"How companies are approaching consumer marketing of student loans and how Sallie Mae does it differently 2008 Southern Association of Student Financial Aid Administrators Conference Crystal City"
How companies are approaching consumer marketing of student loans and how Sallie Mae does it differently 2008 Southern Association of Student Financial Aid Administrators Conference Crystal City, Virginia Prepared by Sallie Mae Consumer Marketing Department 1 Topics • Cost of attendance overview • What is direct to consumer marketing? • Trends in direct-to-consumer student loan marketing • Who is mailing what? • What companies are selling mailing lists and how do they acquire them? • Sallie Mae’s approach to direct-to-consumer marketing • How to opt out of DTC marketing • Appendix – Sallie Mae’s bedebtsavvy 2 How much is the cost of attending college rising? 3 2006 Cost of Attendance = $229 billion Parent/Student Federal Contributions Student Loans Down 15% $52 Up 10% $74 Other (Includes scholarships, grants, tax Private relief and other aid from states, $23 $80 Education colleges, employers and other sources) Loans Up 6% Up 21% Source: Based on estimates by Octameron Associates, “Don’t Miss Out”, 29th Edition; College Board, “Trends in Student Aid”; and Sallie Mae. Includes tuition, 4 room, board, transportation and miscellaneous costs for two and four year college degree granting programs. Demand for Private Education Loans Private education loans help bridge the gap between funding available through government financial aid and the rapidly increasing cost of education Source: College Board Cost of college including tuition, fees, room and board, transportation and other expenses for degree granting institutions. 5 2006 Cost of Attendance • In 20 years, average tuition and fees have doubled for private institutions – More than doubled for public institutions • 05/06 to 06/07 increase for private tuition, fees, room, board is almost 6% to $30,367 • For public institutions, increase is just over 6% to $12,796 6 Borrowing for College Today • More than half of all college students borrow • Total federal loan dollars AY 06/07 = $74B – 139% increase in 10 years in number of loans – 20+% increase in two years • Total private loan dollars AY 06/07 = $23B – 1200% increase in 10 years – 64% increase in two years • 74% of students use credit cards for school supplies • 24% report using credit cards to pay some portion of tuition – OF NOTE: Section 529 college savings plan assets = $72 billion in just 10 years 7 What is direct to consumer marketing? • The promotion of services directly to consumers via broadcast and print media such as television, radio, magazines, mailings, phone calls, billboards, and the Internet. 8 What trends are we seeing in the direct-to-consumer student loan marketplace? 9 DTC trends • With the cost of attendance rising, more lenders are using direct mail to market student loans than ever before Consolidation Loans PLUS Loans 50% 11% 458 million pieces of direct mail offering student loans were sent last year (Source: Compremedia Dec 2005-Nov 2006) 39% Private Loans 10 DTC Trends • Private Loan messages are typically targeted to students, not parents • More messages are from lenders; fewer messages are endorsed by or from schools • Consolidation messages often have official/government look and feel • Proliferation of print, television and radio advertising in national publications, airline magazines and networks • More aggressive on-campus marketing campaigns 11 Who is Mailing What? 12 The number of student loan mailings has increased by 50% or more each year over the past 5 years. Student Loan Mailings 447.5 (in millions) 308.5 208.1 87.7 33.7 2002 2003 2004 2005 2006 Source: Compremedia. Includes Federal & Private Student Loan and Consolidation offers 13 Who is sending mailings? • 4.0 Student Loans • Education Finance Partners • National Student Loans • AAA • Education Loan Center • National Student Loans Direct • Academic Financial Services • Navy Federal Credit Union • Academic Lending Center • Education Loan Funding • • Nelnet • Academic Loan Group, Inc. Educational Direct • NextStudent • All Student Loan