1. The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator. CFFO MEETING JUNE 11, 12, 2008 Student Loans Where’s the Presented by: Suzanne Traaseth, sue.traaseth@csu.mnscu.edusue.traaseth@csu.mnscu.edu Tel: 651-917-4701

2. Slide 2 Perkins Student Loans Federal Perkins Loan Program, formerly the National Defense Student Loan Program was first authorized in 1958. Why Perkins?  Loan borrowers are predominantly from lower income families/ highest need  Low interest loans 5%  No interest while student in school  9-month grace period before interest and payments begin  Deferments and Cancellations available for teaching, law enforcement, nursing, med tech fields and social services providing care to children at risk.

3. Slide 3 Perkins Student Loans Income Facts about Perkins Loan Recipients from 2005-2006 38% of Families with Dependent Students have incomes below $42,000. 28% of Families with Dependent Students have incomes below $30,000. 6% of Families with Dependent Students have incomes below $12,000. See http://www.ed.gov/finaid/prof/resources/data/databook2007/cb-1b.xlshttp://www.ed.gov/finaid/prof/resources/data/databook2007/cb-1b.xls

4. Slide 4 Perkins Student Loans Why Perkins Collections Increased? Between July 2002 and July 2006 Stafford and PLUS loans dropped to historically low interest levels Perkins loans were included in consolidations Defaulted Borrowers eligible, including loans with judgments “In School” Borrowers were eligible for consolidation Perkins is a revolving fund and schools are expected to use all available funds. If not, expected to return “excess cash”.

5. Slide 5 Perkins Student Loans What Changed? Beginning 7/1/2006 “In School” consolidations were eliminated Judgment loans not eligible Defaulted loans eligible IF satisfactory arrangements made Increase in interest rates for Stafford and PLUS loans Perkins loans not being consolidated

6. Slide 6 Perkins Student Loan CONSEQUENCES: NACUBO/COHEAO Survey 273 schools responded 28 % indicated they expect their institution to have a shortfall in their Perkins fund on 6/30/2008, which will require their school to make a loan to the fund. 80% reported they expect to have, on average, about one third less money for loans than they did two years ago Students receive less support

7. Slide 7 Perkins Student Loans Following Example for MSU, Mankato $Collected$ DisbursedConsolidation $ FY031,563,1881,444,581186,915 (1/03 ON) FY041,367,4711,596,851654,652 FY051,5106241,896,817846,174 FY061,532,8391,434,127893,987 FY07*1,654,5451,427,484319,231 to 10/06 FY08 to 5/30/08 958,8921,412,639Not tracked

8. Slide 8 Loan Counts MSU, Mankato Enrolled & Grace Repayment Total 7/01/021350 19063256 4/30/081573 12832856 Fewer Borrowers Fewer Borrowers in Repayment No Federal Capital Contributions Perkins Student Loans

9. Slide 9 Perkins Student Loans NOW WHAT? Communication between Business Office and Financial Aid Office to avoid over awarding NACUBO and *COHEAO are planning to work with the Department of Education to provide guidance to institutions that are experiencing shortfalls in their Perkins Loan funds. Go to http://www.nacubo.org/x10526.xml to see articlehttp://www.nacubo.org/x10526.xml 05/29/08 Dept of Ed addresses shortage: http://www.ifap.ed.gov/dpcletters/CB0805.html * COHEAO is Coalition of Higher Education Assistance Organizations http://www.coheao.org/ http://www.coheao.org/

10. Slide 10 Benefits of Direct Lending ( Information obtained from NACUBO webcast) Completely integrated –FAFSA is the loan application –Transferable master promissory note Simpler business process for schools –Single point of contact for all borrowers –No guarantee agency or other “third parties

11. Slide 11 Benefits of Direct Lending Simpler for students & families –Easier to understand process –No need to remember lender –No uncertainty about fund availability –No confusing marketing campaigns –No separate loan application

12. Slide 12 Benefits of Direct Lending Better for borrowers –Every student gets “best deal” –Interest capitalized least often –Change payment plans anytime –Loan forgiveness –Loans are never sold

13. Slide 13 Direct Lending Advantages for Schools No conflict of interests –Problems reported by Congress, attorneys general, and media did not occur in Direct Lending Eliminates preferred lender list –No need for a process to narrow lender choice Fewer staff needed to administer program

14. Slide 14 Direct Lending Advantages for Schools Fewer telephone calls –To loan providers to problem solve –From students asking help in selecting lender or locating lender Improved institutional cash flow Same business process as Pell Grant No delays in delivery of funds to students Significantly fewer complaints

15. Slide 15 Direct Lending Can Direct Lending handle increase in volume? Yes Reconciliation –Schools presenting* stated their Financial Aid Office was responsible for reconciliation *Schools presenting: University of Nebraska, Lincoln University of Minnesota, Twin Cities Rutgers, The State University of New Jersey Ramapo College Kirkwood Community College

16. Slide 16 Direct Lending Challenges –Change –Lack of IT Resources To obtain additional information regarding Direct Lending go to: http://www.ed.gov/offices/OSFAP/DirectLoan/profe ssional.html