EDUInsight.com


"Covering Innovation and Best Practice in Online Student Communication"

Journal of College Student Retention and Recruiting for both On-Campus and Online Universities



Communicating with students

"Students want to search for schools online, look at school web sites and apply online"

Mark Shay
Chief Academic Liasion
EducationDynamics

Has e-mail peaked?


- The Chronicle of Higher Education asksis email for old people?
- According to a 2005 Pew Internet and American Life study, almost half of Web-using teenagers prefer to chat with friends via instant messaging rather than e-mail.
- Business 2.0 describes a comScore report that statesteen e-mail use was down 8 percent, compared with a 6 percent increase in e-mailing for users of all ages.




Subprime Student Loans
Credit crunch may lead to enrollment drop in the year ahead.

It has been a little over a year since New York Attorney General Andrew Cuomo made a national name for himself through his efforts to stamp out corruption in the student loan industry. His investigation has brought to light certain business practices between schools and lenders that seemed underhanded and did not serve the best interest of the student borrowers. Of the shady practices, a primary concern was the norm of lenders offering gifts and kickbacks to schools in hopes of being placed on "preferred lender" lists. Since the commencement of the investigation, there has been a general movement toward transparency, the development of the "Code of Conduct on Student Lending" and some admittedly embarrassing moments for certain schools and lenders.

Later in the year, as part of the Higher Education Reauthorization Act and perhaps looking to steal the spotlight from AG Cuomo, the Federal government jumped in and tightened some of the slack that existed in the governance of the loan industry. Loan margins were reduced, amnesty programs lifted and fairly quickly, it became unprofitable for a student loan company to be in the student loan business. With the prospects of and increasingly hostile regulatory climate and decreasing margins, a number of companies have left the student loan industry as a result of their inability to operate in the profitable sectors of the market.

...with today's credit crunch, subprime borrowers may be college students, and they may find their once easily-secured borrowing capabilities slipping through their fingertips along with the prospect of attending college.
During this time, the consumer credit market has experienced tremendous pain with the so-called subprime mortgage crisis. For the past five years, mortgage lenders who were eager to profit on the booming housing market lent large sums of money to consumers with questionable ability to sustain the payments. As the economy slowed, these mortgages, often with escalating rates, became an overwhelming burden on the consumer and the number of defaults began to rise. Lenders quickly exited this sector, writing off these now poor-performing portfolios. The once-booming credit markets have now become tremendously bearish.

In a nutshell, it's hard to get credit in America today because there are not nearly as many lenders and not nearly as much available money for borrowing. Lending money to Americans is extremely unpopular in the global financial markets.

For what is believed to be the first time in the history of the federally-guaranteed loan program, recent loan auctions have not sold out. Despite the fact that these loans would be "securitized," or guaranteed, money managers are not putting as much capital into the system. With less money going in, there is fear that there will be less money available for students, especially come back-to-school in August.

Federal loan programs do not cover the full cost of college for most students. The Stafford, Perkins and PLUS loans have a limit that generally falls below the total cost of education, and many families are being forced to borrow from alternative sources. In the industry, this borrowing practiced is referred to as a "private Loan," and they are overseen but not guaranteed by the Federal government. Rates are also not guaranteed, and lenders in a tight market have responded as markets would and are raising their rates. Current private lending rates are ranging from 8-18% and are subject to increasing scrutiny. Low credit scores for the student will also negatively impact their interest rate and approval of loans.

For the upcoming school year, we may be facing a limited amount of federally guaranteed loans. For students in programs who are ineligible for guaranteed loans, the secondary market may not be an option and therefore, school may not be an option either. Most stock analysts who cover the for-profit sector have issued warnings on education company stocks because borrowing for college may be beyond the reach of a number of students, especially those in the lower ranks of the job markets.

Education has always been viewed as counter-cyclical. When the job market is strong, demand for degrees softens and when the job market is weak, demand for degrees strengthens. In past cycles, this demand has resulted in enrollment growth. But with today's credit crunch, subprime borrowers may be college students, and they may find their once easily-secured borrowing capabilities slipping through their fingertips along with the prospect of attending college.

Further reading on the student lending crisis:
http://www.universitybusiness.com/newssummary.aspx?news_date=2008-03-04&news_id=15439#top http://www.universitybusiness.com/newssummary.aspx?news_date=2008-03-03&news_id=15430#top http://www.universitybusiness.com/newssummary.aspx?news_date=2008-03-05&news_id=15450#top

EDUInsight.com is a new online interactive journal that brings academic administrators together to understand and debate the issues of the day, analyze and review the latest trends, exchange ideas, and evolve common sense approaches to student recruiting, retention and online education.




Need translation?, view the eMarketing Glossary, providing a basic overview of online advertising and the buzzwords, acronyms and technical terms.

Additional sections of this journal address student recruiting and student retention. We have also placed all articles with a common theme of online education and distance education programs in a separate portal. New articles will be posted each Monday, please check back by bookmarking this site or placing a link to this Innovative Practices in Communicating with Students portal.

Mark Shay is the founder of EDU - a leading academic advertising provider, - part of Halyard Education Partners, a leader in student lead generation and enrollment management services.