hoped to sell the nonprofit EdFund for as much as $1 billion to help fill the state's budget hole when he introduced the proposal three years ago.

The administration later reduced the anticipated sales price by half and told state lawmakers as recently as last month that the state was on track to sell EdFund, pending federal approval.

But in a letter obtained Friday, the U.S. Department of Education said the federal government plans to terminate its agreement with the state by October. The department has a say over the student loan guarantee agency because EdFund administers federally backed student loans.

In a letter dated July 20, William Taggart, the Department of Education's chief operating officer, told state officials that U.S. Education Secretary Arne Duncan plans to find a replacement agency.

Read More ...

TG Looks to Redefine Itself

2010-07-29T20:37:00.000-07:00

Since its creation, the Texas Guaranteed Student Loan Corp. has guaranteed $41.6 billion in loans for millions of Texas students.

But the massive overhaul of the student loan industry in March cut private lenders out of the student loan equation altogether in favor of direct borrowing from the federal government.

Now, Texas Guaranteed — which reported $52 million in revenue in 2009 — faces a vastly transformed landscape for doing business.

Gone is its "guaranteed" function, and with it a sizeable chunk of the revenue the corporation brought in from originating loans — $32.5 million, or 27 percent of its revenue in the 2009 fiscal year, said George Torres, a senior adviser with Texas Guaranteed.

The Round Rock-based public nonprofit was created by the state Legislature in 1979 to administer the bank-based federal student loan program. It guaranteed loans for half a million student borrowers in 2009 and has served more than 3 million since its inception.

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Sallie Sale Days: Student Lender Hires Goldman to Test Options

2010-07-28T04:48:00.000-07:00

The Reston, Va.-based loan originator is working with Goldman to possibly sell or spin off its student-loan servicing business and do the same with its $145 billion government-subsidized loan portfolio.

As a part of its strategic thinking, Sallie, run by CEO Albert Lord, also has considered converting part of its platform into a traditional deposit-taking bank, one source told The Post.

A Sallie representative was not available to comment and a Goldman spokesman declined to comment.

The move comes as the student lender faces stiff economic headwinds amid a swiftly changing regulatory and political landscape that has proved challenging for the corporation.

Founded in 1972 as a government-backed entity to help originate affordable student loans, Sallie has had an increasingly tough run as a private business since severing ties with Uncle Sam in 2004 and seeing government loan subsidies whittled away.

The end of such subsidies has badly damaged key revenue drivers. Its latest blow: the Federal Family Education Loan Program, a US Department of Education initiative that offered subsidies to private lenders ended this month, forcing Sallie to rely more on its private-lending platform.

Read More ...

Fitch Rates Nelnet Securities

2010-07-27T04:10:00.000-07:00

Interesting Note ... A trend continues as rating agencies assign stable and/or positive outlooks to Class A bonds while downgrading subordinate debt. However, in the case of Nelnet, it appears that Fitch has removed a Negative Watch and assigned a Stable Outlook on a Class B security. This bucks a trend and possibly serves as a sign of better things to come from the perspective of issuing long term debt.

Fitch Ratings affirms the senior student loan notes at 'AAA' and downgrades the subordinate bond to 'AA-' from 'AAA' issued by Nelnet Student Loan Trust 2004-4. Fitch has assigned Stable Rating Outlooks to all bonds and removed the Rating Watch Negative on the subordinated bond.

Fitch's Global Structured Finance Rating Criteria and FFELP student loan ABS rating criteria, as well as the refined basis risk criteria outlined in the press release 'Fitch to Begin Review of U.S. FFELP SLABS Applying Updated Criteria' dated June 29, 2010 were used to review the ratings.

Fitch affirms the following classes with a Stable Outlook:

Nelnet Student Loan Trust 2004-4
--Class A-4 at 'AAA/LS1'; Outlook Stable;
--Class A-5 at 'AAA/LS1'; Outlook Stable.

Fitch downgrades, removes from Rating Watch Negative and assigns a Stable Outlook to the following class:

Nelnet Student Loan Trust 2004-4
--Class B to 'AA-/LS3' from 'AAA/LS3'; Outlook Stable.

Read more ...

VSAC Offering Private Loans ... For Now

2010-07-27T04:02:00.000-07:00

VSAC announced it has just completed a $19 million bond issue last week, all of it sold to Vermont investors. The revenue will be recycled into "Advantage" - or private - fixed rate loans for students needing to close a gap in college financing this fall.

VSAC Executive Director Don Vickers isn't sure how many students will benefit, noting the loan money is available on a first-come, first served basis. "So far, we've had about 600 inquiries, which is very good," Vickers said.

Vickers said the agency was pleased it had so much support from local investors. "There's always some anxiety when you're trying to sell in today's credit markets."

Read More ...

How the New Banking Law Will Affect Consumers

2010-07-26T04:17:00.000-07:00

STUDENT LOANS

The Issue: Students racking up tens-of-thousands of dollars in debt before they enter the workforce.

The Fix: A newly created Student Loan Omnibudsman will have the authority to receive, review and attempt to resolve complaints. The office will also track complaints and practices for private student loans. The new CFPB will also have authority to write rules governing practices.

The Impact: Unclear. It depends on the new rules regulators come up with. Crystal Allen, a 35-year-old single mother, is struggling with more than $20,000 worth of student loans she took out pursuing an associate’s degree and a nurse’s aid certificate that have so far failed to yield a steady job. The East Price Hill resident’s loans are in deferment through the end of the year.

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Impact of the Dodd-Frank Act on Main Street

2010-07-26T04:09:00.000-07:00

On July 15, 2010 the Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which represents the most sweeping change to banking law since Congress adopted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), if not before. FIRREA was the congressional action designed to “forever prevent” another banking catastrophe. Many statements from the late 1980s, such as the elimination of “too big to fail” (“TBTF”), have echoed in the debate over “systemically important” financial institutions. Hopefully, the Act’s Financial Stability Oversight Council and the orderly liquidation authority over nonbanks that pose systemic risk will have more success than the FIRREA tools that were not effectively employed to prevent the subprime bubble.

Read Entire Article ...

Overview of the Texas Economy

2010-07-26T03:56:00.000-07:00

The Texas Industry Portfolio area has detailed information about 27 Texas industry breakouts. Information and data resources on Governor Rick Perry’s six Texas Industry Clusters, including some industry reports and industry-related company directories, are
available at Advanced Technology & Manufacturing; Aerospace & Defense; Biotech & Life Sciences; Information & Computer Technology; Petroleum Refining & Chemical Products; and Energy. There are also Texas industry overviews available, including renewable energy breakouts for biofuels, solar, and wind, as well as a Manufacturing in Texas overview.

For the fourth quarter of 2009, venture capitalists in Texas invested primarily in the Texas industrial/energy, medical devices and equipment, and software.

Read Entire Report ...

The Best Way to Pay for College?

2010-07-25T06:24:00.003-07:00

from the Wall Street Journal ...

1. The marginal return on a college education diminishes as technology advances, so never take out a loan—cash flow your education.

2. Work while in school. Yes, it affects your grades, so does joining a fraternity or sorority.

3. Learn the tax code and how to deduct the cost of your education legally.

4. CLEP the nonsense. Take The College Board's College-Level Examination Program to receive college credit for subjects you already know.

5. Suck up your pride and live at home if possible.

6. Take classes in the summer.

Read More ...

