Flash Survey: Trends in FFEL and Direct Lending Programs March 12, Student Lending Analytics, LLC

Transcription

1 Student Lending Analytics Flash Survey: Trends in FFEL and Direct Lending Programs March 12, 2009 Slide 1

2 Background Situation Obama administration recently put forward a budget blueprint which would move federal loans to a 100% direct model using private sector servicers Survey Goals Determine prevalence of schools who have decided to move to Direct Lending for or considering such a shift Ascertain reasons behind school s decision on whether to remain in FFELP or move to Direct Lending Determine if Obama budget proposal impacts school s decisionmaking process Evaluate Direct Lending program through eyes of existing DL participants Slide 2

3 Methodology ed flash survey on March 5, 2008 with due date of March 9, In addition to demographic questions, the survey asked respondents the following questions: Which description most accurately describes your school's federal student loan plans for the school year? We remain committed to FFELP and have not considered a move to Direct Lending. We are a FFELP participant and currently contemplating a move to Direct Lending. We have contemplated a move to Direct Lending (in the last 6 months) but expect to remain a FFELP participant. We are currently a FFELP participant and have made the decision to go the Direct Lending route for We are currently a Direct Lending school and plan to remain so. We are currently a Direct Lending school and have decided to become a FFELP participant for the school year. Other Slide 3

4 Methodology (Cont.) Depending on the response to the previous question, respondents were given a choice of answering one of the following sets of questions: FFELP-related questions Please indicate the importance of each factor in your school's decision to remain a participant in FFELP. What are your current intentions regarding your lender selection process for the academic year? Direct-related questions Please indicate the relative importance of each factor in your decision to switch to Direct Lending (or to consider making the switch). When do you anticipate making a final decision about whether or not to move to Direct Lending? Describe your level of satisfaction with the Direct Lending program for each of the factors described below. In light of Obama budget blueprint, asked the following question to those institutions considering a move to Direct Lending: To what extent has the Obama Administration's recent budget proposal to shift entirely to Direct Lending had an impact on your school's decision-making process for ? Responses were normalized for following reasons: addresses that did not correspond with an educational institution were excluded Several schools provided multiple responses; only one response was included in the analysis. Overall, there were 551 survey responses analyzed Slide 4

5 Profile of Survey Participants School Type School Ownership 50% 40% 30% 20% 10% 0% 4-Year Private 4-Year Public 2-Year Public Other 60% 50% 40% 30% 20% 10% 0% Private Public Other School Region 40.0% 30.0% 20.0% 10.0% 0.0% South Northeast Midwest West Slide 5

6 Summary (Based on Survey Respondents) 25.7% of FFELP respondents indicated that they are considering a switch to Direct Lending (15.0%) or have already committed to making the change for the academic year (10.7%) A similar percentage of survey respondents from both 4-year public (13.2%) and private (12.5%) institutions in FFELP have already committed to Direct Lending for academic year 7.5% of two-year publics have committed to move to Direct Lending 1 in 5 respondents (20.0%) from two year public institutions are still mulling over a shift to Direct Lending Comparable numbers are 15.4% and 12.5% for four-year private and fouryear public institutions, respectively Slide 6

7 Summary (Based on Loan Volume of Respondents] Based on loan volume, schools representing over 1/3 of the FFELP volume in the survey (33.7%): Have made the decision to go to Direct Lending (15.0%) OR Considering a change to Direct Lending (18.7%) Survey results indicate that Direct Lending could grow to 40-45% market share of federal loans from 26% in Current 26% market share figure for Direct Lending based on latest market share estimates for from the Department of Education Large proprietary schools in FFELP, not in survey, could be swing factor The 15.0% of FFEL volume that has already made the decision to go to Direct Lending could boost Direct Lending share up to 37% Projected Direct Lending market share (for ) dependent on percentage of FFELP schools considering a change who ultimately move to DL as the table below indicates: Percentage considering change who go to Direct Lending 0% 25% 50% 75% 100% Projected DL Market Share 37.1% 40.6% 44.0% 47.5% 50.9% Slide 7

