Navigating a Sea of Change: The Year In Review SUNYFAP Annual Conference Binghamton Regency Hotel...

Navigating a Sea of Change:

The Year In Review SUNYFAP Annual Conference

Binghamton Regency HotelApril 22, 2009

What a Year It Has Been!

In April 2008, SUNYFAP gathered here in Binghamton for our Annual Conference 2008. The student loan world was already in turmoil and things were changing rapidly.

Let’s talk about “the way we were” in 2008…

Navigating a Sea of Change: The Year in Review

Situation Update: Early 2008

CCRA and the “credit crunch” have combined to create a one-two punch” for the student loan industry.

o Many smaller and regional lenders are quitting the FFELP /Alt Loan programs.

o Those that remain are eliminating benefits and raising alternative loan rates/criteria.

o SUNYFAP is worried about conference.



Lenders are dropping out and laying off…o Bank layoffs hitting hundreds of people.o On March 17 M&T and HSBC both announce they

are quitting FFELP. o FFELP schools scrambling to find lenders and

to get students/parents to do new MPN noteso Nobody asking about borrower benefits anymore…



March 10 - The Governor gets busted…o SLATE rules are being proposed and discussed.o Political process has moved on to other things…o … like a new Governor on March 17.o Professional associations (including SUNYFAP)

beginning to worry about their long-term viability without lender monetary support.


Days Before SUNYFAP - April

The student loan industry is in free fall…o Banks are dropping FFELP on a daily basis.o “Strengthening Student Aid for All Act”

proposed by Ted Kennedy in Senate April 3.o TERI files Chapter 11 on April 7o Sallie Mae quits Consolidation loans on April 11

and a tidal wave of lenders follow suit. o Bank of America quits private loans on April 17


SUNYFAP: April 2008SUNYFAP goes ahead with annual conference:

“Starting Over With a Clean Slate”...

o SUNYFAP Conference begins with far fewer lender representatives than in past.

o Mood is upbeat but tentative.o “Spitzer” jokes and comments are still in vogue,

although starting to grow passé…o Big topic is TEACH implementation.o Lender room is small – and few people visit it.


Waning Days of April 2008

HR 5914-The Student Loan Access Act,o Introduced on April 29.o designed to provide capital for student loans o planned to use Federal Financing Bank to lend

money to lenders for student loans.o bill never passed, but some ideas incorporated

into other legislation


School Perspective: May 2008

Lender access becoming a crisis…o Small schools/community colleges having trouble

making up a FFELP lender list w/ 3 banks.o Even schools with access to lenders are growing weary of playing musical MPNs with banks.o Many schools switching to DL in panic. o Many more presidents putting pressure on FA Directors to switch to FDSLP


Congress to the Rescue!

The Ensuring Continued Access toStudent Loans Act of 2008

o Combination of several different billso Signed by President May 7, 2008o $2,000 increase to Unsubsidized Loan limits.o Aggregate limits also changed.o Creates PLUS grace period.o Authorizes DOE to purchase FFELP loans from

lenders/holders.


Situation Update: May 2008

A few noteworthy events…o May 5 First Marblehead lays off 500 employees.o May 7 Pres Bush signs The Ensuring Continued

Access to Student Loans Act of 2008o May 13 SLX lays off 124 and CIT liquidates.o May 21 Citibank dropping “unprofitable” schoolso May 21 THE/NorthStar gets back “in” FFELPo Nelnet announces that it will do FFELP for 08-09.


Political Dealings – June/July

Commencement may be over… but the fun is just beginning…

o Summer terms are starting – participating lenders are in question.

o Reauthorization still working through Congress.o Everyone waiting for rules on DOE purchases of FFELP loans from lenderso July 1 - TEACH Grant and New Sub Stafford

Interest Rates begin.