Corporation • Educational Loan Company • American Education Services • North Texas Higher Education • Fast Payday Loans Authority, Inc. • American Student Assistance • American Student Loan Consolidation • Federal Student Loan Consolidation • NSL Direct Corp. Professionals • PNC Bank • American Student Loan Services • Federal Student Loan Solutions • Sallie Mae • AutoMoney, Inc. • First Convenience Bank • ScholarPoint Financial, Inc. • Bank of America • Student Funding Services • Brazos Higher Education Service • First National Bank • First Ohio Banc & Lending, Inc. • Student Lending Works Corporation, Inc. • Student Loan Consolidation Center • Buffalo Metropolitan Federal Credit Union • GMAC • CFS Affinity Services • Student Loan Xpress, Inc • Goal Financial • Student Trust • CFS-SunTech Servicing, LLC • Charter One Bank • Graduate Consolidation Services • Student Trust, Inc. • Chase • Graduate Loan Associates • SunTrust Bank • Citibank • HSBC • TCF National Bank • Class Advantage, LLC. • Huntington Bank • The Educated Borrower • Class One Associates • The First National Bank of Bryan • CLC/College Loan Corporation • IDAPP • Clout College Loans • JPMorgan Chase & Co. • The Student Loan Processors, Inc. • College Funding Consultants • K2 Financial • TIAA-CREF • CollegeInvest • Top Consolidator • KeyBank • • Collegiate Funding Services U.S. Bank • Commerce Bank • Higher Education Resource Loan To Learn • UFS • Commercial Bank of Texas, N.A. • M&I Bank • University Financial Services • Compass Bank • M&T Bank • Vista Financial, Inc. • Connecticut Student Loan Foundation • Mohela • Wachovia • Direct Loans • • Doral Bank • MyRichUncle Wells Fargo • EdFed • National City • Xanthus Higher Education Loan • EdFinancial Services • National Student Loan Center Program • EdFund • National Student Loan Center Finance Unit • Edloan • Education Direct 14 Source: Compremedia 2006 The number of PLUS Loan mailings has more than doubled each year since 2004. PLUS Loan Mailings (in millions) 48.3 20.6 8.2 9.5 1.8 2002 2003 2004 2005 2006 Source: Compremedia 15 Who is sending PLUS Loan Mailings? • Academic Loan Group, Inc. • Higher Education Resource • All Student Loan Corporation Organization • American Student Loan Services • JPMorgan Chase & Co. • Charter One Bank • MyRichUncle • Citibank • National Student Loan Center • College Loan Corporation • Nelnet. • Collegiate Funding Services • NextStudent • Commercial Bank of Texas, N.A. • Sallie Mae • Connecticut Student Loan • Student Loan Xpress, Inc Foundation • SunTrust Bank • Education Loan Center • The First National Bank of Bryan • Educational Loan Company • Wachovia Education Finance • GMAC Bank • Wells Fargo Bank • Goal Financial, LLC Source: Compremedia 2006 16 The number of Consolidation Loan mailings has increased nearly 30% per year in the past 3 years Consolidation Loan Mailings 218.3 (in millions) 170.1 123.0 57.5 16.2 2002 2003 2004 2005 2006 Source: Compremedia 17 Nearly 40% of annual loan consolidation mailings hit student’s mailboxes in May and June 60.0 Consolidation Loan millions of pieces mailed Mailings 40.0 20.0 0.0 Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- 06 06 06 06 06 06 06 06 06 06 06 07 Source: Compremedia 18 Who is sending Consolidation Loan Mailings? • 4.0 Student Loans • Education Finance Partners • Graduate Loan Associates • Academic Financial Services • Education Loan Funding • National Student Loans • Academic Lending Center • Educational Direct • National Student Loans Direct • Academic Loan Group, Inc. • Federal Student Loan Consolidation • Nelnet • All Student Loan Professionals • NextStudent • All Student Loan Corporation • Federal Student Loan Solutions • North Texas Higher Education • American Education Services • First National Bank Authority, Inc. • American Student Assistance • First Ohio Banc & Lending, Inc. • NSL Direct • American Student Loan Consolidation • Goal Financial • Sallie Mae Corp. • Graduate Consolidation Services • ScholarPoint Financial, Inc. • American Student Loan Services • Higher Education Loan Providers • Student Funding Services • Bank of America • Higher Education Resource • Student Lending Works • Brazos Higher