Download - Presentation to the Montana Board of Regents
Presentation to the Montana Board of Regents
September 2008
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Significant Events for Montana Students in FY 08
Montana AY 08-09 students benefit from increased grant funds and lower interest rates on Stafford student loans
Lower Montana borrower benefits for post-October 1, 2007 loans
Consolidation loans for FFELP borrowers available only through Direct Loan program
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Other Industry-wide Significant Events in FY 08
Lender and guarantor returns lowered for post-October 1, 2007 FFELP loans
Auction bond markets “frozen”
Liquidity crunch impacts student loan providers
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Montana Higher Education Student Assistance Corporation (MHESAC)
FY 08 Results and FY 09 Business Plans
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MHESAC FY 08 FFELP Loan Volume
MHESAC and its Montana lending partners provided more than $211.8 million in capital for Montana FFELP student loans in FY 08
Stafford - $122.8million – 16,711 borrowers PLUS - $14.2 million – 1,955 borrowers
Consolidation – $75.8 million – 2,528 borrowers
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MHESAC Portfolio Growth
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Breakdown of MHESACPortfolio at June 30, 2008
Dollars # of Borrowers
Montana
$994,177,371 33% Stafford
67% Consolidation
92,134
National $485,050,548 95% Consolidation
15,461
Total
$1,479,227,919
107,595
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All of these loans are guaranteed to at least 97% if a student defaults on their payments.
MHESAC FY 08 Borrower Benefits
Dollars
# of Borrowers
Payless $285,410
5,730
Incentives $ 11,345 257 $wiftstart $442,259 1,838 Montana’s Choice $3,289,816 25,561 ACH Interest Rate Reduction $342,557 8,172
Total Delivered $4,371,387
41,558
MHESAC delivered $4,371,387 in borrower benefits to 41,558 Montana borrowers in FY 08.
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MHESAC Current Information
Auction bond market disruption increased MHESAC’s borrowing costs by more than $19.7 million in FY 08
MHESAC’s borrowing costs have improved and financings now have positive cash flow
MHESAC financings have a $30 million reserve fund
MHESAC has more than $250 million available for making or purchasing AY 08-09, AY 09-10 and AY 07-08 Montana loans
FY 08-09 borrower benefits are currently a .25% interest rate reduction for ACH.
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MHESAC Major FY 09 Focuses
1. Provide and acquire AY 08-09 FFELP Stafford, PLUS and PLUS Grad Loans using the 2007 VRDO
2. Acquire remaining AY 07-08 Montana FFELP loans made by Montana lenders
3. Prepare to provide and acquire AY 09-10 Montana FFELP loans
4. Restructure/refinance existing MHESAC auction financings
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MHESAC Major Focuses - FY 09 (cont.)
5. Provide Montana borrower benefits for AY 08-09 loans
6. Provide borrower benefits to existing Montana borrowers
7. Work with officials on MHESAC’s relationship to the state
8. Acquire non-Montana loans currently owned by MSLF if the markets improve
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MHESAC Expected Performance – FY09
Projected AY 08-09 Montana Loans Expected to be Originated by MHESAC and Montana Lending Partners - $80-100 million
Projected Montana Loan Acquisitions in FY 08-09 - $99.7 million
Projected FY 09 Net Cash from Operations - $4,638,422
Projected FY 09 Net Income - $270,657
Projected Montana Borrower Benefits FY 09 – $1.1 million
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FY 08 Results and FY 09 Business Plans
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SAF’s Business
SAF manages > $2.0 billion in assets
SAF services > $3.99 billion in FFELP student loans for more than 40 lenders
MLSF (a limited liability corporation of which SAF is the sole member) currently owns $222 million in non-Montana FFELP loans
Increase in SAF Serviced Portfolio
The following graph shows the increase in serviced portfolio size over the last four fiscal years.
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Breakdown of SAF Serviced Portfolio at June 30, 2008
Dollars # of Borrowers
MHESAC
$1,479,227,919
81,877 Others $2,513,503,795 60,526
Total
$3,992,731,714
142,403
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SAF FY 08 Public Benefits Delivered
ProgramBenefits Provided
Access Grants & Other Grants $1,707,647
Sponsorships $123,411
Outreach $1,508,281
Total Benefits Delivered $3,339,339
SAF Current Information
SAF is analyzing the possibility of servicing loans for lenders using the Secretary of Education Participation Program for AY 08-09 loans
MSLF incurred a major margin call. MSLF line borrowing costs likely to rise significantly. MLSF looking to swap loans for other lenders Montana FFELP loans.
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Expected SAF Performance - FYE 09
Loan serviced portfolio expected to be$3.75 - $4.0 billion
$2.93 million in FY 09 public benefit programs expected to be delivered
- $1.21 million in Access Grants- $474k in other grants- $1.24 million in outreach programs
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SAF Public Benefit Programs - FY 09
Key SAF Business Focus - FYE 09
Provide on-going grant and outreach services to Montanan’s
Manage MHESAC’s day-to-day affairs, financing, loan acquisition and loan origination business
Service MHESAC, Montana lenders and existing national lenders FFELP student loan portfolios
Obtain additional national FFELP servicing clients
Work with Congress on re-defining federal student loans in the future
Explore alternative business lines
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What Does the Future Hold?
MHESAC FFELP Loans AY 09-10
If market returns to normal, MHESAC will consider a financing
MHESAC expects to have between $50-60 million of funds available from its 07 VRDO financing for AY 09-10 loans. Additionally, MHESAC currently has more than $100 million in its recycling accounts that could be available for AY 09-10 loans.
If necessary, MHESAC could consider sale of AY 08-09 loans to the Secretary of Education in order to generate funds for Montana AY 09-10 loans
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What’s Next – MHESAC?
When will liquidity crunch improve to allow financing of Montana FFELP loans?
When will liquidity crunch improve so as to allow restructuring of MHESAC balance sheet?
How will future federal student loan programs be structured?
How will Montana 2009 legislature impact student loans in general and MHESAC specifically?
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What’s Next - SAF?
When will liquidity crunch improve to allow financing of non-Montana loans owned by MSLF? Will MSLF line of credit be foreclosed?
How will future federal student loan programs be structured?
What FFELP loan servicing opportunities exist?
Do alternative student related business activities exist?
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Comments, Suggestions, Discussion and Questions
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