1. Montana Guaranteed Student Loan Program An Overview of the M ontana G uaranteed S tudent L oan P rogram (MGSLP) September 25, 2003

2. 2 Who is MGSLP?  MGSLP is part of the Commissioner’s Office. Established in Montana Statute in 1979, the Board of Regents was designated as the entity which guarantees federal student loans.  MGSLP was created to administer the program on behalf of the Board of Regents.

3. 3 How is MGSLP Funded?  MGSLP receives no general fund dollars.  All employees and all related administrative expenses are paid from fees earned through the contractual agreement with the US Department of Education.

4. 4 What is a Guaranteed Student Loan?  A loan made by a participating lender;  A loan made to a student attending an eligible, post- secondary institution at least half-time;  A loan that is guaranteed by an agency or entity approved by the US Department of Education to guarantee student loans;  A loan that is granted at a favorable interest rate and favorable terms.

5. 5 Student Loan Interest Rates 2003-2004  In school, grace or deferment: 2.82%  In Repayment: 3.42%  Parent Loans: 4.22%  Consolidation Loans: vary depending upon the weighted average of the loans being consolidated, but cap is 8.25%

6. 6 Student Loan Limits  Students may borrow more each progressive year in school.  Total limit for a dependent student is $23,000.  Total limit for an independent student is $46,000.  Total limit for a graduate/professional student is $138,500.

7. 7 What Does MGSLP Do?  We guarantee federal education loans.  We work with students, schools, lenders and other partners to guarantee that financial aid is delivered efficiently and effectively.  We provide a wide range of information regarding post- secondary education.  We guarantee there is compliance by the participants of the program.  We administer various scholarship and grant programs.

8. 8 What Doesn’t MGSLP Do?  We don’t provide the actual principal for the student loans. Lenders (like MHESAC) provide the capital.

9. 9 Why is There a Need for Guarantee Agencies?  Guarantors provide oversight of both lenders and schools to guarantee financial integrity for students – as well as for American taxpayers.  A lender would have a conflict of interest if it were to guarantee its own loans.  Lenders would likely not participate without the guarantee (due to the relatively low rate of return on a student loan and the risk associated with that loan).

10. 10 Do Guarantee Agencies and Lenders Duplicate Services?  Sometimes – if it benefits the borrower. Some duplication is required because of regulatory requirements. Both guarantors and lenders must contact delinquent borrowers based upon due diligence requirements established by the US Department of Education. Both lenders and guarantee agencies work hard to prevent default.

11. 11 Do Guarantee Agencies and Lenders Duplicate Services?  Other duplication is unintentional or unavoidable: One school might prefer Exit Counseling from a particular lender, while the next school prefers Exit Counseling from the guarantor. Federal regulations don’t dictate where the counseling comes from, just that it must occur.  MGSLP is presently looking at what services are duplicated and working to eliminate duplication to the extent possible.

12. 12 How Many Students Do We Serve?  In 2002-2003, we helped 28,211 students.  For the 2002-2003 academic year, MGSLP guaranteed 28,187 (new loans) + 10,278 (consolidation loans) 38,465 loans  For a total of $92,590,113 (new loans) + $136,059,266 (consolidation loans) $228,649,379

13. 13 Volume at Schools Gross New Loan Guarantee Volume by Top Ten Schools FY 2003  See Attachment A SCHOOL SUBSIDIZED Stafford Loan UNSUB Stafford Loan PLUS Loan TOTAL % MGSLP Volume The University of Montana – Missoula $20,063,291$14,353,255$4,043,444$38,459,99041.8% Montana State University – Billings $7,304,148$5,119,415$142,805$12,566,36813.7% University of Great Falls $2,627,643$2,670,078$253,392$5,551,1136.0%

14. 14 Our Lending Partners  Student Assistance Foundation (SAF) is our largest lending partner.  During the last state fiscal year, MGSLP guaranteed 82.1% of its new loans for SAF (including SAF serviced lenders) 83.3% of its consolidation loans for SAF (including SAF serviced lenders)  For a total of $76,018,455 (new loans) + $113,393,785 (consolidation loans) $189,412,240 in guarantee business with SAF

15. 15 Median Debt for Graduating Students  Nationally, when a student graduates from a 4- year public school, the median debt is *$15,375.  For Montana, a student who graduated in academic year 2002, from a 4-year public school, the median debt was **$19,035. *Estimates from the 1999-2000 National Postsecondary Student Aid Study. **Source is MUS Data Warehouse and National Student Loan Data Systems.

16. 16 What is Default Prevention?  Any activity that takes place prior to a borrower becoming 270 days delinquent that helps a borrower, or potential borrower, avoid default.

17. 17 Default Prevention  In 1998, the US Department of Education increased the requirements for guarantee agencies, lenders, and other program participants to engage in a wide variety of education to potential and current borrowers. Most entities consider these “Outreach” efforts to be time and money well spent – even if they are somewhat duplicated.  Many schools utilize default prevention assistance from a variety of sources.

18. 18 How Do We Assist Our Schools?  We indirectly underwrite some of the financial aid administrative expenses.  We provide local and on-site help. We deal with unique delivery problems, allowing the financial aid staff to concentrate on helping students.

19. 19 Questions