August 2008

Reauthorization Bill and the Start of Classes…o Higher Education Opportunity Act is passed…o Signed by President Bush August 14, 2008o Fall Semester begins.o Many lenders unable to fund all disbursements immediately, delaying for some students/schools.o Presidents who had been unaware/unconcerned

now have a clue because of cash flow…


HEOA Immediate Changes

Certain provisions effective upon signing:August 14, 2008

Most significantly…o Loan Code of Conduct – Post to Websiteo Preferred Lender Policies/Disclosureso Copyright Infringement Protection Plano Huge List of Disclosure Requirements


September in Washington

The Credit Crisis becomes a big issue – and no one cares about student loans anymore…

o TARP “Bailout” Bill negotiated between Congress, President, and two Presidential Candidates

o Stabilization Act of 2008 signed by President Bush on October 3 2008

o Presidential campaigns are in full swing. o DJIA over 11,000 on 9/26, falls to 8451 on 10/10


September in the FA Office

Loan disbursements continue to lag from some lenders…

o Students and parents are upset…o Student Accounts is upset…o President is upset…o FAOs spend time trying to explain the credit crisis…o Also – schools are struggling get TEACH done.


September at the Lenders

Lack of capital causes more lenders to cut back… o Sept 4 CLC suspends private loanso Sept 5 MRU suspends private loanso Sept 11 Campus Door lays off 142, severely curtails

alternative loanso Sept 16 Key Bank suspends certain alt loan productso Sept 30 Sallie Mae significantly increases FICO scores for alt loan products.


October /November/December

The Economy continues to spiral downward. o “Historic” election results in “change”o President-elect Obama joins with President Bush

to ask Congress for second TARP bailout bill.o Bank failures escalateo Federal Government buys ownership stake in some major banks


October /November/December

The student loan lender crisis continues. o Oct 1 Wachovia suspends private loanso Oct 23 A total of 168 lenders have quit FFELP o Nov 3 Astrive Student Loans (First Marblehead)

shuts downo Nov 13 National Education comes back into FFELPo Dec 18 Education Finance Partners files Chapter 7


Happy New Year!

The Presidential Inauguration is twenty days away, and no one knows what it will bring…

o FAOs wonder what the spring disbursements will bring… will there be more delays?

o MRU kicked off NASDAQ stock exchangeo Feb 2 Citibank: $1B of TARP to go to student loanso Feb 9 My Rich Uncle files Chapter 7. Company reports $11M assets vs. $45.7M in liabilities.


February Blahs

American Recovery and Reinvestment Act… o Commonly referred to as “stimulus bill”o Largest spending increase in history.o Signed by President Obama on February 17o $500 increase in Pell Granto $700 increase in Hope Tax credit /up to 4 yearso $200 million increase in Federal Work Studyo $200 million increase in Americorps


March Madness!

Obama Administrations’ Proposed Budget includes elimination of FFELP by 6/30/2010…

o Almost all remaining FFELP lenders decide NOT to participate in “PLUS auction”

o Mar 3 - Chase announces it will not originate any PLUS for 2009-2010

o New surge of schools switching to DLo Alt loans largely unavailable to students/parents


SUNYFAP 2009 !

Glad you are here! I wish that I could tell you that this year will be less stressful than the last, but…

o The PLUS auction is an epic failure.o The elimination of FFELP may or may not happen,

but if it does, will lenders stay in business for a final year or get out now?

o Will the alternative loan business ever become a viable financing option for most families again?


What We Know For Sure…

Changes in the works for 2009…o Year-round Pell takes effect 7/1/2009o FY2009 is already underway and new CDR calculation is in effect – well, sort of….o Regs will be coming “fast and furious” to implement all the changes from 2008-2009. o HEOA reporting requirements are already in effect,

and most schools still have to implement them.


The Future

Same old issues are still here…o The regulatory complexity continues to

increase. (JOB SECURITY!)o SUNY budget having a “bad year” (SAME AS

EVERY YEAR) o Young people not staying in profession

(JOB OPENINGS!)o Need for training never ends (SUNYFAP!)


Please Get Involved!In times like this we need our professional associations like SUNYFAP more than ever…

o Everyone is pressed for time, more than evero Many hands make light work.o Look for opportunities to get involved, but more

importantly, look for opportunities to encourage the young professionals in your offices to get involved.

o It doesn’t require superhuman effort!


Thanks for Coming!

Enjoy the conference and the camaraderie of your friends – but resolve not to go home without making a new friend or two.

David M. CanaskiPresident - FA Experts

Toll-free 866-767-5692 www.faexperts.com


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Navigating a Sea of Change: The Year In Review SUNYFAP Annual Conference Binghamton Regency Hotel...

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