8 Summary For those schools participating in FFELP and currently considering a change to Direct Lending, almost 1 in 3 (32.3%) respondents indicated that the Obama budget proposal would make them more likely to move to Direct Lending in In terms of reasons for staying with the FFELP program, customer service (4.8) and borrower choice (4.5) were the most important factors. Previous experience with Direct Lending was the least important factor with rating of 2.4 For those committed to the FFELP program, just over 40% (40.7%) of respondents expect to complete a formal RFI process for the academic year. 31.7% expect to use their existing lender list while 17.0% do not intend to provide a lender list to their students Slide 8

9 Current Plans for FFELP Participants (Overall) - Respondents 60.0% 50.0% 56.3% 48.9% Percentage of Total 40.0% 30.0% 20.0% 10.0% 18.1% 17.5% 18.7% 15.0% 15.0% 10.7% Respondents Loan Volume 0.0% Committed to FFELP Considered DL, Expect Stay in FFELP Considering DL Decided to go DL for Survey question: Which description most accurately describes your school's federal student loan plans for the school year? Slide 9

10 Current Plans for FFELP Participants (By School Type] Percentage of Total FFELP Respondents 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 52.2% 63.7% 53.8% Committed to FFELP 22.8% 18.8% 20.0% 15.4% 13.2% 12.5% 12.5% 7.7% 7.5% Considered DL, Expect Stay in FFELP Considering DL Decided to go DL for Survey question : Which description most accurately describes your school's federal student loan plans for the school year? 4-Year Private 4-Year Public 2-Year Public Slide 10

11 Over 1 in 5 (21.7%) Committed to FFELP Will Sign Up (And Not Disburse) Under DL 80.0% 78.3% Percentage of Total FFELP Respondents 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 14.4% 7.3% 0.0% Not Registered for DL Registered for DL Intend to Register Survey question : Respond to this statement: My school has signed up for Direct Lending, although we do not intend to disburse funds in the DL program for the academic year. Slide 11

12 Reasons for Staying in FFELP Importance (Most Important = 5.0) Customer Service Choice Borrower Benefits Systems Conversion DL Reconcil. Process Prev. DL Experience Survey question: Please indicate the importance of each factor in your school's decision to remain a participant in FFELP. Slide 12

13 Lender Selection Process for FFELP Respondents Percentage of Total FFELP Respondents 40.0% 30.0% 20.0% 10.0% 0.0% 31.7% Keep Current List 28.8% RFI for FFELP/Alt. Loans 17.0% No Lender List 11.9% RFI for FFELP ONLY 7.7% Less Formal Survey Question: What are your current intentions regarding your lender selection process for the academic year? 2.9% Other Slide 13

14 Considering Direct Lending For those considering a switch (or have made the decision to switch) to Direct Lending, the top three reasons provided were (rating of 5.0 equivalent to Most Important ): Financial stability of student lenders (4.3) Customer service/loan processing issues (3.9) Borrower benefits (3.9) For those schools participating in FFELP and currently considering a change to Direct Lending, almost 1 in 3 (32.3%) respondents indicated that the Obama budget proposal would make them more likely to move to Direct Lending in Reflecting the high degree of uncertainty, almost 59% of those schools considering a switch to Direct Lending are not sure of timing of final decision Slide 14

15 Reasons Considering (or Switching To] DL Program Importance (Most Important = 5.0) Financial Strength Cust. Service Borrower Benefits Borrower Confusion Lender List Maint. Lender List Regs. Not Enough Lenders Survey question: Please indicate the relative importance of each factor in your decision to switch to Direct Lending (or to consider making the switch) Slide 15

