People Capital: Weekly Briefing

People Capital Weekly Briefing

July 27, 2009

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

First of all, a few comments about the government plans to overhaul the Federal Loan industry and how it does (or does not) affect People Capital.

While the government initiative is related to "Federal Loans", People Capital provides only "Private Student Loans". While we encourage students to seek Federal Loans, these loans cannot cover the entire cost of higher education. To fund the gap between the cost of education and government funding, students seek other forms of funding - most notably Private Student Loans. We estimate the gap for which students have to find funding each year to be over $113 billion.

The Federal Loan Program has traditionally had "private lenders" (such as Citibank, Chase, Sallie Mae, etc.) making the loans and the government "guaranteeing" them.
This is the process that the government is eliminating. All Federal Loans will now be originated by the Federal Government.

This is not the same as a "Private Student Loan" space - which does not have any government involvement and/or guarantee. The demand for Private Student Loans is still high, and growing.

We'd like to take a moment to thank One Day, One Job for its positive coverage ... It's kind of like Kiva for education, but with a for-profit incentive keeping things efficient ...
When People Capital's idea catches on, it has the potential to completely change the lending industry-not just the student loan industry. ... It's hard to say whether people are ready for this kind of a business model yet, but if they are, People Capital is going to be growing at insane rate pretty soon (if they aren't already). (read the full article)

Finally, we would like to encourage you to Become a Fan of People Capital on Facebook.

Industry News and Trends

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

The continuing argument around standardized tests
California State University campuses are anticipating a $584 million budget reduction
Many students to lose aid in Indiana
Vermont Student Assistance Corp. announced challenges in raising the capital necessary to offer loans

The Other Side of 'Test Optional' (New York Times)
When colleges announce they're making entrance exams optional, they publicly embrace a holistic stance: standardized tests are incomplete scorecards on how a student will fare in college; they favor families who can afford test prep, while minority students tend not to do well, New York Times reports. Cynics cite additional motives ... We don't know how widespread it is, but we suspect a significant number of schools that are test-optional do use test scores for some merit scholarships, says Robert Schaeffer, public education director of FairTest. While quick to plug the benefits of being test-optional, he acknowledges, 'This is a problem that we are gravely concerned about. (Read more)

California: Budget Crisis Threatens To Derail Students' Dreams (Diverse)
San Jose State University senior Daniel Ruelas has been looking for a job since May 2009 without luck. His father is currently receiving unemployment benefits, so Ruelas needs to find a way to make money to pay for college and his living expenses, Diverse reports. Unfortunately for Ruelas, things may become more difficult due to California's budget crisis. California State University campuses, like San Diego State, are anticipating a $584 million budget reduction. In a video message posted on the CSU web site, Chancellor Charles B. Reed revealed his action plans to address the unprecedented cuts to the university. I have never seen a massive reduction come so fast in the 40 years I have been doing this business, Reed said. It's nothing short of a mega meltdown, financially. (Read more)

Indiana: Many College Students to Lose Aid (Wane.com)
In about a month, students will head back to college, but in Indiana, many students may face a financial aid shortfall, Wane.com reports. A 34% increase in state financial aid applications and a 6% increase in state aid funding: this mathematical failure is just the beginning of the problem ... The increase isn't enough to cover the rising number of applicants, and those who do get aid, won't get as much. For example, the maximum academic and need-based aid students will receive for public colleges comes in now at about $4,206. That's down from about $6,096. The cap for private or independent colleges had been nearly $10,992 a year. Now, that'll be more like $7,584. (Read more)

Vermont: VSAC seeks to Weather Credit Crisis, Federal Loan Reform (Burlington Fress Press)
Customary federal and private student loans will be fully available this fall, the Vermont Student Assistance Corp. announced Wednesday, Burlington Fress Press reports. What's not 'business as usual' is VSAC's way of raising the capital necessary to offer those loans, in the short run. Then there's the volatile political climate in Washington that could lead to an overhaul of the student-loan industry and VSAC's role in it, in the long run. (Read more)

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The People Capital Team
Info@people2capital.com