|
Education Lending Group Inc. - Student Loans -
Category Main Page
(858)
617-6080
12760 High Bluff Drive, Suite 210
San Diego, CA 92130
Sales
$86 million
Business Description
Education Lending Group Inc. is a specialty finance company principally
engaged in providing student loan products, services and solutions to
students, parents, schools and alumni associations. Our business is focused
on originating and purchasing guaranteed student loans made under the
Federal Family Education Loan Program, known as FFELP, which includes
consolidation loans, Stafford loans and Parent Loans for Undergraduate
Students (PLUS). We also offer and purchase alternative supplemental loans
that may be guaranteed by a third-party guarantor. As of December 31, 2003,
all of our alternative supplemental loans were guaranteed by a third-party
guarantor. The company's website is
www.educationlendinggroup.com .
To date, the vast majority of loans we have originated have been
consolidation loans. We generally hold these loans on our balance sheet.
Currently, we sell the majority of Stafford and PLUS loans we originate in
the secondary market. During the year ended December 31, 2003, we originated
or purchased more than $2.5 billion in student loans. As of December 31,
2003, we held an aggregate of $3.3 billion of student loans on our balance
sheet. All of our student loans are currently serviced by third-party
servicers. We have recently created a wholly-owned subsidiary which we
intend to use to service some of our loans.
We generate revenue primarily by earning interest income on the loans we
hold on our balance sheet. This financial model allows us to benefit from
the predictable revenue stream of our portfolio, unlike specialty finance
companies whose revenues are primarily derived from one-time gains upon the
sale of their assets. When we do sell loans, we record a gain on the sale of
the loans on our income statement. We have agreements with a number of
third-party marketing partners who we engage to provide us with completed
loan applications. In accordance with generally accepted accounting
principles (GAAP), we expense these marketing partner fees as they are
incurred. These fees have historically represented more than 50% of our
operating expenses. Accordingly, as a make and hold lender, we have recorded
and will continue to record, net losses until our portfolio attains scale to
generate net interest income sufficient to absorb our expenses, including
these marketing partner fees. We expect this to occur during 2004.
The low interest rate environment in the last two years has encouraged many
borrowers to consolidate their variable rate student loans into one loan
with a low, fixed interest rate. Since we began our student loan operations
in September 2001, we have addressed this demand by offering a consolidation
loan product through our multiple marketing channels. Our success in
originating consolidation loans has allowed us to fund the further
development of these channels for offering other student loan products, such
as Stafford and PLUS loans. Our management team has developed important
relationships in the student loan industry, and has extensive experience
marketing loans directly to potential borrowers and in marketing and
financing all types of student loans.
Our Products and Services
As mentioned above, we are a specialty finance company principally engaged
in providing student loan products, services and solutions to students,
parents, schools and alumni associations. Our business is focused on
originating and purchasing guaranteed student loans made under FFELP. This
includes consolidation loans, PLUS loans and Stafford loans. We also offer
and purchase alternative supplemental loans that may be guaranteed by a
third party guarantor.
We market our products and services through four channels:
• Strategic alliances and other marketing relationships;
• School preferred lender-lists;
• Direct marketing to consumers; and
• Secondary market acquisitions.
Strategic Alliances and Other Marketing Relationships
We have forged strong marketing relationships with third parties to leverage
their marketing platforms and access their established and growing customer
bases. Currently, we have relationships with 13 third parties who market our
guaranteed consolidation loans, Stafford loans and PLUS loans to potential
and existing borrowers. The services these marketing partners provide
include marketing our federal consolidation loans offered and originated
under FFELP and providing us with qualified leads to prospective loan
applicants. Approximately 66% of the loans generated during 2003 were
originated through this channel. The agreement terms and termination rights
of the parties vary, but generally, the parties have the right to terminate
upon the occurrence of material breach, regulatory changes and bankruptcy.
Each party has agreed to indemnify the other in connection with their
activities under the agreement, subject to certain limitations.
