People Capital: Weekly Briefing

People Capital Weekly Briefing

January 25, 2010

News and insight from the world of higher education, student loans and peer-to-peer lending. To learn more about People Capital and how it is revolutionizing education finance please visit us on the web at www.people2capital.com and learn more about how credit risk assessments, based on a student's Human Capital Score™ underpin a cutting-edge peer-to-peer lending platform.

News about People Capital

People Capital was profiled in Student Loan Blog in an article about our Fresh Approach to Academic Funding.

We continue to register student borrowers during our beta period. (If you are looking for a loan for your current educational expenses, and have not done so already, please register now.)

Our Human Capital Score calculator is now being trialled by a number of educational institutions and advisers. If you are a college guidance counselor, college planning advisor or other professional in the educational field and are interested in a free trial of the professional version, please email us at freetrial@people2capital.com.

Industry News and Trends

Listed below is a weekly compilation of Industry updates. The major highlights include:

Financial aid strategies for this economic climate.
Incoming freshmen worry about paying for school.
Demand for student loans continues to rise.
Diminished state funding for higher education.
Can states keep up with Obama's goals for education?

Financial Aid Strategies in Tough Economic Times (University Business)
In a recent Moody's survey, almost 30 percent of private colleges projected declines in net tuition revenues for the current fiscal year. This is likely not because enrollments declined, but because more financial aid was spent in achieving enrollment goals. Officials at institutions whose discount rates increased this fall are wondering if this is the new cost of doing business or whether they spent more than necessary.
The drivers behind increased discount rates are many, including:
· Increases in the percent of students who applied for financial aid
· Increases in average need that exceeded the increase in charges
· Cuts in state support that colleges either deliberately replaced with institutional dollars, or replaced by default through continuing to meet the same percent of need with grants as grant sources shifted
· More generous responses to appeals to ensure enrollment targets were met
So what should officials do to prepare for fall 2010 and beyond? Here are 10 activities that make sense:
1. Identify the key metrics that reveal how you're performing, then track them against the same or a similar period in the prior two years.
Tracking the admission funnel begins with looking at inquiries by source category (e.g., self-initiated, direct mail, etc.) and making comparisons to the same period in the prior year (the last two years would be ideal, as 2009 may either be an outlier or the new base year). This will provide a picture of how the admissions office is progressing toward goals.
(Read More)

Cost of College Is a Big Worry of Freshmen in National Survey
(The Chronicle of Higher Education)
Financial concerns, from paying for college to job prospects, dominated the new-student experience in 2009, according to an annual survey on freshman attitudes.
About two-thirds of freshmen said they were either somewhat or very worried about their ability to finance their college educations. Those citing "some" concerns about money increased about two percentage points, to 55.4 percent, while students citing "major" concerns remained at 11.3 percent, about the same as in 2008.
The survey, The American Freshman: National Norms Fall 2009, is conducted by the Higher Education Research Institute at the University of California at Los Angeles. This was the 44th year of the report, which provides institutions with information about the demographic profile, perceptions, and mind-set of their incoming freshmen classes.
The institute's Cooperative Institutional Research Program, which includes the survey, collected data from about 220,000 first-time, full-time freshmen at 297 four-year colleges and universities. The students were surveyed at the beginning of their first semester, a point that ranged from summer to late September.
John H. Pryor, director of the survey, said the effects of the economic downturn were spread across the college experience, whether the issue was how to pay for college or what majors and eventual careers to pursue.
Some of the students' concerns were driven by family finances. About 78 percent said they planned to pay for their first year of college at least in part from family resources.
(Read More)

Student Loan Demand at Record High (Reuters)
As lenders continue to curtail access to mortgages, credit cards and other types of loans, one area of the credit market is rapidly expanding: student loans.
Unprecedented growth in student loans over the past two years is raising questions about whether a generation will be saddled with debt before it has even entered the workforce, according to data that the Equifax Inc credit bureau provided exclusively to Reuters.
The number of U.S. student loan accounts has risen 29 percent to 69 million over two years, according to Equifax, while balances have jumped by $105 billion to $527 billion.
"We've never seen this high student loan activity," said Dann Adams, president of Equifax's U.S. Information Systems.
The demand for student loans results from college graduates pursuing advanced degrees because of high unemployment. Also, parents' depleted savings mean more college-age children are forced to take on debt.
"You have a whole generation of consumers who have never had this debt load, so they're walking into this tough unemployment situation with higher degrees of debt," Adams said. "Young adults probably face higher taxes ahead, and a national system overloaded with debt."
The growth in student loans comes as other types of credit are drying up. A higher savings rate means less demand for credit, while supply is down as lenders increasingly target only the lowest-risk borrowers with strong credit scores.
(Read More)

I'm Sensing A Trend...States Cutting Higher Ed Funds (Student Lending Analytics)
This rash of stories caught my eye and is a good reminder that it is not only federal budgets that are strained. State budgets often are required to be balanced on an annual basis (what a concept!) which explains why they tend to have make these difficult decisions.

Washington (The Daily Evergreen): "Due to a $6 billion state deficit, Gov. Chris Gregoire is planning to make huge cuts in state funding for higher education. According to her proposed budget, state support for universities will be reduced by $89.5 million, bringing it down to 2006 levels. The federal stimulus plan requires that state funding not fall below this level. ASWSU board members said they fear tuition could rise as much as 40 percent next year, which would raise in-state tuition from this year's rate of $7,600 to about $10,640."
New York (Star Gazette): "The governor recommended reducing state funding for SUNY four-year schools by $148.8 million and slashing the contribution to community colleges by $285 per student -- from $2,545 to $2,260. Beyond that, he wants to cut state Tuition Assistance Program awards by $75 per student, which will affect 375,000 people, and make other reductions totaling $34.8 million."
University of Illinois President describing state budget crisis (Daily Illini): "They too will be focusing on the state budget crisis, receiving a report from Walter Knorr in terms of our cash flow requirements and the delay in the payment of our state appropriation. When I wrote the letter or as of even Dec. 31, we were $436 million in arrears. But that hole grows deeper by about $2 million a day. So I think right now, we may be up to close to $475-480 million. So, he'll be giving them an up to date picture of that. We'll have student fee recommendations to bring to the board for adjustment of room and board fees for next year, student activity fees and so forth."

(Read More)

Obama's Higher Ed Goals At Odds With States' Budget Realities (Diverse)
States' higher education systems must dramatically overhaul themselves if they intend to fulfill President Obama's goal of remaking America home to the highest proportion of college graduates by 2020, experts said during a conference held by the University of Southern California. "We have high performing institutions that collectively are not meeting our public goals," said Jane Wellman, executive director of the Delta Project on Postsecondary Costs, Productivity and Accountability, a research and policy group."The state policy agenda is weaker than what it was 20 years ago," helping prompt a public opinion that universities don't deserve more funding, she said.
"We really need to rethink public policy. Having said that, institutions have got to step up their responsibility in the agenda. In way too many states, the language about institutions' responsibility is somewhere between muted and negative," Wellman said.
Analysts and experts identified challenges and solutions for higher education during a conference entitled "What Matters Now: College Access and Success in the Age of Obama," hosted by the USC Center for Enrollment Research, Policy and Practice and sponsored by the Lumina Foundation and College Board.
Policy makers, nonprofit leaders, and university enrollment officers heard how Obama's multi-billion education initiative promises to make over college systems. "The conference seeks to provide the road map to educational progress and success over the next decade," said Jerome Lucido, executive director of the USC center.
(Read More)

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The People Capital Team
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