Obama Cracks Down on For-Profit Colleges, Links Loans to Income

2010-07-23T03:30:00.000-07:00

The Obama administration released a proposal that would tighten for-profit colleges’ access to federal student aid, threatening growth in the industry that received $26.5 billion in U.S. funds last year.

The proposed rules released today by the U.S. Department of Education would link U.S. student aid eligibility at Apollo Group Inc., ITT Educational Services Inc., Career Education Corp. and other education companies to former students’ salaries and debt repayment rates. The rules may cut off access to federal student grants and loans at about 5 percent of all for- profit education programs, Secretary Arne Duncan said in a telephone call with reporters yesterday.

Read Article ...

Does Anybody Else Find This Strange?

2010-07-22T20:10:00.000-07:00

From the Washington Post ...

"Shares of Sallie Mae, the Reston student lender, saw the steepest one-day decline since January after the company said that loan originations decreased and that uncollectible debts rose for the second quarter. Sallie fell 11 percent, to $10.34.

The company, formally known as SLM, extended $219 million in private loans in the second quarter, compared with $387 million during the year-ago period. Private education loan charge-offs rose to $336 million from $284 million.

Applications for new loans are weak as U.S. households reduce borrowing and turn to cheap education loans from the government, chief executive Albert Lord said."

First ... the comment "households ... turn to cheap education loans from the government" would not be a reason for students and parents to not apply for private loans. "Cheap" loans from the government are no cheaper than FFEL loans were at this time last year.

Second ... I would have to ask my friends at Sallie Mae if the sharp decline in private loan funding [as compared to last year] is the result of decreased application demand or increased application denials. Based upon data I receive on a weekly basis, I would definitely say the latter ...

Corporate Debt: Driving Weaker Companies Out of Business

2010-07-21T08:03:00.000-07:00

From Kiplinger ...

It’s not just government debt we have to worry about in the next few years. A squeeze on junk bonds will drive weak companies out of business.

Maturing high risk debt must be rolled over. There’s a manageable $50 billion due this year, but it will rise to $400 billion in 2014. About 71% of that was sold in leveraged buyouts in 2007.

With the economy growing only modestly… Companies won’t have cash to refinance. The cost of borrowing is already heading higher because many investors sense trouble ahead.

Spreads on junk bonds vs. safe 10-year Treasuries surged to 7 percentage points early this month, up from a two-year low of 5.5 percentage points in April, when most economists and investors expected more-vigorous growth.

Sectors most vulnerable to default: Restaurants, retailers and media.

Bond Sale? Don't Quote Us, Request Credit Firms

2010-07-20T17:13:00.000-07:00

From WSJ Online .....

The nation's three dominant credit-ratings providers have made an urgent new request of their clients: Please don't use our credit ratings.

The odd plea is emerging as the first consequence of the financial overhaul that is to be signed into law by President Obama on Wednesday. And it already is creating havoc in the bond markets, parts of which are shutting down in response to the request.

Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law.

The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately. The companies say that, until they get a better understanding of their legal exposure, they are refusing to let bond issuers use their ratings.

Read Article ...

Private Student Loans Now Offered By Great Lakes Credit Union

2010-07-20T17:09:00.000-07:00

With college enrollment at an all time high, paired with the escalating cost of tuition, Great Lakes Credit Union provides families with a product to assist them with funding higher education. The loan can help pay for all qualified education expenses, including tuition, room and board, books, computers, even past due tuition bills. This private student loan option also includes a unique financial literacy component that helps students learn good credit habits and build their credit scores while they are still in school.

Read More ...

Sallie Mae Posts $338 Million Profit on Derivatives

2010-07-20T17:06:00.000-07:00

Courtesy of Bloomberg ...

Net income of 63 cents a share compares with a loss of $122.7 million, or 32 cents a share, a year earlier, according to a statement distributed by Business Wire. Sallie Mae said its core earnings were 39 cents. The Reston, Virginia-based company was predicted to earn 30 cents, excluding some items, according to the average estimate of eight analysts surveyed by Bloomberg.

The lender extended $3.1 billion in government-guaranteed debt in the second quarter, compared with $219 million in private loans, or those that don’t carry U.S. backing. Legislation that ended lending through the Federal Family Education loan program, which took effect June 30, will eliminate a large part of Sallie Mae’s origination business. Students will now obtain federally backed loans directly from the government.

Read Article ...

DBRS Downgrades NextStudent Master Trust I and Places Under Review with Negative Implications

2010-07-17T08:44:00.000-07:00

The Indenture Trustee has been directed by the Directing Holders (a majority of the senior and subordinate bondholders) to declare an acceleration of the trust, liquidate the collateral and redeem the outstanding notes. To accomplish this, a liquidation agent has been hired and is in the process of organizing the auction. A minimum collateral sale price of 93% of the outstanding principal balance of all outstanding senior notes (plus accrued interest and estimated expenses associated with the liquidation plus any other fees and expenses incurred over the remaining life of the trust) has been set. The bids are due on July 21, 2010 and the liquidation is expected to occur soon thereafter.

The downgrades of the 25 classes of notes outstanding under this master trust relate to the acceleration and liquidation of the trust collateral following certain un-remedied Events of Default under the applicable Trust Indenture. The downgrade of the senior and subordinated notes takes into account the potential recoveries anticipated for each class under the terms of the auction.

Due to the nature of the collateral, a sale price at or near market rates would normally be anticipated, however, the circumstances and the auction process itself may add variability to the final outcome. As a result, each series has been placed Under Review with Negative Implications to indicate the potential for further negative rating actions depending on the variability of outcomes introduced under the auction process.

Read Press Release ...

How the Financial Overhaul Bill Will Affect Student Loan Trades

2010-07-16T04:45:00.000-07:00

While most of my colleagues tend to focus on regulatory changes affecting interest rates, fees, disclosure requirements and underwriting standards, I tend to steer my attention toward the provisions that affect our industry's ability (or inability) to facilitate ABS and whole loan trades. Why? Because securitizations and secondary markets have (since the beginning of time) created the liquidity needed to meet loan origination demand in both federal and private education loans.

So how does the financial reform legislation affect this important aspect of student lending going forward?

(1) Firms selling asset backed securities will be required to retain 5% of the risk in the event the underlying loans go bad. This means that the originating lenders will underwrite private loans in a more strict manner, thereby mitigating risk of loss. Rating agencies and credit enhancers will more than likely put more stress on securitized portfolio cash flow analyses ... and will definitely restrict lenders from making "exceptions" to underwriting and servicing standards.

(2) Imposing tougher capital requirements for banks. This could potentially restrict banks from making unsecured loans (e.g. private educational loans) because of risk weighting and loan loss reserve requirements.

(3) Requires that non-bank firms (such as hedge funds and private equity advisors) register with the SEC to ensure that "shadow" financial services do not operate outside of federal regulations. This may affect private equity firms, portfolio management consultants and other "brokers" that are involved in deals to purchase and/or sell student loans or SLABS.

(4) Investors can sue credit rating agencies ... and ABS issuers cannot "shop around" for better credit ratings. The idea is to "purify" and standardize rating agency requirements and ensure that deals are not "out for bid" in order to receive the best rating.

Time will tell as to how these changes will affect student lending. Of course, in order to fully test the changes and react to the experience, the liquidity markets will need to further thaw. Until that happens, these changes are merely a moot point.

Summary of "Restoring American Financial Stability" (Senate Financial Reform Bill)

2010-07-15T18:27:00.000-07:00

HIGHLIGHTS OF THE NEW BILL

Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Advanced Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated - including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Federal Bank Supervision: Streamlines bank supervision to create clarity and accountability. Protects the dual banking system that supports community banks.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation.

Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.

Read Entire Bill Summary ...

Default Aversion: The Truth Behind the "Success"

2010-07-13T06:17:00.000-07:00

Yesterday's article in the "Chronicle of Higher Education" entitled "Government Vastly Undercounts Defaults" addresses several issues that many of us have known to be true for many years. The fact that loans in deferment and forbearance rose by over 100 percent between 1996 and 2007 should come as no surprise to many in our industry.

One national servicer in particular made it a practice in the early 2000's to automatically grant one year forbearance upon borrower request ... even if that borrower only asked for 60 or 90 days of relief.

A well-known default aversion specialty company made a small fortune by literally working with high default rate schools to "bypass" the two-year cohort default rate period by convincing "at-risk" borrowers to either consolidate their loans or enter forbearance for the full two-year period (one year at a time).

While volunteering on an industry trade association committee from 1999 to 2002, we studied the life-of-loan default rate of Stafford Loans ... and found that as many as 30 percent of loans will default (based upon historical data) over the projected 10-year amortization (even though the national cohort rate hovered around 5.5 to 6.5 percent at the time). We also noted that the abusive utilization of forbearance was merely masking the short-term problem while creating a potential train wreck down the road.

Sound familiar?

So were the FFEL community's default aversion efforts successful?

If the objective was to keep the cohort default rates as low as possible for the cohort period, then the answer is Yes. However, if the objective was to develop quality, consistent borrower repayment patterns and minimize defaults through traditional means of collection then the answer is a very obvious No.

Government Vastly Undercounts Student Loan Defaults

2010-07-12T04:20:00.000-07:00

From the Chronicle of Higher Education:

The share of borrowers who default on their student loans is bigger than the federal government's short-term data suggest, with thousands more facing damaged credit histories and millions more tax dollars being lost in the long run.

According to unpublished data obtained by The Chronicle, one in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions.

Read Article ...

FDIC: Bank Failures in Brief

2010-07-11T06:30:00.001-07:00

The FDIC has published a website that lists bank failures in chronological order dating back to 2001. The list has been officially updated as of July 9, 2010.

Click Here to review the complete list.

Shock! Increased Regulation Results In Increased Consumer Cost

2010-07-10T05:56:00.000-07:00

On July 9th, Wells Fargo announced that it was ending its "free checking" program to all new customers in anticipation of regulatory changes that are expected to cost the nation's largest branch bank 15% of revenue from depository accounts. The new consumer checking account will carry a $5.00 minimum monthly charge ... needed to offset reduced revenues and increased costs.

According to Bloomberg Businessweek, "Chief Executive Officer John Stumpf joins other banks in replacing lost fee revenue as Congress nears creation of a consumer protection agency and the Federal Reserve implements rules restricting overdraft fees. Bank of America Corp., the largest U.S. bank by assets and deposits, is developing a tiered structure of charging for checking accounts, the Wall Street Journal reported last month."

So what does this mean for consumers? It's a trade-off. Personal and business customers of banks will receive more disclosures and "protection" in exchange for higher and/or minimum fees.

Be careful what you ask for ...

Read Entire Bloomberg Article ...

A New Era

2010-07-01T07:14:00.001-07:00

July 1, 2010 marks the end of one era and the beginning of a new one. Yesterday, June 30, 2010 marked the last official day that a student loan made under the FFEL program could be first disbursed. Since November 1965, private sector lenders have originated and held federally insured student loans for literally millions of students and families. This program became what many citizens deemed to be the perfect public/private partnership ... government securing loans that were funded by banks, credit unions and other lenders ... private capital insured by the public trust. As of today, this program shifts to one of public funding only.

Going forward, the federally insured student loan program will continue to provide students and families with the dollars needed to pay for college expenses. Some argue that financial aid offices and families will suffer due to a lack of competition and a bottleneck in funding and reconciliation. While this may indeed become the norm going forward, the fact remains that money will still go to the families and students.

The new era of student lending brings forth opportunities for the private sector to fill service and product gaps that remain in the world of education loans and financial aid. Tuition and fees at most colleges and universities continues to rise ... and the federal loan programs simply do not meet the demand for funding.

While I applaud those who have worked hard over the years to provide quality service to students and financial aid administrators, I also challenge those same people to lift their heads high and look beyond the past. What's done is done. There may be a day when federally insured student loans can be originated and held by private lenders once again ... but that day is neither today nor tomorrow.

I believe that capitalism reigns. History has proven that it is not the government that creates new and improved products and services ... it's competition. Competition drives invention, quality and price. As we rise from the ashes of the FFEL world, we will continue to work hard to provide the products and services that are desperately needed by families and schools.

Thanks to all for what you've done ... and for what you will do in the future.

Text of Wall Street Reform and Consumer Protection Act

2010-06-27T05:25:00.000-07:00

From the Wall Street Journal ...

A summary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, released Saturday by the House Financial Services Committee. The legislation is expected to come before Congress next week for a final vote.

Read Full Article ...

How About a Trade? No Certification for No Bankruptcy

2010-06-24T04:42:00.000-07:00

So a great debate continues on the Hill with respect to school certification requirements for the disbursement of private student loans. According to "Inside Higher Education" "... In introducing a compromise version of the financial reform measure, [Senator Christopher) Dodd said that senators -- notably his Republican counterpart on the Senate Banking Committee, Sen. Richard Shelby of Alabama -- had refused to go along with House language requiring "school certification" of private loans."

The argument on the part of Democrats (among others - including some student loan providers) is that the school certification would put the power of allocating non-federal student loans in the hands of financial aid offices. That way, students and parents would not be subjected to higher cost loan programs unless the school essentially says it's okay to do that.

When I talk to financial aid officers, I keep hearing that they want no part of (1) certifying private loans, and (2) managing a private loan preferred lender list. The financial aid officers I have spoken with would prefer directing students and families to the web and other sources in order to research the best alternative for private loans.

So how about a trade? What if Congress settled on a program under which school certified loans would not be able to be discharged through bankruptcy (same as federally insured loans)? Leave non-certified loans out there for lenders to make with the bankruptcy cloud looming over their programs.

Think about it ...

Article: "A Question of Degrees"

2010-06-13T05:39:00.000-07:00

Are we nearing the point when only two categories of students will go to college? Those with more financial resources and lower-income students with scholarships or aid?

The others, with only student loans to help them, may decide they cannot risk a future of uncertain job prospects. "I think I'd rather be a plumber than a philosopher," they'll reason. "People always need a plumber and it's far more secure than being an unemployed philosophy major."

Read More ...

A Good Man

2010-06-09T04:44:00.000-07:00

Early last week, the student loan industry lost a good man. E.G. "Rod" Pittman was a member of the board of directors at the Greater Texas Foundation. The Greater Texas Foundation was the owner of LoanStar Funding Group, of which LoanStar Systems, Inc. was affiliated, until the companies sold to Nelnet in 2005.

Rod Pittman brought a for-profit mentality to a non-profit business. He believed that the only difference between a "non-profit" and a "for-profit" was that "for-profit" companies paid taxes and the "non-profit" companies paid to charity. He believed in diversified business planning ... and supported me when I literally stood alone and made the proposal to move into third party servicing.