These entities conduct business with us because of our expertise in
providing student loan products and services, our reputation and our
competitive compensation arrangements. We partner with these entities by
creating and managing marketing campaigns geared towards their existing
customers. We then purchase the resulting completed loan applications.
Through these marketing relationships, we are able to access a large number
of borrowers without incurring the incremental overhead costs of hiring
additional sales and marketing employees.
School Preferred Lender-Lists
Stafford and PLUS Loan Originations. We originate student loans through the
school preferred lender-list marketing channel. This activity accounted for
approximately 9% of our loan originations during 2003. We have a national
sales force of experienced professionals in the field that focuses on
implementing this strategy by educating college financial aid officers about
us and offering our products and services to them in order to be added to
the school’s preferred lender-list. This preferred lender-list participation
drives Stafford and PLUS loan volume from the students and parents who
select their lender from the school’s preferred lender-list.
Preferred lender-lists came to prominence in the student loan industry in
the early 1990’s by streamlining the student lending process, which had been
unwieldy and heavily paper intensive. Financial aid offices had little
control over where their students were obtaining their loans. Schools
created preferred lender-lists to simplify the administration of the program
in financial aid offices. Many schools like to have preferred lenders
because these lenders typically provide the school with products and
services that ease the financial aid process for their students and help
reduce the workload for the financial aid office.
The following is an example of the lender-list loan origination process:
• a high school student receives an award letter from the college he/she has
chosen to attend;
• the letter provides information on financial aid awarded to the student,
the student’s eligibility for guaranteed Stafford loans and the availability
of PLUS loans;
• the letter informs the student how to apply for student loans and provides
a list of lenders endorsed by the school to fund the necessary loans; and
• the student signs the award letter and selects a lender from the list.
In this channel, our objective is to be included on a school’s preferred
lender-list. We are currently on the preferred lender-list at over 400
schools and expect to be included on the preferred lender-list for more than
450 schools by the end of 2004. Being on a preferred lender-list at an
educational institution provides us an opportunity to generate more student
loans, primarily federal Stafford and PLUS loans, at that institution than
we otherwise would if we were not on the preferred lender-list. By the end
of 2004, we intend to establish relationships with an additional 150 schools
that we expect will process our loan applications from their students even
though we are not included in their preferred lender-list.
The school preferred lender-list business is seasonal as the majority of the
loans are originated in the August/September/October and
January/February/March time frames, which corresponds to the college
disbursement calendar.
Consolidation Loan Originations. We also use the school preferred
lender-list channel to market our Consolidation Assistance Program® (CAP) to
targeted educational institutions and related alumni associations. In this
channel our primary target borrowers are current students and recent
graduates. We believe our easy application process is attractive to many
potential borrowers. We provide a streamlined consolidation loan process,
expert assistance and competitive borrower benefits programs to help
borrowers take advantage of the simplicity and money management advantages
of the federal consolidation loan program.
Diversified Products and Services. We also use the school preferred
lender-list channel to market our Grad Partners® School as Originator
Program to targeted graduate schools, our electronic entrance and exit
interviews and our loans for foreign students enrolled in schools in the
United States.
Direct Marketing to Consumers
The student loan marketplace is evolving. As a result of technological
innovations such as electronic processing of loan applications, electronic
disbursements and e-signatures, we believe that marketing of student loans
is likely to begin to move away from marketing channels, such as schools’
preferred lender-lists, to more direct marketing to consumers. This is
evident in the recent emergence of direct marketing of consolidation and
PLUS loans to parents. Once it was evident that the process did not intrude
on the financial aid office, and in fact enhanced administration of
financial aid, resistance to direct marketing of consolidation and PLUS
loans diminished. During 2003, approximately 24% of our loan business came
to us through our direct marketing efforts.