16 Impact of Obama Budget Blueprint on FFEL/DL Decision 64.5% Percentage of Total Respondents Considering Move to Direct Lending 32.3% % No Impact on Decision More Likely to Go To DL Less Likely to Go DL Survey question: To what extent has the Obama Administration's recent budget proposal to shift entirely to Direct Lending had an impact on your school's decision-making process for ? Slide 16

17 Timing of Decision on Direct Lending 60.0% 59% Percentage of Respondents Considering Switch To DL 50.0% 40.0% 30.0% 20.0% 10.0% 11% 11% 5% 3% 12% 0.0% End of March 2009 End of April 2009 End of May 2009 End of June 2009 After July 1, 2009 Unsure on timing Survey question: For those considering a switch to Direct Lending, when do you anticipate making a final decision? Slide 17

18 Direct Lending Institutions Almost 2 out of 3 survey respondents in the Direct Lending program (63%) had over 10 years of experience with the DL program Overall, Direct Lending respondents reported a high level of satisfaction with the program Overall, the highest rated program elements (Rating of 5.0 equal to Very Satisfied ) were: Program elements Rating Loan processing 4.7 Customer service to financial aid office 4.6 Customer service to borrowers 4.5 Ease of implementation 4.4 New participants to Direct Lending program rated several factors lower than more experienced DL participants Reconciliation: New users rated this 4.1 vs. experienced users who rated it 4.5 Value-added services: New users rated these services 3.7 vs. the 4.1 rating from more experienced users Slide 18

19 Years in the Direct Lending Program 70.0% 63% Percentage of Respondents Participating in DL 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 20% 5% 12% 0.0% Less than one year 1-5 years 6-10 years Over 10 years Survey question: For what length of time has your school participated in the Direct Lending program? Slide 19

20 Satisfaction Ratings for Direct Lending Rating Scale (Very Satisfied = 5.0) New to DL Experienced DL Loan Process. Cust. Serv. To Fin. Aid. Ease to Implement Cust. Serv. To Borrow. Reconciliation Value-Added Services Survey question: Describe your level of satisfaction with the Direct Lending program for each of the factors described below. Slide 20

21 Advice from Direct Lending Institutions Complete compilation of tips from DL institutions available on Student Lending Analytics Blog. Slide 21

22 Thank You Thank you again for your participation! Please contact Tim Ranzetta if you have any additional comments or questions regarding this survey Send to if you would like to receive the comprehensive results with responses and comments for all lenders Phone: Look for more upcoming SLA Flash Surveys in the future For more information on Student Lending Analytics, proceed to the final three slides Slide 22

23 Founded in 2007 Student Lending Analytics Background Independent Research and Advisory Service with NO lender affiliations Mission: Find best lenders for students through an analytically rigorous and comprehensive process Services RFI Management of FFEL and Private Loans Research Successes to Date Managed RFI process at institutions with over $600 million in loan volume Inside Student Lending, our monthly newsletter, reaches over 5,000 financial aid administrators Student Lending Analytics Blog has become the go-to source for breaking developments and analysis on the student lending industry SLA Flash Surveys have included the insights from over 1,500 financial aid professionals on a variety of timely topics Private Loan Options and the SLA s 2008 Alternative Loan Guide provides students and financial aid offices with an objective and focused list of private lenders Slide 23

24 The Student Lending Analytics Process RFI Management Slide 24

25 Student Lending Analytics Research Services Inform financial aid offices on industry developments (implications for their lender lists and relationships) Student Lending Analytics Blog Timely insights to developments in student lending industry Alerts Legislation, lender exits, earnings calls, industry insight Monthly newsletter August Tips for Lender Lists Webinars April Lessons Learned in Trenches of Lender Selection Process September HEOA and Lender Lists Surveys (summaries available on our website) FFEL vs. Direct Lending RFI Practices Implementing increased Federal Stafford loan limits Alternative Loans Legislative and regulatory updates White papers Help Line to answer questions/resolve issues throughout the year Slide 25