For years, Rod provided constructive criticism as to the form and content of my servicing division board reports. At first I was taken aback because the marketing/sales reports were consistently full of smoke and mirrors (as you might expect from a typical marketing/sales report) while mine included statistics, volume numbers, metrics, etc. One day he took me aside and told me that he was critical of my report because the only way you can measure a company's success is to understand it's day-to-day operations. His position was simple: if the operation is intact, then everything else falls into place. Interesting perspective from a gentlemen whose focus throughout his professional life was marketing and sales!

He once compared me to Carole Keeton Rylander [Strayhorn] (former gubernatorial candidate in Texas and first woman elected as Comptroller of Accounts) because he said I'm the only other person who can do an hour long presentation in just 12 minutes. I took that as a compliment ... and was happy that he wasn't referring to my personal appearance!

So long, Mr. Pittman. Your smile, support and constructive criticism will always be remembered and appreciated.

Whatever Happened to Personal Responsibility?

2010-06-06T05:11:00.000-07:00

Alan Collinge of StudentLoanJustice.Org has created a forum that provides jilted student loan borrowers an opportunity to vent their frustrations over the aftermath of defaulting on student loans. For me, the key words of that sentence are "aftermath of defaulting" ... not "vent their frustrations." Alan Collinge takes pride in having influence over Hillary Clinton's "Student Borrower Bill of Rights" ... and I'm certain that he sleeps well at night knowing that federal loans (going forward) will be funded exclusively by the federal government.

First of all ... nobody other than perhaps a pre-law student ever reads the disclosure statements. To fully understand all the disclosures that lenders send out (on private loans) ... your average 20 year old would need to hire a contract attorney. [By the way, isn't Hillary Clinton an attorney??]

So ultimately, what did Mr. Collinge accomplish? Oh yeah, he created a forum that provides jilted student loan borrowers an opportunity to vent their frustrations over the aftermath of defaulting on student loans.

Cortney Munna has become a familiar name within our industry of late. She's the 26 year old graduate of New York University who took out $100K in student loans to obtain a degree in Individualized Studies (with an emphasis upon religious and women's studies). Now that her loans are in repayment status, she is complaining that she was "uninformed" and that she was "too young to know better." In other words, she is struggling to make payments on the loans she used to obtain her degree.

To her credit, Ms. Munna has accepted responsibility ... but seemingly only after over 600 bloggers literally slammed her shortly after her series of stories ran in the Money section of the "New York Times."

We hear from people like Alan Collinge and Cortney Munna all the time ... and the mainstream media is consistently sympathetic toward students and families that have become "burdened" from student loan debt. Who we never hear from are people like the 600 bloggers that express their thoughts and opinions on a concept known as "personal responsibility."

In today's climate, our government and the media constantly highlight the big, bad bankers for causing borrowers to get into an overarching amount of debt. "Predatory lenders" has become the label ... and the concept behind that label is that the bank's forced unwary borrowers to sign loan documents that put them in too much debt.

But the 600 bloggers ... most of whom believe that Ms. Munna should have done a better job of analyzing the return on her educational investment ... have restored my faith in society believing that it all comes down to personal responsibility.

In my opinion, if you're over the age of 18, and you sign on the dotted line, then you must pay back the debt. I learned that philosophy while growing up in an era of personal responsibility. Unfortunately, we only hear from the folks who believe that personal responsibility stops when you stop making payments on your loans.

Thoughts on DL Program Coming Under the Proposed Consumer Watchdog

2010-05-15T05:31:00.000-07:00

The following is an excerpt from the NCHELP Daily Briefing from May 14, 2010:

"Of interest to the student loan community, Senator Mike Enzi (R-WY) together with Senator Murkowski (R-AK) have submitted a proposed amendment which would bring contractors, agents and employees involved in originating, servicing, debt collection, refinancing or any other consumer related activity relating to a Direct Loan under the supervision of the proposed Bureau of Consumer Financial Protection. According to the language, the amendment would “promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ``too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.” Under the amendment, Direct Loan servicers, including not-for-profit servicers, would be subject to the supervision of the new watchdog. It is intended to be proposed as another amendment to #3739 t hat has been previously offered in the nature of a substitute by Senator Harry Reid (D-NV)."

So ... this essentially means that contract servicers would come under federal oversight above and beyond the rules, regulations and guidelines associated with being a federal contractor.

What does this mean?

In a best case scenario, the BCFP would investigate consumer complaints and serve as a watchdog to prevent abuse and/or neglect in areas involving compliance with applicable rules and regulations governing consumer protection, privacy, etc.

Worst case scenario? A "big brother" agency that establishes standardized metrics and measurements on customer service and account processing and regulates everything from consumer protection compliance to operational performance. Ponder the possibility of federal contracts and volume allocation being awarded based upon performance and compliance as designed and mandated by a government agency .....

Kiplinger's Take on "Face-Off On Wall Street" - Vol. 87, No. 17

2010-04-26T11:28:00.000-07:00

Is the SEC going too far? Suing Goldman Sachs is surely a big gamble
for the Securities and Exchange Comm. It accuses the Wall Street giant
of hiding information that buyers of a complex financial product should have had.

Goldman is fighting back hard, insisting that the buyers were big boys
who knew the risks involved and were fully aware of what they were buying.

While both sides have a lot at stake, the SEC may end up the bigger loser.

And the economy may suffer if public confidence in the financial sector
is hurt as a result of what turns out to be overreaching on the part of the SEC.

The timing of the suit looks questionable. By filing charges right now,
during the debate on financial regulatory reform, the SEC raises some doubts
about its neutrality. Critics say the agency is too intent on repairing its image,
badly battered by mistakes in the Bernard Madoff scandal and other cases.

And it will be a very tough case to win in court. The charge will be hard
to prove, Goldman has deep pockets, and the SEC’s resources are more limited.

That makes a settlement possible. But Goldman won’t want to admit guilt,
and the agency will end up looking weak if it can’t follow through on its charges.

When all is said and done, the SEC may be shooting itself in the foot.

The Fall of FFELP

2010-04-24T06:18:00.000-07:00

In January 2007, I was working closely with a major Wall Street investment banking firm on developing a business plan to create a FFELP loan servicing operation. Later that same month, President Bush announced that (as part of his budget to Congress) he was willing to give up 50 basis points in Special Allowance payments to lenders in exchange for keeping his "No Child Left Behind" fully funded. Thus began the fall of the Federal Family Education Loan Program.

The best and brightest of all conspiracy theorists couldn't have crafted a better way to kill what many have considered to be the perfect public/private partnership. After the Bush budget announcement, in April 2007 New York Attorney General Andrew Cuomo unveiled his findings surrounding questionable marketing practices of student loan companies and banks. This assault on the FFEL program and its participants fueled the desire of Democrats to bring the federal program "in-house" ... eliminating the need to keep banks and other private sector lenders in the business.

Effective October 1, 2007, the Bush yield reduction offer turned to reality ... with for profit lenders giving up 55 basis points in special allowance and non-profits giving up 35 basis points. This profit loss was exacerbated by changes made effective April 1, 2006 that removed the floor rate for holders and made the program a pure variable rate asset.

During the fourth quarter of 2007 and into the first two quarters of 2008, the asset backed securities markets were negatively impacted by the implosion of variable rate and sub-prime mortgages that resulted in higher than expected defaults. A domino effect ensued, resulting in a freeze on all asset backed security classes including credit cards, mortgages, municipalities and student loans. The auction rate securities marketplace became non-existent for more than a year ... and long term financing structures were forced to re-price (to the detriment of loan holders) in order to sell in the open market.