We view student loans as consumer loans that can be originated in any
fashion convenient for the student, parent or school. We market some of our
products and services, such as consolidation and PLUS loans directly to
students, parents and alumni associations utilizing our website, web
advertising, print advertising and direct mail. A large portion of our
direct marketing to consumers is geared towards driving calls from eligible
borrowers to our Education Finance CenterSM where callers receive
information specific to their eligibility for different loan programs. All
of our Education Finance CenterSM associates are trained education finance
specialists. Each associate participates in intensive training developed
with the assistance of our advisory board of financial aid administrators.
We attempt to operate our Education Finance CenterSM like a school financial
aid office. Our associates take an easy-to-understand, engaging approach to
education finance. They provide parents and students specific, concise and
accurate financial aid information. They can typically qualify a borrower
over the phone for consolidation, Stafford and PLUS loans in less than 10
minutes. Additionally, the availability of e-application and e-signature
expedites the application process. In order to build this channel to scale,
we will continue to work closely with financial aid offices to insure
conformity to their internal systems for Stafford and PLUS loans.
Secondary Market Acquisitions
Since September 2001, we have used this channel to purchase additional
student loan volume. After a lender funds a loan, the lender can either hold
the loan and collect the payments or sell the loan in the secondary market.
Many FFELP lenders sell their loans. As a result, there is a robust
secondary market for student loans. Less than 1% of the loans added to our
balance sheet during 2003 came to us through such acquisitions.
We fund our acquisitions of loans in the secondary market through our
commercial warehouse line of credit and from direct access to the
asset-backed securitization marketplace. On our secondary market purchases,
we earn income on the portfolio based on the difference between the student
loan borrower rate and the interest cost of our borrowings under the
commercial warehouse line of credit or asset-backed securitization market,
less the amortization expense of the acquisition cost of the portfolio. We
intend to maximize revenue and build our balance sheet over time by holding
most of the student loans we acquire. Our management team has extensive
experience in buying student loans in the secondary market.
Our Strengths
We offer a full array of guaranteed student loan products. Our portfolio of
student loans continues to grow and we expect it to provide substantial
future cash flow. We believe the following factors will continue to be
instrumental in maintaining our growth and securing our position in the
student loan industry:
• Predictable cash flow from a high quality loan portfolio;
• Multi-channel loan origination;
• Strong marketing alliances;
• Access to cost-efficient, flexible financing; and
• Experienced management team.
Predictable cash flow from a high quality loan portfolio
As of December 31, 2003, we held $3.3 billion of student loans on our
balance sheet, of which more than 99% are guaranteed FFELP loans. We expect
this portfolio to generate predictable cash flows for the duration of the
loan portfolio, which is currently approximately 21.8 years. FFELP loans
carry a guarantee of at least 98% on the principal and accrued interest. As
of December 31, 2003, less than 1% or $10 million of our portfolio,
consisted of alternative supplemental loans. These loans are fully
guaranteed by The Education Resource Institute, Inc., or TERI, a third party
guaranty agency.
Multi-channel loan origination
We have developed a highly diversified marketing strategy which allows us to
market our products and services through four channels, including strategic
alliances, school preferred lender-lists, direct marketing to consumers and
secondary market acquisitions. Our multiple channel origination strategy
limits our reliance on any one source, permits greater penetration into the
student loan market, reduces seasonality of loan originations and enables us
to customize our marketing approach to each market segment we serve.
Strong marketing alliances
We have forged strong marketing relationships with third parties to leverage
their marketing platforms and access their established and growing customer
bases. These entities conduct business with us because of our expertise in
providing a full array of student loan products and services, our reputation
and our competitive compensation arrangements. We partner with these
entities by creating and managing marketing campaigns geared towards their
existing and targeted customers. We then purchase the resulting completed
loan applications. Through these marketing relationships, we are able to
access a large number of borrowers without incurring the incremental
overhead costs of hiring additional sales and marketing employees.
