Contact: Laura Telander Graf Phone: 651-698-4006 e-mail: ltg@mcfarlandcahill.com
NorthStar Returns $13 Million to Student Loan Borrowers in 2007
Marking 10 Years of Saving Students Money, Nonprofit Lender Remains Committed to Its Mission of Helping Students Lower the Cost of Financing a Higher Education ST. PAUL, MINNESOTA (August 30, 2007) – NorthStar Education Finance, Inc., a nonprofit lender based in St. Paul, Minnesota, projects another year of record savings for students and families who have borrowed funds through its innovative Total Higher Education (T.H.E.) loan programs. NorthStar is currently saving borrowers approximately $1.2 million a month with its T.H.E. Bonus, a repayment benefit delivered as an extra payment to the borrower’s account each month. NorthStar’s borrowers will receive nearly $13 million in benefit payments in 2007, bringing the total repayment savings created for students and families in the last 10 years to $39 million. Borrowers using T.H.E. loans also realized an additional $168 million of fee savings, for a total savings of $207 million. By 2034, NorthStar estimates that it will have saved its current borrowers nearly $1.2 billion* over the life of their loans, thanks to generous, simple repayment benefits and the associated savings from avoiding further compounded interest.
* Forecasted savings based on existing $6 billion loan portfolio; does not include future new loans.
“Since our first day in business, we have been committed to helping students and families lower the cost of financing a higher education,” said Taige Thornton, president and CEO of NorthStar. “While scrutiny has been placed on other lenders, we have a unique model and are proud of the results we’ve achieved.” NorthStar continues to set industry standards for borrower benefits with more than 97 percent of its customers receiving their repayment benefit every month. Independent studies and industry experts, such as Mark Kantrowitz of FinAid.org, have shown that less than 10 percent of borrowers earn the repayment incentives offered by most lenders because of stringent requirements for eligibility. NorthStar’s benefits and programs substantially reduce the debt levels of individual borrowers. For example: • Today’s typical medical student currently in repayment with a combination of loan types totaling $150,000 could expect to pay $245,785 by the end of a weighted repayment term of 240 months. That same medical student borrowing through T.H.E. would have the benefit of automatic T.H.E. Bonus payments on his/her account every month, which will save $30,867 — more than 32 percent of interest cost over the life of the loans. • A typical undergraduate student with a loan repayment balance of $20,000 would pay nearly $28,000 in total payments including interest. That same student working with NorthStar would realize more than $1,600 in savings as a result of T.H.E.’s Repayment Bonus. In addition to saving its borrowers more than a billion dollars on the cost of financing an education, NorthStar has been a significant influence on the industry’s willingness to offer savings opportunities for students. NorthStar was one of the first national lenders to: • Offer zero origination fees for FFELP loans, saving students thousands and giving them more money when they needed it most. The industry quickly followed NorthStar’s lead, and zero-fee loans are now common. Publicly announce and offer in-school consolidation, enabling students to lock in rates as low as 2.875% for the life of their loans. Establish a simple but generous repayment benefit for all students with almost no conditions. Design and implement systems and processes in less than five months to offer the relatively new Grad PLUS loan, a money-saving alternative to high-interest private loans. Create an online repayment counseling service that evaluates each individual loan for a student and offers advice on achieving the lowest-cost repayment method.
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Launch a comprehensive — and unbiased — borrower education program that shows students how to borrow wisely and manage credit.
Kennon Rothchild, the chair of NorthStar’s board, said, "The majority of the credit for NorthStar's accomplishments goes to its management and the employees who are highly motivated by their mission and work environment. When starting our nonprofit organization in 1997, the board wanted to maximize the amount of savings that could be extracted for the students from the existing industry business model for students and families. To the board members’ pleasure, the management team and staff executed this plan faultlessly, making NorthStar an unparalleled success in its mission to lower the costs for student borrowing.” More details about NorthStar’s repayment benefits for borrowers can be found by clicking on the Analysis of August press release link at http://www.northstar.org/AboutNorthStar.aspx. About NorthStar The Total Higher Education (T.H.E.) Loan Programs are a product of NorthStar, one of the most respected names in the student loan industry. Based in St. Paul, Minnesota, NorthStar is a nonprofit organization whose mission is to help students lower the cost of financing a higher education. Since its inception in 1997, NorthStar has returned $207 million to borrowers in the form of repayment benefits and zero-fee programs. As the 13th largest FFELP lender in the U.S., NorthStar has originated more than $6 billion in student loans. Visit NorthStar and Total Higher Education online at www.theloanprogram.org. # # #