Even before the Obama Administration dug its claws into the FFEL program ... (as a recap) the following events took place to weaken the private sector's ability to make and hold Stafford and PLUS Loans:

(1) The Bush Administration gives up 50 basis points in lender yield ... which turns into a 55 basis point reduction for the majority of FFEL holders.

(2) Andrew Cuomo exposes violations of marketing inducements ... resulting in a deteriorated public perception of the banks and other lenders making federal loans.

(3) The student loan asset backed securities market freezes as a result of defaults within the mortgage industry ... resulting in a liquidity and credit crunch and increased cost of funds.

The unfortunate messiah of the FFEL program came in the form of government assistance ... better known as ECASLA. With ECASLA, the federal government essentially became the industry's only secondary market. This lifeline, however, turned out to be nothing more than a stop-gap measure to ensure that Direct Lending could be put in place for the 2010-2011 academic year.

Then came the Health Care and Education Reconciliation Act of 2010 ... which put the final nail in the coffin of the program.

Since the blockbuster movie came to theaters ... the term "perfect storm" has been used and abused to describe a series of events that ultimately causes demise and destruction. Unfortunately, I cannot think of a better way to describe the death of FFELP ... except to say that it got caught up in the perfect storm.

Sallie Mae Posts 1Q Profit ... Increases Lending

2010-04-21T18:27:00.000-07:00

Sallie Mae said its "core," or adjusted earnings, came in at $212 million, or 39 cents per share. Core earnings included the restructuring charge, but excluded treatment for student loans bundled together as securities and derivatives, the complex financial instruments used as a hedge against swings in interest rates.

Read More ...

Stolen Student Loan Data Recovered

2010-04-17T05:40:00.000-07:00

So how exactly did a non-employee exit the offices with two, 200-pound safes full of data?

“Honestly, I don’t know,” says Richard Boyle, President and CEO of ECMC. Details of the investigation are still being withheld.

In terms of security at the headquarters, Mr. Boyle says that security experts and regulators have weighed in on how to improve security.

Read More ...

Uncertain Economic Times Intensifies Private Loan Demand

2010-04-10T06:21:00.000-07:00

With the country still recovering from a massive financial meltdown and credit crisis, families have seen their savings and home equity dwindle -- traditionally the two biggest sources of contribution toward education expenses. At the same time, school endowments and scholarships are down, while tuition continues to rise, creating a growing gap between federal student loan limits and the money required to fund an education. While the federal PLUS loan helps to enable parent borrowing for part of this gap, for many student borrowers, private student loans remain an option and continue to play a critical role when paying for college.

Read More ...

The New Student Loan Czar?

2010-04-05T17:38:00.000-07:00

By the appointment of Robert Shireman as the Deputy Undersecretary of Education, President Obama appears to have broken a campaign promise to keep lobbyists out of his administration (see video above). Mr. Shireman, founder and former President of The Institute for College Access and Success (TICAS), was a “Registered Lobbying Client” (as defined by Section 3 of the Lobbying Disclosure Act of 1995).

Read More ...

Student Loan Website Broken on First Day

2010-04-01T04:08:00.000-07:00

Special thanks to Joel Powers for passing this one along ...

The government's Web site for handling student loans was broken most of Tuesday — the very day President Obama signed a law putting the government in charge of all subsidized student lending.

Visitors to the site www.studentloans.gov early Tuesday afternoon saw an error message, while users Monday saw either an error message or, in the evening, were simply unable to connect to the site at all.

Read Article ...

Goldman Sachs to Launch IPO for Student Loan Company

2010-03-29T07:58:00.000-07:00

Higher One Holdings Inc said in a regulatory filing last week that it is in the process of doing a public stock offering of up to $100 million. The lead underwriter for the transaction is Goldman Sachs (NYSE: GS).

The move by Higher One comes at an interesting time as Congress is currently working on legislation that would drastically impact the firm’s business. Higher One Holdings provides student loans, along with processing financial aid payments and banking services for colleges & universities.

The company competes directly with SLM Corp., commonly referred to as Sallie Mae, and other banks that provide student loans. However, regulators in Washington have created a piece of legislation that would prevent banks from providing student loans, making the process controlled by the government; likely by a direct to consumer government agency.

Read More ...

Sallie Mae Shares Jump On Student Loan Changes

2010-03-27T07:04:00.001-07:00

SLM Corp. (SLM 12.58, +0.53, +4.40%) shares rose more than 5% Friday after the House and Senate both passed bills late Thursday to overhaul the nation's student loan program. The bill reportedly ends the Federal Family Education Loan Program, which supported private student loans with federal subsidies.

Borrower Date Stolen from ECMC

2010-03-27T06:59:00.000-07:00

Personal data on 3.3 million people have been stolen from the company that guarantees student loans in Virginia and two other states, authorities said.

The theft occurred last weekend at the headquarters in St. Paul, Minn, of ECMC, which has been the designated federal student loan guaranty agency in Virginia since 1996. The nonprofit company also guarantees loans in Oregon and Connecticut.

Read More ...

Supreme Court Ruling in Student Loan Bankruptcy Case

2010-03-25T04:02:00.000-07:00

The Supreme Court’s decision on Tuesday rejected positions advanced by the federal government, more than 30 states and the student loan industry. The lender in Mr. Espinosa’s case, United Student Aid Funds, warned in a brief that a decision in his favor would “open the floodgates” to allowing others to avoid paying their debts, including “taxes, domestic support obligations, drunk driving personal injury and death liabilities, and criminal fines and restitution.”

But the court, in a unanimous decision by Justice Clarence Thomas, resolved the case on a narrow ground. It was undisputed, Justice Thomas wrote, that there had been legal misfires along the way in Mr. Espinosa’s case. The issue before the court, he said, was whether the lender had waited too long to object to them.

Read More ...

Reconciliation: Your Guide To The Game

2010-03-23T04:23:00.000-07:00

The House might be finished with reconciliation (for now), but the bill is still FAR from passing. Get ready to add some new words to your Congressional glossary.

Read More ...

Federal Program Overcharging Some Repaying Student Loans

2010-03-22T14:25:00.000-07:00

What happened? It appears that ACS Education Solutions, the private company that collects payments for the Department of Education's Direct Loan program, based Zumas' repayments on her gross income, rather than her adjusted gross income, as Congress intended.

Often, the difference between gross income and adjusted gross income comes to little more than a rounding error. In Zumas' case, it mattered a lot: Her gross income in 2009 was $49,000, but her adjusted gross income, which strips out certain tax deductions, was only $23,000. If ACS had correctly used her adjusted gross income, Zumas' monthly bills would only come to $85, instead of the $400 it charged her.

Read More ...

Sallie Mae Sells Debt at Higher Rate Than Borrower Rate

2010-03-17T18:34:00.000-07:00

SLM Corp., the largest U.S. student-loan company, raised $1.5 billion in the bond market, paying more than it charges some borrowers to begin addressing $11 billion of bonds maturing through next year.

Sallie Mae, as the company is known, sold $1.5 billion of 8 percent notes due in 2020 at a yield of 8.25 percent, according to data compiled by Bloomberg. Stafford federal loans disbursed between July 1, 2009, and June 30, 2010, have a fixed interest rate of 5.6 percent, according to the company’s Web site.

With $4.51 billion of bonds maturing this year and $6.44 billion in 2011, Sallie Mae is reestablishing access to unsecured debt markets. The offering may bolster investor confidence, lowering borrowing costs as the company will likely need to tap debt markets again, said Matthew Eagan, a money manager at the Loomis Sayles Bond Fund in Boston.