Access to cost-efficient, flexible financing
We have access to a warehouse loan facility of $500 million. From time to
time our lender has approved temporary increases in the warehouse loan
facility, with the largest increase to date allowing us to borrow up to
$1.25 billion. We use this facility to fund the origination and purchase of
student loans. Our warehouse loan capacity allows us to fund and pool
student loans until we aggregate sufficient volume to access the
securitization markets for more cost-efficient financing.
Experienced management team
Our executive management team has extensive experience in all aspects of the
student loan industry, including marketing, financing, securitizing,
servicing and processing. Prior to forming Education Lending Group, our CEO,
Robert deRose, was a founder, president and chief executive officer of
American Express Educational Loans. Michael H. Shaut, our President and COO,
was the president and chief executive officer of Student Loan Funding
Resources, Inc. prior to its acquisition by Sallie Mae. Other members of our
executive management team also have significant experience in the student
loan industry.
Our Strategy
Our objective is to strengthen our position as a leader in delivering
student loan products, services and solutions directly to consumers in the
medium of their choice. We believe that we can accomplish our objective by
pursuing the following key strategies:
• Vertically integrate our student loan business. In order to provide
end-to-end services to the student loan industry, we are developing our own
servicer to service some of our loans. By offering schools a consistent
interface for the duration of the loan, we expect to enhance our ability to
drive business through our marketing channels.
• Increase market share by diversifying product and service offerings. We
continue to develop innovative, value-added products and services, such as
proprietary alternative supplemental loans, our School as Originator
program, electronic entrance and exit interviews and loans for foreign
students enrolled at schools in the United States. Through these efforts, we
expect to be added to more school preferred lender-lists as we continue to
meet their demand for diversified products.
• Further leverage our direct marketing to consumers channel to increase our
presence in the graduate school lending and PLUS programs. We intend to
market our graduate school and PLUS loans directly to students and parents
by allowing them to submit applications in the medium of their choice. By
utilizing technology such as e-application, online pre-approval and
e-signature, all of which expedite the application process, we expect to
drive additional volume through our direct marketing to consumers channel.
• Establish additional strategic alliances. We intend to enter into new
strategic alliances with financial services companies and other associations
with greater access to consumers who we do not actively target. We partner
with these companies because we expect to leverage their existing
relationships to access a large number of borrowers without incurring the
incremental overhead costs of hiring additional sales and marketing
employees.
• Make selective strategic acquisitions. We intend to pursue strategic
acquisitions that would increase loan originations and advance our efforts
to vertically integrate our business. During the normal course of our
business, we evaluate acquisition opportunities as they arise.
Student Loan Industry Overview
The high cost of post-secondary education has resulted in students and
parents carrying increasingly high levels of indebtedness and burdensome
monthly payments upon graduation. The Higher Education Act created FFELP
which provides a convenient, low-cost source of capital for families to
utilize to finance college education.
There are three major federal education loan programs:
• The Federal Family Education Loan Program (FFELP) allows private financial
institutions to make loans that are guaranteed by intermediary guaranty
agencies who are, in turn, reinsured by the federal government. FFELP was
originally created by the Higher Education Act of 1965. FFELP is the single
largest source of college financial assistance in the United States.
• The William D. Ford Federal Direct Student Loan Program (FDLP) was enacted
in 1993 and allows the federal government to lend funds directly to students
and parents from the U.S. Treasury for financial aid purposes.
• The Perkins Loan program is a relatively small program that provides
capital to schools to help establish revolving loan funds the schools can
use to make loans to their students who have exceptional financial need.
Together, FFELP and FDLP accounted for 97% of all federal education loan
volume in the 2000-2001 academic year.
The
Federal Family Education Loan Program (FFELP)
FFELP, the single largest source of college financial assistance in the
United States, is a public-private partnership where lenders make guaranteed
student loans to students and parents in coordination with school financial
aid offices. During the 2001-2002 academic year, $30.4 billion of new FFELP
loans, accounting for approximately 70.5% of all new (non-consolidated)
student loan volume, were committed to eligible borrowers according to the
College Board’s 2003 report on Trends in Student Aid. According to the
Department of Education (DOE), new FFELP volume is projected to grow to
$34.0 billion in the 2004 budget year while FDLP volume is projected to grow
to $13.6 billion, resulting in total new student loan demand of $47.6
billion in 2004.
