FUTURE DEMAND OF ALTERNATIVE LOANS

1
FUTURE DEMAND OF ALTERNATIVE LOANS

• 2001 NCHELP Training Conference

2
What Students Ask When Considering an Alternative
Loan

• I need more money, what is available?
• Which lender should I use?
• Do I need to have a co-signer?
• How much can I borrow?

3
Alternative Loan Issues for Schools

• The numerous number of loan products
• Internal documentation of alternative loans
• Tracking the status of loans in process
• Packaging
• Consistency with internal policies (i.e.,
  satisfactory progress, non-matriculated students,
  etc.)

4
Why Alternative Lending Has Increased and Why It
Will Continue

• FFELP Limits
• Add-on institutional programs
• Summer enrollment
• Alternative to PLUS loan
• Most of the perks of the FFELP, but not all the
  requirements

5
What Schools/ Students Need from Alternative
Lenders

• Simplified application process
• Quick approval process
• Customer service

6
The Future of Alternative Lending

• Move to a paperless process
• Fewer lending institutions
• Electronic delivery of funds
• More restrictive eligibility requirements
• More integrated with traditional student aid

7
KEY EDUCATON RESOURCES

• 47 years in the Alternative Education Loan
  market
• Nationwide programs
• Product Offerings for all levels
• Grade School / High School
• Undergraduate / Graduate
• Continuing Education
• 600 Million in annual Alternative Loan Volume

8
Key Education Resources
ELECTRONIC PROCESSING

• Paperless alternative education loan
  applications are already here
• Electronic credit underwriting
• Real-time credit decisioning of applications
• Promissory notes remain the only hard copy
• Delivered electronically via email with PDF file
• Not needed to process the loan application
• Non-completion of promissory note stops
• disbursements

9
Key Education Resources
ELECTRONIC PROCESSING

• Electronic Signatures needed for a completely
  paperless process
• Only legal way to electronically deliver the
  promissory note
• Current DOE supported PIN process will not be
  the future electronic signature
  process
• Identification process, not a true electronic
  signature
• Only works if you have already been in the
  system (i.e.
• FAFSA)
• Closed system that can only be used for
  education
• financing
• Cannot be used for other transactions

• Electronic Signature verification processes will
  develop
• Families will sign up with a signature vendor
• Electronic signature will be used for all
  electronic transactions
• Businesses will need to accept various signature
  vendors

10
Key Education Resources
LIABILITY IN A PAPERLESS PROCESS

• Most of the liability falls on the lender
• Enforceability of note
• Acceptance of electronic signature

• School liability increases as their involvement
  does
• Completing the applications
• Verification process

• Fraud can be mitigated by disbursements directly
  to schools

• Legal liability can be reduced through outside
  legal opinions
• State law reviews
• Exportation capabilities
• Validity of Electronic Signature Processes
• Bankruptcy Protections

11
Key Education Resources
HOW FAR AWAY IS THIS ELECTRONIC FUTURE

• It is Already Here!
• Only 27 of Keys applications are hard copy
  (primarily parent- based products)
• 47 are Internet applications
• 26 are VRU or manned telephone applications

• Real-Time Credit Decisioning
• 60 of Keys applications are real-time
  decisioned today
• All non-paper applications will be real-time
  decisioned by
• the end of 2002

• True Electronic Signatures are less than a year
  away
• Signature vendors already exist
• Financial institutions are in the development of
  the systems