New York Higher Education Loan Program for Students - NYHELPS An alternative loan for New York students attending New York colleges

Financing Issues in Higher Education v Families have fewer options this year v Unemployment in New York State has escalated v Nest eggs have dwindled v Home equity has dropped v Demand for “second looks” has increased

SUNY Unmet Need $2835 $6965$12,165$12,680 Total Cost of Attendance SUNY 4-Year First-Time Full-Time Freshman: Unmet Need (New York State Residents Only) Financially Dependent Student Unmet Need After Financial Aid

Limited Private Options v Many lenders have stopped offering products v In the past, a 600 – 620 FICO would generate loan eligibility v Now, most lenders require at least a 700 FICO v Some lenders require in-school interest payment

NYHELPs vs. PLUS Loans v NYHELPs is not designed to compete with PLUS v More parents have adverse credit v Some parents will not become borrowers v Independent students

Alternative Loans vs. NYHELPs v Alternative Loans - variable only, average rates above 10%, high credit requirements; do students really know what they are getting v NYHELPs - fixed and variable options, lower costs, transparency, credit access

Why NYHELPs Is Needed v Bridges the gap v Students in all sectors have unmet need v Not all families can access Parent PLUS v NY is one of the few states without a state loan program v There is a 2 billion dollar demand for alternative loans in New York State v The private loan market is very expensive v Students should understand the obligation before they sign a P- note

Key Features of NYHELPs v Lower interest rates v Fixed and variable rate loans v Required web-based financial literacy educates the borrower v Online loan comparison and selection tool, based on loan terms and rates v Leverages a relatively small state investment

More Key Features v Lower FICO (underwriting will permit a floor of 640) v All NYHELPs are school certified v In-school payment of interest is optional v Students may borrow for a prior term

How NYHELPs Works v Borrower shops on HESC Student Loan Marketplace v Selects loan product v Fixed % +5% fee v Variable LIBOR % + 5% fee v If NYHELPs is selected, borrower completes a financial literacy module v Borrower completes P-note

Cosigner Requirement v In a credit based loan program, a creditworthy cosigner reduces the interest rate v With a cosigner a student is much more likely to be offered a loan

NYHELPs Financial Literacy v Online financial literacy course required v This course will provide: –A robust, web based experience –Learning paths used at the participants own pace –Tracking through HESC

NYHELPs Structure v Uses private capital backed by a default reserve fund v SONYMA issues bonds up to ($350 million /year) v Lender can hold loan or sell (fixed loans) to SONYMA after loan is fully disbursed v One servicer (loan remains with servicer) v Borrower payments repay bondholders

Purpose of Default Reserve Fund v Reassures ratings agencies v Provides assurance to lenders of the guarantee v Reassures bondholders v Lowers interest rates to borrowers

State Support Establishes Default Reserve Fund v The default reserve pays claims to the holder of the loan as a backstop v The funds that make up the default reserve are the appropriations from the State of New York ($50 million initially and $10 million in future years), all borrower fees, 1 percent college fee, and all default collections

SONYMA bond sale; loan cost established Borrower shops for private loan on Student Loan Marketplace Borrower receives offers and selects NYHELPs product Default Reserve Fund Borrower is directed to HESC financial literacy module Borrower completes module Borrower is directed to HESC’s servicer to complete electronic Promissory Note Servicer collects all required documentation from borrower and co-signer HESC bills school for 1 percent loan fee School pays 1 percent loan fee to add to default reserve fund Lender sells loan to secondary market Lender holds loan Loan enters repayment Loan paid in full Loan defaults Loan paid in full Loan defaults HESC collects on defaulted loan State makes contribution to Default Reserve Fund Lender reimbursed SONYMA reimbursed Servicer sends Certification Request (CR) to school through AltLoan Connection School certifies loan online or using FAMS Updated CR returned to servicer by HESC Lender funds disbursement roster through servicer Loan fees sent to Default Reserve Fund Schools receives funds through HESC Escrow EFT NYHELPs Fixed Rate Loan Lender loan total allocations determined

NYHELPs Provides Transparency v NYHELPs will only be offered in the HESC Student Loan Marketplace. v Students can choose NYHELPs or other offered products v Students will comprehend loan terms before they sign P-note v Students will see total cost of borrowing

Your input is requested v HESC is drafting regulations v There will be a public comment period, however you are welcome to send your comments and concerns to the

When v Bond sales will begin in October 09 v Fixed rates will be determined at the time of sale v NYHELPs products should appear in the HESC Student Loan Marketplace in January 2010

Questions?