FFELP loans offer below-market interest rates and favorable repayment terms
to students who attend eligible institutions on at least a half-time basis,
without regard to the student’s credit worthiness. Loans made under FFELP
include:
• Consolidation Loans, which have terms of up to 30 years and allow student
and parent borrowers to simplify repayment by combining different types of
federal loans from different lenders with various repayment schedules into
one loan. The primary benefits of consolidation in today’s market are
locking in a low fixed interest rate and simplifying repayment by creating a
single loan with one holder and one monthly payment. According to the DOE,
during the 2002 federal fiscal year, $22.9 billion was committed to fund
federal consolidation loans.
• Subsidized Stafford Loans, which have terms of up to 10 years after the
borrower leaves school and are awarded to students on the basis of financial
need. The loans are referred to as “subsidized” because the federal
government pays the interest that accrues while students are enrolled, for a
six-month grace period after they leave school and during certain authorized
deferment periods. This loan type is the largest component of FFELP, with
aggregate borrowing by any single borrower limited to $23,000 for
undergraduate or graduate students. During the 2001-2002 academic year,
$19.9 billion in subsidized Stafford loans were made according to the
College Board’s 2003 report on Trends in Student Aid.
• Unsubsidized Stafford Loans, which have terms of up to 10 years after the
borrower leaves school and are available to all students regardless of
financial need. They offer the same low interest rate and six-month grace
period as Stafford subsidized loans, but interest on these loans accrues
while students are in school, grace periods or deferment. Students may opt
to make interest payments during those periods, or they may choose to have
the interest capitalized so that they pay it when the loan is in repayment
status. Maximum aggregate borrowing by a single borrower of unsubsidized and
subsidized Stafford loans is $23,000 for a dependent undergraduate student,
$46,000 for an independent undergraduate student and $138,500 for a graduate
student (including undergraduate borrowings). During the 2001-2002 academic
year, $17.3 billion in unsubsidized Stafford loans were made according to
the College Board’s 2003 report on Trends in Student Aid.
• PLUS Loans, which have terms of up to 10 years and allow parents of
dependent undergraduate students to borrow up to the total cost of
attendance at a low interest rate. Unlike student borrowers, parents must
pass a credit test to borrow under the PLUS program. Borrowers may borrow up
to the cost of attendance per child, minus financial aid from other sources.
During the 2001-2002 academic year, $4.7 billion in PLUS loans were made
according to the College Board’s 2003 report on Trends in Student Aid.
Payment of principal and interest on all FFELP student loans originated
after October 1, 1993 are 98% guaranteed by guaranty agencies against
default by the borrower as to principal and interest. Guaranty agencies are,
in turn, reinsured for up to 95% of their guarantee payments by the federal
government. We are required to pay the DOE a one-time 50 basis point
origination fee on consolidation, Stafford and PLUS loans and an annual 105
basis point rebate fee on all consolidation loans originated and held after
October 1, 1993.
Consolidation Loans
Unlike other FFELP guaranteed loan programs, the Consolidation Loan Program,
(CLP), under the Higher Education Act did not commence until 1986. The CLP
allows college or graduate school students to merge their variable-rate
federal education loans into a single loan, with a fixed rate, to be repaid
over a term of up to 30 years. The consolidation loans are insured and
reinsured on a basis similar to Stafford loans. Federal consolidation loans
may be obtained in an amount sufficient to pay outstanding principal, unpaid
interest and late charges on federally insured or reinsured student loans
incurred under FFELP selected by the borrower, as well as loans made
pursuant to the FDLP, Perkins and Health Professional Student Loan Programs.
