The MeasureOne Private Student Loan Performance Report 2014 Authors: Dan Feshbach Chief Executive Officer Rushali Parikh Managing Director Products and Operations Jeff Weinstein Chief Economist, Managing Director of Research and Development Sanket Dhokte Analyst Nicole Mitchell - Analyst Contact: www.measureone.com
Thank You MeasureOne thanks the six participants for their willingness to participate in this study and their ongoing efforts to increase transparency in the trillion-dollar student loan market. We welcome feedback and encourage others to join the ongoing effort to expand transparency to better enable data-driven decision-making. Dan Feshbach CEO The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne LLC 2
TABLE OFCONTENTS 1. Introduction 2. PerformanceImprovementSincethe2008FinancialCrisis 3. TheStudentLoanMarket:OutstandingBalances 4. DelinquencyTrendsbyQuarter(AsaPercentageofLoansinRepayment) 5. DistributionbyProgram Type(byQuarter) 6. BalancebyProgram Type(byQuarter) 7. DistributionbyLoanStatus(byQuarter) 8. LoanStatusbyQuarter 9. DelinquencybyProgram Type(byQuarter) 10. GrossCharge-ofRatesbyQuarter 11. DelinquencybyAcademicYearofOrigination(byQuartersSinceOrigination) 12. GrossCharge-ofsbyAcademicYearofOrigination 13. RepaymentTrendsbyAcademicYearofOrigination 14. OriginationVolumeandDistributionbyProgram TypebyAcademicYearofOrigination 15. Cosignedvs.Non-CosignedLoanDistributionbyAcademicYearofOrigination 16. SchoolCertificationbyAcademicYearofOrigination 17. GlossaryofTerms 18. MeasureOneMethodologyforDataColectionandValidation
INTRODUCTION Background TheMeasureOnePrivateStudentLoanReportisasemi-annualupdateonthestatusofthePrivateStudentLoanMarket.ThisreportservesasanupdatetotheJuly2014report, andaddsdatafor2014and2014. ThisreportisbasedondatacontributedbythesixlargestmarketparticipantsthatcompriseMeasureOne sdataconsortium.theseparticipantsincludediscoverbank;navient; PNCBank,N.A.;RBSCitizens,N.A.;SalieMae;andWelsFargo,N.A.,andarethesixlargestprivatestudentlendersandholdersinthemarkettoday.Cumulatively,these participantsrepresentthemajorityofoutstandingprivatestudentloans,andanevengreatershareofneworiginations. Together,thesixConsortium participantsprovideacomprehensivepictureoftoday sprivatestudentloanmarket. ExecutiveSummary TheMeasureOnePrivateStudentLoanReport,sinceitsfirstissuanceinDecember2013,hasdemonstratedthatprivatestudentloans,characterizedbycredit-basedunderwriting, adocumentedabilitytorepay,andahighpercentageofcosigners,showstrongperformancetrendsintermsofrepayment,delinquencies,andcharge-ofs.thisinstalmentofthe reportcontinuestohighlightthesepositivetrends. KeyObservations -Year-over-yeardelinquenciescontinuedtoexhibitasignificantdownwardtrend. -Overal,2014delinquencyratesarethelowestsincebeforethe2008economiccrisis.Delinquencieshavedroppedwhilelenderscontinuetouseforbearancejudiciously, withonly2.4% ofloansinforbearanceasof2014.earlyandlatestagedelinquencyratesaveraged3% and2.3%,respectively,fortheyearandbothshowyear-over-year declineofapproximately-2. -Charge-ofratesareattheirlowestlevelsincepre-crisis.At2.4% for2014,theyear-over-yearcharge-ofdeclineis22%. -Loanperformancecontinuestoimprovewitheachsubsequentoriginationvintage.Delinquenciesandcharge-ofshavegeneralydeclinedforeachsuccessivevintageineach quarterafterorigination. -Asof2014,totalbalancesofthesixConsortium