Making Sense of the Student Financial Aid World and Its Future

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Making Sense of the Student Financial Aid World
and Its Future

• National Association of Presidential Assistants
  in Higher Education
• San Diego, CaliforniaFebruary 9, 2008

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Utah Higher Education Assistance Authority

• UHEAA is the financial aid and college savings
  organization of the Utah State Board of Regents
  (SBR).
• Governed by a separate board of directors
• 19-members
• Acting under direction of State
• Board of Regents
• 208 employees

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UHEAA

• UHEAA is Utahs major financial aid provider.
• Student loans
• 10 grant and scholarship programs
• College outreach
• UtahMentor.org
• 1.5 to 2 million page hits per month
• Utah Educational Savings Plan Trust (UESP)
  Utahs 529 college savings plan

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Fast Facts

• UHEAA loan volume in fiscal 2007
• 102,700 student loans
• 502 million Consolidation, Stafford and PLUS
  loans
• UHEAAs default rate
• 4.3 (national rate is 4.6)
• UHEAAs student loan portfolio
• 163,000 borrowers
• 1.97 billion
• UESP
• Over 113,000 accounts
• 2.5 billion total account balances

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Fast Facts

• UHEAA operating budgets
• 210 million
• No State appropriations for UHEAA operating
  expenses

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UHEAA Borrower Benefits Interest Rate Discounts

• One of the best discount programs.
• Wall Street Journal
• (June 2, 2004)

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UHEAA Money-Saving Benefits for Borrowers

• No fee Stafford loans
• 0.50 rate reduction for automatic payments on
  Stafford and PLUS loans
• 2.00 balance reduction after 48 on-time payments
  on Stafford and PLUS loans

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UHEAA Savings for Borrowers

• UHEAA is a not-for-profit, State agency and
  shares its revenues with students to reduce
  borrowing costs.
• Savings to Borrowers
• 17.6 million in FY 2007
• 110.1 million since FY 1998

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Loans Are the Largest Source of Student
Financial Aid
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Headlines Student Loan Misconduct
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Financial Aid Administrators

• Honest, hard-working, professionals.
• Few received kickbacks or payola of any kind.
• Those that did should be punished.

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Navigating Rough Waters

• Code of Conduct for financial aid administrators
• National Association of Financial Aid
  Administrators (NASFAA)
• Refrain from taking any action for his or her
  personal benefit.

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Student Loan Prohibitions

• Financial aid administrators nor their family
  members
• Cash payments
• Stock
• Club memberships
• Gifts
• Entertainment
• Expense-paid trips

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Safe Harbor Preferred Lender Lists

• Selection of lenders for inclusion on a
  preferred lender list.
• Based solely on the best interests of students
  and parents.
• Placement not based on payment to an employee or
  the institution.

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Safe Harbor Preferred Lender Lists

• New Regulations (Effective July 1, 2008)
• Prohibit the use of a preferred lender list to
  deny or impede borrower choice of lender.
• Preferred lender list must include at least three
  lenders.
• Institution must disclose method and criteria for
  selecting lenders.
• Prohibit assigning a lender to a first-time
  borrower.

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Safe Harbor - Identity

• No employee or agent of a lender should ever be
  identified, either directly or by implication, as
  an employee of the institution.
• Protect your institutions name, logo, colors,
• and mascot.
• What you dont want to hear from a student
• I thought they were from the universitys
  financial aid office.

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Safe Harbor - Inducements

• Prohibit lenders from using electronic gear, gift
  cards, sweepstakes, or other offers to entice
  students to sign up for loans.
• No per loan payments to the institution
• School-affiliated organization
• Alumni organizations, foundations, athletic and
  academic organizations
• Possible probes regardless of whether it is
  within the colleges structure and control
• Red flag Institutions student
  loan volume
  
  from a single
  lender

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Safe Harbor - Permissible Activities

• Items of nominal value for generalized marketing
  or advertising, or to create goodwill
• Meals and refreshments that are reasonable in
  cost in conjunction with training, meetings,
  conferences, etc.
• References CFR 682.200 and 682.401