Payment of principal and interest on all FFELP consolidation loans
originated after October 1, 1993 are 98% guaranteed by a guaranty agency
against default by the borrower as to principal and interest. Additionally,
the holder receives a direct payment from the government based upon a
Special Allowance Payment (SAP) formula. SAP is generally paid whenever the
average of all of the applicable floating rates (91-day Treasury bill,
commercial paper, 52-week Treasury bill, or the constant maturity Treasury
rate) in a calendar quarter, plus a spread of between 1.70% and 3.50%
(depending on the loan status and origination date), exceeds the rate of
interest which the borrower is obligated to pay. However, the holder is
required to pay an annual fee to the DOE of 105 basis points on
consolidation loans it holds.
Currently, the interest rate paid by a student on a consolidation loan is
fixed at a rate equal to the weighted average of the interest rates on the
loans retired, rounded up one-eighth of one percent, not to exceed 8.25% per
annum. Once a student consolidates his or her loans, the rate determined at
that point is fixed to the student for the life of the loan. The portion, if
any, of a consolidation loan that repaid a loan made under other federal
programs may have a different variable interest rate.
Legislation has been proposed that would permit borrowers holding
consolidation loans made under the Higher Education Act to reconsolidate
their loans. Legislation has also been proposed that would abolish the
so-called “single holder rule,” which restricts the ability of other lenders
to consolidate student loans away from a lender that owns all of a
particular borrower’s loans. Should such legislation be approved with the
reauthorization of the Higher Education Act, we would have the opportunity
to consolidate previously consolidated loans away from other lenders,
potentially increasing our loan portfolio. While we would risk losing a
portion of our loan portfolio as other lenders consolidate loans away from
us, we believe the risk associated with this is minimal as a substantial
portion of our consolidation loan portfolio was originated during a record
low interest rate environment.
Market Participants
Participants in FFELP include:
• Eligible Lenders. Eligible lenders registered with the DOE originate
and/or purchase FFELP loans and receive interest subsidy payments, SAPs and
default reimbursement. Eligible lenders include banks, savings and loan
associations, credit unions, pension funds, insurance companies, student
loan companies, schools and, under certain circumstances, guaranty agencies.
In addition, other entities that do not meet the definition of “eligible
lender” can effectively participate in the market through trust arrangements
with entities that meet the eligible lender definition.
• Servicers. Servicing of student loan assets is critical for FFELP lenders
because the guarantee is conditioned on the loans being administered in
accordance with DOE and guaranty agency requirements. Proper servicing of a
student loan is also required in order to maintain eligibility for SAPs and
interest subsidy payments.
• Guaranty Agencies. Guaranty agencies reimburse lenders for losses on
defaulted student loans. These guaranty agencies are non-profit institutions
or state agencies that have entered into federal reinsurance contracts with
the DOE pursuant to the Higher Education Act. Guaranty agencies reimburse
eligible lenders from reserve accounts established for this purpose. The
guaranty agency, in turn, receives reimbursement of up to 95% of its
payments to lenders from the DOE.
• Department of Education. The DOE’s regulations provide a number of
incentives to student loan market participants. The DOE provides eligible
private lenders with an incentive to lend to students by reinsuring
guarantors for a portion of their default reimbursements to lenders. When
applicable, it also pays SAPs to ensure that the lender earns a competitive
return. The DOE provides eligible borrowers with an incentive to borrow by
providing interest subsidies and capped interest rates.
Regulatory Requirements
The guarantee and the lender’s right to subsidy payments on FFELP loans is
conditioned on compliance with requirements set by the DOE and guaranty
agencies. FFELP loans that are not administered in accordance with DOE
regulations risk loss of their guarantee and subsidies, in full or in part.
The most common reason for loss of guarantee or subsidies on a loan is
violation of federal regulations requiring certain collection steps, such as
collection letters and phone calls for loans that become delinquent.
Regulations also authorize the DOE and guaranty agencies to limit, suspend
or terminate lenders’ participation in FFELP. Additionally, the DOE is
authorized to impose civil penalties, if lenders violate certain program
regulations. We engage independent third parties to conduct compliance
reviews, as required by the DOE, with respect to our student loan portfolio.