Education Service Organization • Student Loan Consolidation Center Corporation, Inc. • Student Loan Xpress, Inc • CFS Affinity Services • HSBC Bank USA • Student Trust • CFS-SunTech Servicing, LLC • JP Morgan Chase Bank • SunTrust Bank • Citibank • K2 Financial • The Student Loan Processors, Inc. • Class Advantage, LLC. • KeyBank • Top Consolidator • Class One Associates • UFS • CLC/College Loan Corporation • Loan To Learn • University Financial Services • Collegiate Funding Services • Mohela • Vista Financial, Inc. • EdFed • National Student Loan Center • Wachovia Bank • EdFinancial Services • National Student Loan Center Finance • Xanthus Higher Education Loan • Edloan Unit Program • Education Direct Source: Compremedia 2006 19 The growth in private loan mailings seems to have leveled off a bit in the past year Private Loan Mailings (in millions) 191.0 180.2 110.0 72.4 15.3 20.3 2002 2003 2004 2005 2006 2007 Source: Comperemedia. 2007 data is YTD through October. 20 Who is sending Private Loan Mailings? Top Mailers in 2007 • Bank of America • KeyBank • Charter One Bank • Chase • Loan to Learn • Discover • MyRichUncle • Education Finance Partners • National City • GE • PNC Bank • General Motors • Sallie Mae • Goal Financial • U.S. Bank 21 Sample Private Loan Mailing 22 Sample PLUS Loan Mailing 23 Sample Loan Consolidation Mailing 24 What companies are selling mailing lists and how do they acquire them? 25 Who sells lists? Industry lists & Compiled Lists: Credit Bureau Lists: • Equifax • American Student List • Experian • Student Marketing Group (SMG) • TransUnion • FastWeb • Kaplan Test Prep • Princeton Review • Alloy/360 Youth 26 How do companies acquire their mailings lists? Industry lists & Compiled Lists • College-bound Students – Scholarship searches – College prep classes and inquiries – Surveys – Online websites • In-college Students – Compiled University Directories – On-campus Surveys – Online websites • General Compiled Lists – Product Warranty Cards – Public Information sources including: • home ownership records, • drivers licenses in some states, • auto registrations, • even college registrations through the freedom of information act. 27 How do credit bureau lists work? Credit Bureau Lists • Pre-screened Lists – All Federally regulated lending institutions are required to report their consumer lending relationships to at least one credit bureau. – The mailer submits a list request with specific credit criteria such as minimum FICO score, loan balance, deferred or not-deferred payment status, etc. that meet the requirements for the loan being offered. – Mailer must extend a firm offer of credit in their mailing • Invitation to Apply Lists – Demographic data pulled from the credit files, and compiled lists held by the credit bureau. – The mailer submits specific demographic criteria (age, income, age) that they wish to target. – No individual credit information is provided to the mailer – Mailer is an invitation to apply • Firm offers of credit must: – State the amount for which they are pre-qualified – Tell recipient how to opt-out of receiving future pre-screened offers via bureau 28 Sallie Mae’s Direct to Consumer Marketing Approach 29 Five Simple Consumer Marketing Best Practices from Sallie Mae Best practice #1: Sallie Mae's 1-2-3 approach to paying for college.SM 1. Free - Get the free money first 2. Federal - Apply for federal student loans 3. Private - Fill any gap with private loans 30 Sallie Mae Consumer Marketing Best Practices… 2. Encourage students to apply for scholarships and grants first, then federal loans, then private funding. 3. Provide online tools including cost-of-attendance calculators and award letter analyzers to help families determine the cost of attendance at their chosen school and to estimate prospective repayment amounts. 4. Provide online services such as courtesy emails to remind in-school students of FAFSA deadlines, help them borrow responsibly and maintain good credit, and encourage them to graduate. 5. Prevent over-borrowing and provide educational materials and online tools and support on managing finances. 