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On the Horizon

• Investigations beyond student loans
• Cuomo Expands Investigation of Study-Abroad
  Programs to Colleges
• -- THE CHRONICLE OF HIGHER EDUCATION
  (January 21, 2008)
• Selling student names and addresses

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How Do Students Pay for College?
Savings
Work
Loans
Scholarships
Family Support
Grants
Credit Cards
Institutional Aid
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Example of Financial NeedCosts for one academic
year

• Cost of Attendance 20,000
• Less Expected Family Contribution 2,200
• Need 17,800
• Less Aid Awarded
• Pell Grant 2,480
• FSEOG 800
• Institutional Grant 800
• Stafford Loan 3,500
• Work Study 2,200
• Remaining Need 8,020
• This example is based upon a dependent student
  from a two-parent household with a family size of
  six and two in college. Parental income is
  60,000 with both parents working and 5,000 in
  savings. Student income is 3,600 with 1,000 in
  savings. Components of Cost of Attendance include
  tuition, fees, books, supplies, transportation,
  personal expenses, room board, and may include
  loan fees, dependent care expenses, and expenses
  related to a students disability.

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Be on the Lookout Debt Burden

• Two-thirds of college students finish school with
  debt, up from less than half in 1993
• Student loans a blessing and a curse
• A blessing because families rely on student loans
  to cover the rising cost of attendance
• A curse because debt burden weighs on graduates
• Trouble spots Credit Cards and Cars
• Calls for more financial literacy courses

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Average Student Loan Debt Burden

• National average debt for
• graduating seniors 19,646
• Utah average debt for
• graduating seniors
• in 2006 12,807
• The Project on Student Debt, Student Debt and
  the Class of 2006, September 2007,
  http//projectonstudentdebt.org/pub_home.php
• Calculations by the Project on Student Debt,
  based on data from Thomson Petersons
  Undergraduate Financial Aid and Undergraduate
  Databases. http//projectonstudentdebt.org/state_b
  y_state-data.php

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Be on the Lookout Default

• What business are we in?
• The Student Success Business
• No one succeeds if a student defaults.
• Calls to change the cohort default rate formula.
• Possible sanctions on institutions with high
  default rates.
• High risk borrowers dropouts skips.

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Be on the Lookout Default

• Consequences of default for student borrowers
• Ruined credit rating
• Collections costs
• Garnished wages
• Tax refund liens

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Be on the Lookout Pressure on Institutions to
Reduce Debt Burden

• Senators Letter Grills 136 Wealthy Colleges
  About Endowment-Spending and Financial Aid
  Policies
• -- THE CHRONICLE OF HIGHER EDUCATION (January
  25, 2008)
• Harvards Plan to Increase Affordability
• -- The Washington Post (December 12, 2007)
• No-Loan Policies Opening Doors to Expensive
  Colleges
• -- Chicago Tribune (December 23, 2007)

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Be on the Lookout 3 More Issues

• Student Loans Direct marketing to your students
• Google student loans
• 53,500,000 results in 0.09 seconds
• Difference between borrower choice and borrower
  confusion

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Be on the Lookout 3 More Issues (cont.)

• Calls to Simplify the Application Process
• The Gettysburg Address 235 words
• The Ten Commandments 297 words
• The Declaration of Independence
• 1,341 words

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Simplify the Application Process

• The Free Application for Federal Student Aid
  (FAFSA)
• 8,327 words
• Up to 121 questions

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Be on the Lookout 3 More Issues (cont.)

• Access to Student Loans
• Subprime woes to hit student loans
• (January 11, 2008)
• Turmoil in Credit Markets.
• Congressional action has reduced lender
  subsidies.
• Some lenders scaling back on loan participation.

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Return on Investment

• Brianne Moon
• Southern Utah University graduate
• Pell, Loans, UCOPE
• UCOPE leads to internship
• Internship leads to job offer
• Staying in Utah to teach elementary school

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Achieving Goals

• Ky Sealy
• New Century Scholarship recipient
• BS MS in Electrical Engineering from Utah State
  University
• First generation college graduate
• Arrived at USU ready for the rigors of college
• Siblings will receive New Century Scholarships

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One Day at the Gas Station