In order to maintain eligibility in the FFELP, schools must maintain default
rates below specified levels, which have been established by the DOE.
Reauthorization and Proposed Regulatory Changes
The Higher Education Act, and as a result FFELP, is subject to comprehensive
reauthorization every five years. The Higher Education Act is scheduled to
expire on September 30, 2004, and reauthorization is currently under
consideration by the United States Congress. Changes in the Higher Education
Act made in the two most recent reauthorizations have included reductions in
student loan yields paid to lenders, increased fees paid by lenders and a
decreased level of guarantee.
Additionally, funds for payment of interest subsidies and other payments
under FFELP are subject to annual budgetary appropriation by Congress. In
recent years, federal budget legislation has contained provisions that have
restricted payments made under FFELP to achieve reductions in federal
spending.
Changes made under this program when the reauthorization occurs may
positively or negatively impact our business, depending on the nature of
those changes when implemented.
Federal Direct Loan Program (FDLP)
In 1992, Congress created FDLP. Under FDLP, the DOE makes loans directly to
student borrowers attending schools that choose to participate in the
program. The Direct Lending Consolidation Loan Program (DLCP) following its
enactment, grew rapidly because of the ability to consolidate FFELP loans
into the DLCP, while FFELP lenders could not consolidate FDLP loans into
FFELP loans. With a limited number of lenders focused on originating
consolidation loans and the great appeal of the product to student
borrowers, there was demand for private sector consolidation loans, and
private lenders were given the right to consolidate DLCP loans in 1998.
Alternative Supplemental Loans
Alternative supplemental loans are made to students whose loan eligibility
under the FFELP program does not meet their total borrowing needs. Unlike
FFELP loans, alternative supplemental loans are credit-based. Depending on
the loan program, the credit requirements may be met by a co-borrower.
Interest rates are reset quarterly and may be tied to prime or to commercial
paper (CP) rates. Alternative supplemental loans may be guaranteed by a
third-party guarantor. At December 31, 2003, all our alternative
supplemental loans were 100% guaranteed by third-party guarantors.
While the alternative supplemental student loan market is small in
comparison to the federal student loan market, significant increases over
the past three years reflect a growing reliance on private borrowings as an
alternative to guaranteed student loans. This is partly because Congress has
not raised borrowing limits on guaranteed student loans since 1992. We
believe that the alternative supplemental student loan market will continue
to fill the gap between the cost of education and the amount of funding
available to pay that cost through guaranteed student loans.
Industry Growth
Demand for student loans is highly correlated to growth in the cost of and
demand for college education which is expected to continue to increase over
the next 10 years. Total college enrollment in 2000 reached a new record of
approximately 15.3 million students. Projections from the National Center
for Education Statistics indicate that school enrollment will continue to
reach record levels over the next nine years. From 2002, total college
enrollment is projected to increase by a total of 13% to 17.7 million
students in 2012. Additionally, tuition increases have far outpaced growth
in personal and family income over the past two decades, and the need for
federal and alternative supplemental student aid has increased dramatically.
Average tuition at both public and private institutions more than doubled
from 1981 to 2002, while the median family income has been relatively
stagnant, increasing just 25% during the same period.
In 1992, Congress last raised federal loan limits. In the 1991-1992 school
year, FFELP loans, excluding consolidation loans, were $14.0 billion. Total
FFELP loans, excluding consolidation loans, grew to $30.4 billion in the
2001-2002 school year. In connection with the proposed reauthorization of
the Higher Education Act, Congress is considering raising federal loan
limits again, which, combined with increased college enrollment and tuition
costs, may result in increased demand for federal student loans.
Ticker
EDLG
SIC Code
6141
- Personal Credit Institutions
Student Loan Companies in the Directory
Education Lending Group
Nelnet
SLM Corporation (Sallie Mae)
The Student Loan Corporation
|
|
