Callahan - new forum threads

Navy FCU

Fri, 31 Aug 2007 19:53:07 +0000

There are many constraints for students taking out Federal
loans, making our Tuition Options Program (TOP) very
attractive. This private student loan , which is a DTC model,
allows the student along with an eligible cosigner to receive
loan funds for the remaining cost of education that the Federal
loan does not cover. Plus unlike the PLUS loan it can be
deferred until 6 months after the student graduates. The
maximum loan amount for student loans through the Federal
program has not changed since 1998, while tuition cost continue
to rise every year. The TOP loan has been a great success for
students looking for optional financing.

In 2004 we disbursed $17 million through the program, and
increased to $22 million for 2005. This represents 22% of our
education loan business for 2005. When we started offering the
TOP loan in 2003, private loans nationwide were representing
about 6% of lenders education loan volume. With cost of
education continuing to rise and Federal loan amounts remaining
low, it is predicted private loan volume will only continue to
grow. If a member comes to us for a private loan, they will
learn through counseling or NFO, that we also have a Federal
program , presenting us with a cross selling opportunity.

UW Credit Union

Fri, 31 Aug 2007 19:52:12 +0000

a. Background of U of W credit union
i. Field of membership = U of W schools, and one other private school in Wisconsin
b. Student loans are currently 25% of total loan portfolio
c. $125M total student loans
d. Before, only offered federal loans
e. Launched alternative loan program last week
i. Had to look into adding program, because was necessary to be a preferred lender
ii. In the first 4 days, already 28 applications
f. Program details
i. Annual limit -$20,000
ii. Aggregate limit - $100,000
iii. Possibility of limiting private student loans to 5% of total loan portfolio
iv. 12 year repayment
v. 5 years of deferral
vi. No fees
vii. No insurance
viii. Majority of applications are online
ix. Servicing through greatlakes
x. “Look-Back” feature – can include expenses that occurred during the past 6 months
xi. Eligible borrowers are U of W Madison students, or students from the other small private college in their FOM
• If not a US citizens, then a co-signer is required
• U of W Madison has one of the lowest cohort default rates in the country
xii. Credit Criteria
• 620 FICO score, or no credit score at all
• Minimum of $18,000 income or co-signer with equivalent
• 45% debt to asset
a. Majority of loans have co-signer
g. Benefits of Program
i. 25 bps deduction for automatic payment
ii. After 36 months of on-time payments, co-signer is released
h. Distribution is through the school’s financial aid office
i. How did they model their program?
i. Lots of guidance from the U of W financial aid office
j. Why did they decide to do it in-house?
i. Want to build loan portfolio, attractive variable rate product, spread is good
k. Hold federal loans, and plan to hold private loans

Eastman Credit Union

Fri, 31 Aug 2007 19:46:20 +0000

How long have you had your student lending program?
Lisa joined in 1998 and by then it was in place for a while, so Lisa thinks early 1990s.

Why did Eastman start offering private student loans?
The company Eastman serves is know for paying high salaries, as such many of the employees were not able to receive sufficient federal aid to cover all their educational expenses. Eastman saw an opportunity to meet this need and started offering private student loans.

Loan Numbers:

of loans dispersed

2002: 195
2003: 292
2004: 291
2005: 448 (went community Jan 1, 05)

$ Amount of Approved Line of Credit
2004: $5.9 million
2005: $9.8 million

Amount of Total Student Loan Portfolio
2005: $17 million

How does the program work?
• Opened as a line-of-credit based on cost of entire education,
o Tuition, books, living, travel, computers, etc…
• Up to $125,000
• Started just for students entering four year colleges, then opened to two year and recently added trade schools –
o look at accreditation and with trade schools evaluate the program on an individual basis.
• Students apply once (Eastman see’s this as a niche for marketing, since federal loans require annual re-application)
• The total amount total amount for all years is calculated then looked at and dispersed on a semester basis.
• The limited may be higher than the student needs to borrow, but this provides an extra cushion in case
• Students can get request the per semester advance in one to three sums with a minimum amount of $500 (Eastman does this to decrease the needed volume of paperwork and time).

How is the money dispersed?
It can be dispersed by check or direct deposit. Only students with a checking or savings account at Eastman can direct deposit – this gives the credit union an opportunity to cross-sell products and create lasting relationships. It also helps keep the money in house to fund additional loans.

How does the repayment process work?
Students have 2 options:
• Interest only while in school and principal repayment deferred until 6 mths after graduation
• Students may pay principal and interest while in school.
• Once principal payments have begun minimum total payment is $100.
• The maximum repayment period is 15 years.

How does Eastman underwrite its student loans?
In-house, just like all other loan products.

Does Eastman hold or sell its student loans?
Eastman holds all student loans for the life of the loans.

What is Eastman’s student loan portfolio delinquency rate?
Less then ANY OTHER loan product! She didn’t have exact numbers but thought less than 0.1%. This is historically true for the life of the loan.

Co-signer information:
90% of student loans have a parent co-signer. The other remaining 10% are students who already have credit history, need a low line-of-credit, or are working part-time while in school.

What is the yield on these loans?
As of today, 8% - adjustable at prime.

What is required of the borrower?
Students must provide documentation of all expenses at the start – official statement of costs, acceptance letter, proof of income for student and/or parent guarantor, and ID. To get each subsequent advance, the students must provide a copy of his/her grades and maintain a 2.0 GPA.

What is the student loan department like at Eastman?
There was one full time student loan coordinator – mostly responsible to entering data into database (i.e. student grades, advance requests, etc..) But with recent increase changing structure.

Given that the majority of loans are taken in Aug or Sept – next month there will be a training for all branch loan officers so that student loans can be processed at all branch locations, but there will still be a centralized office for advance requests and database work.

What contributes to the success?
There are no application or processing fees, no prepayment penalty, a fast application turnaround and interest is not capitalized during the deferment period.

Eastman has made it a very online user friendly. Students can request advances from their online account – this is the preferred method. They can also receive the advances and make payments electronically which eases the process.