Read Article ...

The Shrunken Student Aid Bill

2010-03-15T04:44:00.000-07:00

As Congressional Democrats and the White House begin a last-ditch push to pass legislation to overhaul health care this week, it remains far from certain that a plan to revamp the student loan programs will be merged into the health legislation. While the odds of that happening are better than not, it is still possible that Democrat leaders will decide to ditch or postpone action on the student aid measure if they conclude that it could discourage even a few key lawmakers from supporting the health care bill.

Read More ...

Texas A&M University Goes Direct Lending

2010-03-12T12:01:00.000-08:00

Effective summer 2010, Texas A&M University (College Station and Galveston campuses) will begin participating solely in the William D. Ford Direct Loan program from the U.S. Department of Education for all subsidized and unsubsidized student loans, Parent Loans for Undergraduate Students (PLUS) and Graduate PLUS loans (GradPLUS).

Read More ...

Key Senators Balk at Adding Student Loans to Healthcare Legislation

2010-03-10T20:19:00.000-08:00

"I think it threatens the health-care bill," said Senate Budget Committee Chairman Kent Conrad (D-N.D.) "It would threaten to sink them both."

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What Now For Student Aid Legislation?

2010-03-08T04:28:00.000-08:00

Now, with Democrats having decided to push health care through Congress with or without Republican support, the possible paths forward for the student aid measure are a little clearer -- but they don't necessarily bode well for its immediate passage, according to several Congressional aides, college lobbyists, and other Congress watchers interviewed for this article.

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Consumer Credit in U.S. Rises For First Time in a Year

2010-03-07T05:28:00.000-08:00

Borrowing by U.S. consumers unexpectedly rose in January for the first time in a year, led by auto and student loans, a sign Americans are gaining confidence in the economy.

Consumer credit increased $5 billion, or 2.4 percent at an annual rate, the Federal Reserve said today in Washington. Borrowing dropped $4.6 billion in December, more than first estimated. The figures track credit card debt and non-revolving loans, including those for automobile purchases.

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Why Make Government The Primary Source For Student Loans?

2010-03-06T04:42:00.000-08:00

Here is what they haven't told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education -- and to help your U.S. representative's reelection.

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Citigroup’s Auction-Rate Bonds Freeze $1 Billion in Hawaii Cash

2010-03-04T04:48:00.000-08:00

Two years after the auction-rate bond market froze, Hawaii has lost about $250 million in market value on $1 billion in student-loan securities sold by a single Citigroup Inc. broker as a cash substitute that the state has had difficulty unloading.

Hawaii purchased half of the securities for its short-term treasury account from Honolulu broker Pete Thompson, 60, in the eight months before the market collapsed, according to Scott Kami, an administrator at the state finance department.

The transactions came while Citigroup was increasing brokerage commissions and traders were being told to “make sure all hands are on deck” and “do whatever is necessary” to dispose of auction-rate bonds as the $330 billion market began to fail, according to a 2008 U.S. Securities and Exchange Commission complaint against the New York-based bank in a separate case related to sales of the debt.

Entire Article ...

Dodd Now Wants Fed to Oversee Consumer Protection

2010-03-02T03:33:00.000-08:00

In an effort to secure Republican support for an overhaul of financial regulations, the chairman of the Senate Banking Committee on Monday proposed giving the Federal Reserve responsibility for protecting consumers from abusive and deceptive financial products, The New YorK Times’s Sewell Chan reported.

The new plan, described by an official briefed on the negotiations, was the latest iteration of an idea that has divided members of the committee, largely along party lines, and has been the major barrier in the path toward the most significant overhaul of banking rules since the Depression, a priority of the Obama administration, The Times said.

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Excerpt from Elizabeth Warren Interview

2010-03-02T03:29:00.000-08:00

There has been some controversy over whether risky private student loans made by schools, as opposed to banks, should be exempt from the CFPA. Do you think that would lead to more abuses?

There’s no question that the CFPA needs real and clearly outlined curbs. For example, the agency doesn’t have authority over investment products or most insurance products. I get more concerned though when we start talking about carving out what are clearly consumer credit products, like private student loans. A glaring example of a special interest carve-out in this area is the exemption the House passed for car dealers. It is remarkable that lawmakers would choose to trust used car dealers over banks and other auto loan originators, especially when there is such a well-documented trail of abuses. The key insight of the CFPA is that there’s no reason one kind of auto loan or student loan should have one set of rules while an auto loan or student loan from a different lender should have another set of rules. We don’t regulate child car seats differently based on who manufactures them, and it’s time we start treating like consumer credit products alike as well.

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New Calculation Finds Less Savings for Government in Student-Loan Industry's Plan

2010-03-02T03:21:00.000-08:00

The banking industry's bid to keep its central role in the system of federally subsidized student loans may have just gotten a little tougher.

The nonpartisan Congressional Budget Office, at the request of Democrats, made another review of the latest alternative the industry proposed to President Obama's plan to end the bank-based loan program. And the budget office concluded the industry plan would save taxpayers about $8.5-billion less than would the Obama administration's plan.

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Check Out The New EdAssure Sponsored Page

2010-02-28T06:41:00.000-08:00

Our partner, EdAssure, recently set up a new informational website for consumers and professionals. Check out "The Student Loan Guy" at www.thestudentloanguy.com.

Editorial: Does Duncan Have Any Clue What a Free Market Is?

2010-02-26T08:47:00.000-08:00

On the heels of exploiting the name of perhaps the world’s all-time greatest free-marketeer, U.S. Secretary of Education Arne Duncan has decided to cut right to the chase and abuse the term “free market” itself. Writing in the Washington Post as part of his ongoing effort to demonize banks and push the Student Aid and Fiscal Responsibility Act over the finish line, Duncan offers the following:

The president’s plan actually creates jobs and draws on free-market principles by selecting private companies through a competitive process to service student loans issued directly by the Education Department. These private companies, including Sallie Mae, compete for our business and are evaluated on the quality of their customer service and their default rates.

Got it? When the federal government decides which companies get to service loans that it completely controls, those are “free-market principles” at work.

Right. And the legislation Duncan is trying to sell us really is fiscally “responsible.”

See Article ...

S&P Eases Threat of Downgrading Sallie and Nelnet

2010-02-26T08:44:00.000-08:00

Standard & Poor's Ratings Services somewhat lessened the threat of moving student-loan companies SLM Corp. (SLM) and Nelnet Inc. (NNI) into junk territory, saying U.S. legislation overhauling student lending likely won't pass in time to affect the 2010-2011 school year.

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Fynanz to Offer Private Student Loans with CUNA Strategic Services

2010-02-23T04:46:00.000-08:00

A new alliance between CUNA Strategic Services and Fynanz, Inc. will help credit unions get a piece of the private student loan market to help them attract new members and assist borrowers with financing their tuition and achieving their higher education goals. Private student loans provide value to students in need of education financing while helping credit unions develop lasting relationships with younger members, which helps them build members for life.

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Delaware Senators Back Student Loan Program Lenders

2010-02-23T04:43:00.000-08:00

Sens. Tom Carper and Ted Kaufman want to change student-loan reform legislation to help protect about 1,000 jobs at Access Group and Sallie Mae, two student-loan providers in Delaware.