31 What should schools expect from lenders? Require that the lenders you include on your lender lists… • Prevent over borrowing by providing clear roadmaps to help consumers borrow wisely and to clearly understand and navigate their education financing options. • Teach consumers how to establish and maintain good credit through smart decisions and responsible financial habits. • Educate borrowers about their rights and how to opt-out. • Encourage students to consult with their financial aid office at every step of the way. 32 Cost of attendance calculator • Cost of attendance available for all schools –COA information gathered from College Board or school profile –Used as guide for how much an applicant can borrow • Over-borrowing review –Originations system now captures borrowers’ existing SM loans & loan requests adjusted accordingly –Call to borrower if multiple private loans for same academic period in process – borrower given choice • Calculator tool –Helps estimate unmet financial need by calculating in-school expenses and any gaps in financing. 33 Sallie Mae’s 1-2-3 Approach to Paying for College • Guides students to get free money first and provide links; • Positions federal student loans as the first loan alternative; • Then use private loans to fill any gaps. • We also provide helpful resources addressing myths about financial aid 34 Graduate Student Loan Pages Advise Federal Options First • Place Federal Loans first and advise them that these have more favorable terms, • Provide a direct link to a PLUS MPN, • Remind them of the federal loan option once again in the text of the private loans 35 Private Loan offers remind students about federal loan options and reinforce the message of not exceeding the cost of attendance Maximum loan amount and loan availability varies by school. Tuition Answer Loan proceeds are solely to pay for a student’s qualified higher education expenses, as described in Section 221 (d)(2) of the Internal Revenue Code of 1986, 26 U.S.C. Section 221 (d)(2), at an eligible educational institution. The expenses considered “qualified higher education expenses” may vary from school to school and may affect a student’s ability to qualify for a school’s financial aid Students seeking federal program. financial assistance should seek that assistance first, and then use the Tuition Answer Loan, and any other private loan proceeds, for any remaining financial need gap and, if necessary, to finance their expected family contribution (EFC). 36 Does Sallie Mae sell students other products besides student loans when they contact us? • Customer research has shown that our borrowers trust Sallie Mae to refer them to other reputable companies who provide some specific services they need upon graduation. • Our partnership process is highly selective and driven by requests and feedback form our borrowers. • Customer communications are limited to borrowers in- repayment (NOT to in-school borrowers). 37 How can students stop receiving marketing communications? bedebtsavvy Advice for Any Consumer Easy steps to: Opt out of unwanted solicitations • Credit Bureau Opt-out • Telemarketing – DNC Registry Guard against identity theft • How to proceed if a victim Build and protect credit • Understand lending terms • Identify/avoid credit scams 38 Does Sallie Mae offer financial counseling to students and parents? bedebtsavvy 39 Do lenders take responsibility for helping prevent students from over-extending themselves? Sallie Mae does. bedebtsavvy Goals • Centralize and integrate Sallie Mae’s debt management materials to for the benefit of a wide variety of audiences. • Provide a clear roadmap for consumers for borrowing wisely and navigating education financing options. • Teach consumers how to establish and maintain good credit through responsible financial habits. 40 What does bedebtsavvy deliver? The right guidance for borrowers at the right time: 1. Before college (borrowing wisely) 2. In school (budgeting, learning about credit) 3. About to graduate (understanding repayment options) 4. Out of school (how to get and maintain good credit) 41 Available freely at www.salliemae.com/bedebtsavvy 42 Before You Borrow 43 While in School 44 Preparing to Graduate 45 In Repayment 46