Footing the Tuition Bill: The New Student Loan Sector Book

List of Illustrations

Acknowledgments

Introduction Frederick M. Hess Hess, Frederick M. 1

The Federal Loan Landscape 7

A Quick Guide to Key Actors 9

An Anachronistic System? 12

Overview of the Volume 15

1 Higher Education's Student Financial Aid Enterprise in Historical Perspective John R. Thelin Thelin, John R. 19

Principles and Precedents: The Historic Roots of Financial Aid 20

The Principles and Pilot of the 1944 GI Bill 22

The 1947 Truman Commission Report: Access and Affordability 24

Some Landmark Developments of the Past Half-Century 26

The High Tide of Federal Student Financial Aid Programs: The 1972 Reauthorization of the Higher Education Act 28

Readjustments of Federal Student Aid Programs, 1978-90 34

Closing the "Tuition Gap" in Statewide Higher Education Planning: State Scholarships and Independent Colleges 35

Recent Trends 37

Conclusion: Connecting Past and Present in Policy Analysis 40

2 Opportunity Costs: The Politics of Federal Student Loans Andrew Rudalevige Rudalevige, Andrew 42

Federal Student Loans: Actors, Organizations, and Issues 45

Institutions of Higher Education 46

Students 50

Lenders and Guarantors 52

The Higher Education Act, Forty Years On 59

The Path (Dependence) Ahead 68

Muddling Through 69

Fiscalization and Polarization 70

What's Next? 72

3 Private Lending and Student Borrowing: A Primer Christopher Mazzeo Mazzeo, Christopher 74

Defining Private Loans 76

Profiling the Private Loan Industry 79

Understanding the Growth of Private Loans 83

Loan Limits and Rising Tuition 84

College Choice 86

Who Are Private Borrowers? 89

Recommendations for Federal and StatePolicymakers 91

4 The Demand Side of Student Loans: The Changing Face of Borrowers Bridget Terry Long Long, Bridget Terry Erin K. Riley Riley, Erin K. 99

College Loan Programs: The Supply Side 103

The Evolution of Federal Student Loan Programs 103

Current Federal Student Loan Programs 103

State and Institutional Loan Programs 107

Private Loan Options for Students 107

College Loans for Parents and Other Loan Options 108

The Characteristics of Borrowers 109

Borrowers by Attendance Pattern 110

Loan Demand by Type of institution 114

Borrowers by Income and Dependency 118

Borrowers by Race or Ethnicity 125

Concerns about Student Loans: Too Much or Not Enough Debt? 126

Trends in Cumulative Debt 126

Measuring the Burden of Debt 128

Too Much Debt? Concerns about the Effect of Debt Burden 130

The Loan Limit Debate 132

Not Enough Debt? The (Un)Willingness to Take Out Loans 133

Debt and College Dropouts 133

Conclusions 134

5 The Supply Side of Student Loans: How Global Capital Markets Fuel the Student Loan Industry Joseph Keeney Keeney, Joseph 136

Student Loan Volume and Growth 137

The Student Loan Industry 138

Key Metrics: The Art and Science of Loan Losses 140

Key Metrics: Loan Value 143

Student Loan ABSs: A New and Rapidly Growing Asset Class 145

Student Loan ABS Investors 147

The Nuts and Bolts of Student Loan Securitization 149

Market Risks and Opportunities 150

Disclosure and Compliance 153

International Student Loan Market 154

Summary 156

6 Marketing Opportunity: Challenges and Dilemmas Richard Lee Colvin Colvin, Richard Lee 157

Sallie Mae: "We're Big and We're Competitive" 165

First Marblehead: Behind-the-Scenes Giant 170

Banks and Private Loans 174

Consolidators: A New Kind of Business 175

MyRichUncle 176

Questions Raised 180

7 The End of Autonomy: How the Role of the Financial Aid Office Is Changing Alan Greenblatt Greenblatt, Alan 182

An Accidental Profession 184

An Era of Free Agency 188

Losing Clout 190

Going Private 191

What's Best for Students 194

Interactions with the Loan Industry 196

Access and Influence 200

Conclusion 201

8 Thoughts on the Industry's Past and Present: An Insider's Perspective Richard George George, Richard 203

The Perspective 204

A Brief Outline of Context 205

Concentration 205

Integration 206

Securitization 207

Consolidation 207

Private or Alternative Loans 208

An Alternative Path 211

A Necessary Reform 215

Conclusion 222

9 Projections for the Student Loan Industry William D. Hansen Hansen, William D. 223

Federal Financial Aid Overview: Grants and Loans 223

Alternative Market Mechanisms 226

Impact of the Deficit Reduction Act 230

New Policies and Needed Reform 232

Growth in Alternative Student Loans 237

Considerations for the Future 240

Proposal #1 Repeal Tax Benefits and Increase Support for Pell Grants 241

Proposal #2 Privatize the Perkins Loan Program 243

Proposal #3 Auction the FDLP Portfolio 244

Proposal #4 Private Philanthropy 246

Conclusion 247

Appendix A Key Developments in the Federal Loan Sector 251

Appendix B Commonly Used Abbreviations and Acronyms 257

Notes 261

About the Authors 297

Index 301