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Apollo Group Falls as Student Dropouts Increase

2010-02-20T05:16:00.000-08:00

Apollo Group Inc., owner of the second-largest university in the U.S. by enrollment, fell the most in four months after it said second-quarter profit will miss analysts’ estimates because of difficulty in collecting tuition owed by students, especially dropouts.

Apollo, parent company of the University of Phoenix, said it expected adjusted earnings per share of 79 cents to 84 cents for the quarter ending Feb. 28, compared with analysts’ estimates of 93 cents in a Bloomberg survey. Apollo, based in Phoenix, fell $4.53, or 7.4 percent, to $56.92 at 4 p.m. in Nasdaq composite trading. It earlier fell as much as 10 percent, the most since Oct. 28.

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Evan Bayh Wants His Lasting Achievement To Be Stifling Student Loan Program

2010-02-20T05:12:00.000-08:00

Sen. Evan Bayh (D-Ind.) cast his impending retirement as an expression of disgust with Congress to do the people's business. So now that he's liberated from the obligations of raising money and similar grimy political considerations, we can expect Bayh to spend his remaining months in the World's Greatest Deliberative Body working with apolitical, high-minded intentions to do the people's business.

We will be disappointed. Bayh has instead joined the corporate-tool caucus on the subject of student lending.

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Merrill Lynch Sued over $44 Million in Student Loan Asset Backed Securities

2010-02-19T04:02:00.000-08:00

Maui County has filed a lawsuit against the brokerage firm Merrill Lynch Pierce Fenner & Smith Inc., charging that the business misrepresented the sale of $44.2 million in student loan auction rate securities.

"The County of Maui was told that the investments could be easily accessed, just like cash," Maui County Mayor Charmaine Tavares said yesterday. "Assurances by Merrill Lynch at the time of the investment turned out to be false, and we are seeking justice for the taxpayers of Maui County."

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First Place Resources Announces Partnership with Cology

2010-02-17T07:11:00.000-08:00

Cology, Inc., the technology and universal core processing experts, today announced that its core processing system, Volta™ will now be offered by First Place Resources, LLC to create custom loan solutions for use with their partners, including EdAssure™, a company that provides colleges and universities with financial aid solutions and lenders with product diversification. Cology's Volta will bring First Place Resources a complete loan origination program that is custom-branded, entirely profile-driven and compliant with all 2010 regulatory changes.

"We are very pleased to be offering Volta to our business partners and clients," said Lance Teinert, President of First Place Resources. "Our ability to bring turnkey solutions for our EdAssure private loan origination and servicing program is greatly enhanced by this relationship."

Read Press Release ...

Editorial: Socialism for Student Lenders

2010-02-16T06:22:00.000-08:00

IF EVER there were an example of “socialism for the rich, capitalism for the poor,’’ it’s the nation’s student lending system. Industry giants receive government subsidies to originate and administer government-backed student loans. These loans bring little to no risk and huge profits, even as college students and graduates struggle under the weight of crushing debt during a down economy.

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Student Loan Lobbyists March on Washington

2010-02-13T05:26:00.000-08:00

Call it the "March on Washington to Subsidize Student Lenders." In an effort to prevent the Senate from passing a reform bill that would make college affordable for all, the student loan industry has mounted a massive lobbying campaign to keep its vast government subsidies. Loan giant Sallie Mae alone currently has more than 20 lobbyists blanketing the Hill, trying to sink an effort to reduce college costs and take the middle man out of student lending.

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The $555,000 Student Loan Burden

2010-02-13T05:24:00.000-08:00

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

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More Small Banks Offer Private Student Loans

2010-02-12T04:40:00.000-08:00

This fall, Washington, D.C.-based Independent Community Bankers of America will launch iHelp, a nationwide lending program that will allow students to apply for loans up to $10,000 per year through community financial institutions nationwide. As more small local institutions join the student loan game, college kids will have even more options for private loans. But know the pros and cons of banking small.

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Making a Killing on Student Loans

2010-02-11T19:18:00.000-08:00

... But as the student loan reform movement picks up steam and takes center stage, a number of outcomes should be expected and fought vigorously against. If the 2009 health insurance reform debacle is any indicator, students should expect private loan companies to play the victim—against all laws of sanity ...

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Duncan Urges Passage of Student Loan Legislation

2010-02-09T18:24:00.000-08:00

But Dewey Knight, associate director of financial aid at the University of Mississippi, says his school won't switch unless it has to. "The current program has served our students very, very well."

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Arne Duncan Criticizes Sallie Mae and Banks

2010-02-09T18:10:00.000-08:00

The Obama administration is widening its criticism of the banking industry, this time taking aim at lenders who oppose its campaign to overhaul the student loan business.

The overhaul effort, proposed by the White House last spring but now held up in the Senate, would eliminate all loan subsidies to private lenders and have the federal government issue all low-interest loans directly to students.

The nonpartisan Congressional Budget Office says the move would save about $8 billion in loan subsidies a year, money the White House wants to use for other education efforts.

In an interview, Education Secretary Arne Duncan on Tuesday blamed the current stalemate on intensified lobbying by the banking industry. Banks and institutions like student-loan giant SLM Corp., he said, “will do anything to keep these subsidies flowing.”

Duncan focused particular his ire on SLM, better known as Sallie Mae, accusing the company of raising alarms about potential job losses in targeted ads around the country, while also moving “thousands of American jobs overseas.”

Sallie Mae officials, he said, have paid themselves “hundreds of millions of dollar in the last decade while teachers, nurses and scientists…face crushing debt because of runaway college tuition costs.”

Officials at Sallie Mae said they don’t oppose the administration overhaul; they merely want to modify it to preserve a role for private lenders to act as loan originators for a set fee.

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Yale Questions Merits of Government Takeover of Student Loans

2010-02-08T02:55:00.000-08:00

Last November, amid certainty that the proposed bill would be passed by Congress, Yale administrators announced the University would soon shift to the new direct federal lending program. But since then, the Democrats' recent defeat in Massachusetts, debate over the health care bill and intense lobbying from private lenders have made the passage of the bill appear less certain.

Yale's Director of Student Financial Services Caesar Storlazzi told the Times he now questions the merits of a complete government takeover of student loans.

“It really felt like the administration was just shoving this down our throats,” Storlazzi said. Private lenders offer better prices and services, he added.

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CNN Political Ticker: Student Loan Fact Check

2010-02-06T20:36:00.000-08:00

CNN Fact Check: Would cutting student loan subsidies save taxpayers billions?

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President's Loan Forgiveness Plan Deserves an "F"

2010-02-06T20:32:00.000-08:00

President Barack Obama likely has a standing invitation to just about any fraternity fete or community-college coffee klatch since pledging to expand a school loan forgiveness program.

The president already was a hit with young people who typically don't pay property taxes or have mortgages. With his pledge to wipe out some college debt for future graduates, he's probably more popular with student groups than a 10-cent taco right about now.

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Sallie Mae Reaction to Obama Budget

2010-02-03T03:41:00.000-08:00

President Barack Obama's budget proposal would end private-bank involvement in student-loan. He wants to funnel the savings into more grants to lower-income students.

That could bring an end to the Sallie Mae Corporation ...

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Statement Released by NCHELP (02-02-2010) Regarding the President’s FY2011 Budget Proposal

2010-02-02T11:33:00.000-08:00

The National Council of Higher Education Loan Programs (NCHELP) is encouraged by the President’s commitment to improving college access for students by increasing Pell Grant funding in his FY2011 budget proposal. We also support the College Access and Completion Fund and the goal of increasing the number of students who complete a postsecondary degree.

The President’s budget recognizes that a large number of these students will rely on loans to finance their higher education. According to the budget, for the first time in the history of the federal loan programs, students borrowed more than $100 billion in federal fiscal year 2009. Using budget estimates, and an annual growth estimate of 6 percent, over $1.7 trillion will be needed in additional federal borrowing to originate direct loans over the next decade.

This presents two serious challenges: 1) It adds a huge amount to the federal debt at a time when reduction is necessary. 2) It means that more students than ever will need assistance in repaying loans at a time when services are being severely reduced. It is one thing to make student loan funds available. It is another to provide the complementary services that prevent delinquencies and default.

The budget calls for the elimination of the FFEL Program, which would cease the comprehensive services developed to improve financial literacy, increase college access and prevent student loan delinquency and default. These specialized outreach services are provided on a local basis to meet the needs of students and schools from varied backgrounds. A recent NCHELP survey found that in the last year, FFELP organizations provided hands-on financial literacy, college awareness and financial aid training to more than 1.4 million students and parents, hosted 10,000 financial aid nights, and trained more than 26,000 school guidance counselors who then assisted thousands of students to pursue their postsecondary goals.

In addition, FFELP organizations have developed customized default prevention programs to help borrowers who experience troubles repaying their student loans and were able, in fiscal year 2008, to successfully return $60 billion in delinquent FFEL loans to repayment status.

Along with eliminating these essential services, the budget proposes to reduce the amount of onsite travel that the Department of Education will conduct, which means less in-person training and support for schools and students. They are planning to replace this training with videoconferencing. We are already seeing casualties of the proposed elimination of the FFEL Program by an agency that does not have the same ability to serve individual schools and students and whose one-size-fits-all approach will inevitably lead to a reduction in quality service. At a time that demands innovative and comprehensive services, the risk to students, schools and taxpayers is too high.

Alternative student loan reform proposals have been presented that would achieve significant savings while preserving services and choice for students and more than 30,000 local jobs. We urge Congress to give serious consideration to these proposals.

How Much Does It Cost to Pave an Education?

2010-02-02T11:04:00.000-08:00

"And, by the way, it's time for colleges and universities to get serious about cutting their own costs, because they, too, have a responsibility to help solve this problem." President Barack Obama, "State of the Union" speech, January 27, 2010.

President Obama has done the following over the past year ...

(1) Presented his plan to eliminate lender subsidies ... in essence, the FFEL program.
(2) Presented his plan to increase Pell Grants.
(3) Presented his plan to move Pell from discretionary spending to mandatory spending.
(4) Presented his plan to increase the participation in Income Based Repayment.
(5) Presented his plan to increase participation in Loan Forgiveness programs.
(6) Presented his plan to create education related tax credits.

The list goes on .....

What bothers me is that not a single one of these plans does anything to control the cost of education. The only thing President Obama has done to address the rising cost of college tuition is quoted at the beginning of this post.

No plan. No presentation. No ideas.

Has a college education become an entitlement program? If you can afford to attend ... then pay your own way. If you cannot afford to attend ... then the government will pave the way.

But at the end of the day ... who pays for the paving?

WSJ: Support Renewed For Student Loan Overhaul

2010-02-02T03:48:00.000-08:00

The proposal to end subsidy payments made to banks currently active in the student-loan market was first floated in last year's budget request. At the time, the news roiled markets, with the stocks of companies like SLM Corp., better known as Sallie Mae, falling sharply as a result.

The result of the ending of subsidies would effectively cut out private lenders from making loans. The Department of Education would become the sole provider of government-backed loans as a result.

There would still be a limited role for banks in servicing loans after they are made by the federal government.

Read Article ...

Editorial: False Moves Led VSAC to Brink of Insolvency

2010-02-01T04:35:00.000-08:00

Last year, VSAC pulled $23.1 million from emergency reserves, using $10.1 million just to cover day-to-day operations. The remaining $11.9 million shored up the lender’s creditworthiness. Because of VSAC’s long record in withholding information from the public as required by law, it’s difficult to know how much more money has been lost since June 30, the date of the company’s last annual report.

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Bush Knew About "$1 Billion Student Loan Debacle"

2010-01-30T05:38:00.000-08:00

A Nebraska lender has subpoenaed U.S. Department of Education records aiming to show that members of the Bush Administration’s education department not only knew about a boondoggle that improperly shelled out $1 billion to a group of student loan lenders, it approved the plan.

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First Marblehead Announces FY 2nd Quarter Results

2010-01-29T06:35:00.000-08:00

The First Marblehead Corporation (NYSE: FMD) today announced its financial and operating results for the second quarter of fiscal 2010 and for the six-month period ended December 31, 2009.

Total revenues for the second quarter of fiscal 2010 were $10.1 million. Total non-interest expenses for the second quarter of fiscal 2010 were $31.2 million, including a $10.7 million unrealized loss on education loans held for sale, as compared to $59.1 million in total non-interest expenses for the second quarter of fiscal 2009, including a $29.3 million unrealized loss on education loans held for sale. For the second quarter of fiscal 2010, compensation and benefits expenses decreased $2.1 million, or 20%, and general and administrative expenses decreased $7.2 million, or 37%, compared to the same quarter in the prior fiscal year, largely as a result of the company's expense reduction initiatives.

Article ...

Income Based Repayment Proposal by Obama Met with Skepticism By House Republicans

2010-01-29T06:32:00.000-08:00

The proposal was an oblique reference to the Income Based Repayment (IBR) program, which allows students with government-provided or subsidized loans to repay those loans at reduced rates and have any outstanding balances forgiven.

Created in 2007 – but not implemented until 2009 – the program lets students make regular payments on the loans for 25 years before an outstanding balance will be forgiven, the repayment period is reduced to 15 years if the student goes to work for the government.

If a borrower reaches the applicable repayment deadline, the government will forgive the remainder of the loan amount, using taxpayer money to repay the rest of the loan.

Obama’s suggestion would amount to an expansion of the program as well as a change in its terms making it more generous to student borrowers – especially those who work for the government.

Rep. John Kline (R-Minn.) reacted negatively to the idea Wednesday night, issuing a statement calling the proposal a “one-size-fits-all government expansion,” which would not help make higher education more affordable.

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Bill Ending Banks' Role in Student Lending Stalls In Senate

2010-01-29T06:27:00.000-08:00

The assumption on Capitol Hill is that Democrats will attempt to move the student loan bill through a special procedure that requires a simple majority rather than the usual 60 votes out of 100 needed to stop a filibuster. That tactic is also under discussion for health-care reform, said the aides, who asked for anonymity to speak candidly. So the two issues have become intertwined.

Timing is significant. because the student loan legislation would require all colleges to use direct government lending as of July 1 for federal loans. Currently, they can choose between direct lending and a federal program that guarantees student loans made by private banks. The bill would not affect nonfederal loans.

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Article from Dick Morris on State of the Union Speech

2010-01-28T08:48:00.000-08:00

Even Dick Morris likes the elimination of lender subsidies in order to pay for things like the $10,000 tax credit and expansion of Pell Grants ...

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Things Are Tough All Over

2010-01-28T08:20:00.000-08:00

Tough times in student lending aren't isolated to the United States. The Student Loans Company serving the United Kingdom has had it's share of struggles ... not being able to fund loans in time, unable to answer phone calls, etc. Today the SLC announced a layoff of 150 workers ...

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