Participantsedgedup2.6% year-over-yearto$64.2bilion,reflectingmodestgrowthinoriginationsforundergraduateloans for4-yearprograms. -Thepercentageofloansindiferentrepaymentstatuseshasremainedstablesince2011,withabout75% ofloansinactiverepaymentatanygiventime. SizeofPrivateStudentLoanMarket Theoutstandingbalancefortheentireprivatestudentloanmarketisestimatedtobe$91.8bilion,or7.5% ofthe$1.22trilioninoutstandingbalancesfortheentirestudent loanmarket.thesixparticipantsrepresentapproximately7 oftheentireprivatestudentloanmarket. 1
PERFORMANCE IMPROVEMENT SINCE THE 2008FINANCIALCRISIS LongTerm TrendsRevealSubstantialImprovementinPerformanceOverTime. Togetacompletesenseofthepositiveperformancetrendsintheprivatestudentloanmarket,itisnecessarytoconsidertheentiretimehorizonsincethefinancialcrisis.The cumulativeimpactofincremental,year-over-yearimprovementsisconsiderable. CurentBalance $46.28B Repayment($) $22.46B 30-89(% ofrepay) 4.9 90+(% ofrepay) 3.04% AnnualizedCharge-ofs(% ofrepay) 3.09% Repayment(% oftotal) 48.53% PerformanceOverPast5Years 2008 2009 2010 2011 2012 2013 2014 $50.61B $28.26B 5.49% 5.03% 9.41% 55.83% $56.13B $35.50B 4.83% 4.41% 6.2 63.24% $58.53B $40.41B 4.58% 3.78% 4.62% 69.04% $60.77B $44.14B 4.07% 3.91% 3.84% 72.63% $62.53B $46.21B 3.96% 3.07% 3.11% 73.91% $64.16B $47.65B 3.19% 2.39% 2.42% 74.27% Forbearance(% oftotal) 5.52% 3.57% 2.56% 2.76% 2.1 2.17% 2.41% YearOverYear%Change 2009 2010 2011 2012 2013 2014 9.38% 10.9 4.27% 3.83% 2.89% 2.61% 25.83% 25.63% 13.83% 9.23% 4.71% 3.11% 11.96% -11.98% -5.23% -11.09% -2.79% -19.27% 65.54% -12.32% -14.34% 3.51% -21.38% -22.37% 204.07% -34.09% -25.58% -16.81% -19.06% -22.26% 15.04% 13.28% 9.17% 5.2 1.76% 0.49% -35.35% -28.39% 7.95% -23.86% 2.99% 11.11% ChangeOver5Years 2014 26.77% 68.65% -41.8-52.56% -74.32% 33.04% -32.64% Thebalanceofloansinrepaymentincreased69% since2009,approximately2.5timestheincreaseincurentbalanceof27%.thisindicatesthatwhilethetotalbalanceof loansincreasedatrateof$2bilionperyearonaverage,theshareofthoseloansinrepaymentincreasedmorerapidly. Thoughthehighrateofincreaseforcurentbalanceandrepaymentbalanceimmediatelyfolowingthefinancialcrisisdiminishedovertime,repaymentcontinuestoincreaseata fasterratethancurentbalance. Asof2014,earlystagedelinquencyasapercentofloansinrepaymentisdown42% from 5yearsago,latestagedelinquencyisdown52%.Today,74% ofalloansarein repaymentstatus,comparedto56% 5yearsago,anincreaseof33%.Theincreaseinrepaymentpercentagecanbeatributedtolowerratesofcharge-ofs,forbearance,and deferment. Charge-ofspeaked5yearsagoat9.4%;todaytheyareatalowof2.4% -a74% decreaseover5years.injustthepastyear,delinquencyandcharge-ofsshowedyoyimprovement rangingfrom 19% to22%. Forbearancedroppedsubstantialybetween2008and2012,butroseincrementalyoverthelast2years.Overal,forbearanceis32% lowertodaythan5yearsago. 2
THE STUDENT LOAN MARKET:OUTSTANDING BALANCES Theprivatestudentloanmarketis7.5% ofthe$1.22trilionstudentloanmarket. TotalStudentLoanMarketOutstandingBalance(Bilion$) PrivateStudentLoansOutstandingBalance(Bilion$) 70 $64.2b 7 60 Federal $1,129.8b 92.5% Private $91.8b 7.5% OutstandingBalance($Bilions) 50 40 30 20 10 $17.0b 19% $10.6b 12% 0 SixParticipants OtherSecuritized Private(Publicly Reported) OtherPrivate Lenders Source: FederalLoans:htps:/studentaid.ed.gov/about/data-center/student/portfolio;OutstandingfederalloansasofSeptember2014. SixParticipants:Itincludesthesixparticipatinglenders/holders. OtherSecuritizedPrivateLoans:MeasureOnestandardizedstudentloansecuritiesdatausingpubliclyavailableremitancereports,whichincludesdatafrom AccessGroup,FirstMarblehead,KeyCorp,andothernon-profit issuers.itdoesnotincludedatafrom thesixparticipantsinthereport. OtherPrivateLenders:MeasureOneSurveythatincludesdatafrom banksandcreditunions. Note:Thisreportdoesnotcoverloansmadebyinstitutionsofhighereducation. Theentirestudentloanmarketiscomprisedoftwomajorcomponents:(1)thefederalstudentloanmarket,and(2)theprivatestudentloanmarket. Theoutstandingbalancefortheentireprivatestudentloanmarketisestimatedtobe$91.8bilionor7.5% ofthe$1.22trilioninoutstandingbalancesfortheentirestudentloan market.thesixparticipantsinthisreportrepresentapproximately7 oftheentireprivatestudentloanmarket. 3
DELINQUENCY TRENDS BY QUARTER (AS A PERCENTAGE OFLOANS IN REPAYMENT) Privatestudentloandelinquenciesforthesixparticipants declinedin2014butincreasedin2014duetoseasonalefects. Earlystagedelinquenciesare19% loweryear-over-yearandlatestagedelinquenciesare22% loweryear-over-year. Quarter 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 30-89(% of Repay) 4.9 6.93% 6.69% 4.63% 5.49% 6.84% 5.84% 4.75% 4.83% 6.13% 5.27% 4.18% 4.58% 5.56% 4.63% 4.25% 4.07% 4.76% 3.61% 3.39% 3.96% 3.36% 2.99% 2.88% 90+(% of Repayment(% Repay) oftotal) 3.04% 3.27% 5.12% 5.72% 5.03% 4.89% 5.12% 4.89% 4.41% 4.07% 3.87% 3.71% 3.78% 3.61% 3.51% 3.5 3.91% 3.37% 2.92% 2.64% 3.07% 3.19% 2.55% 2.07% 48.53% 56.48% 55.09% 58.26% 55.83% 61.68% 60.9 64.15% 63.24% 68.59% 67.78% 70.64% 69.04% 73.02% 71.76% 74.27% 72.63% 75.63% 74.09% 75.9 73.91% 75.55% 73.68% 75.63% 2014 3.19% 2.39% 74.27% Delinquencies(% ofrepayment) Repayment(% oftotal) 6% 4% 2% 8 7 6 5 Delinquencies(% ofoutstandingbalanceinrepayment) 30-89(% ofrepay) 90+(% ofrepay) 2009 2010 2011 2012 2013 2014 Repayment(% oftotaloutstandingbalance) 2009 2010 2011 2012 2013 2014 Fordelinquencyratesforloansinrepayment,measuredonayear-over-yearbasis,downwardtrendscontinue: 15% declinein30-89daydelinquencies(asa% ofrepayment)from 3.4% in2013to2.9% in2014 19% declinein30-89daydelinquencies(asa% ofrepayment)from 4. in2013to3.2% in2014 22% declinein90+daydelinquencies(asa% ofrepayment)from 2.6% in2013to2.1% in2014 22% declinein90+daydelinquencies(asa% ofrepayment)from 3.1% in2013to2.4% in2014 Theoveralrepaymentbalanceasapercentageofthetotaloutstandingbalanceremainedstablenear74% forthepasttwoyears.thisimpliesthatrecentdelinquencydeclines reflectchangesinborowerbehaviorratherthanborowercomposition.inaddition,clearandlargeseasonaldiferencesinbothrepaymentand30-89daydelinquencyratessuggest thatyear-over-yearmeasuresarethemoreappropriatemeasureofrecenttrendsthanquarter-over-quartermeasuresbecausethelatermayreflectenrolmentandprogram completionpaternsratherthanlong-term trends. 4
DELINQUENCY BY PROGRAM TYPE (BY QUARTER) PerformanceimprovedforbothundergraduateandgraduateprogramsonaYoYbasis.Bothearlyandlatestagedelinquenciesarecloseto2 lower in2014comparedto2013. 30-89DaysDelinquent(% ofoutstandingbalanceinrepayment) 90+DaysDelinquent(% ofoutstandingbalanceinrepayment) 1 Program Type Undergraduate 1 Program Type Undergraduate 30-89(% ofrepay) 5% Graduate 90+(% ofrepay) 5% Graduate 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 2008 Undergraduate 6.2% 2008 8.7% 2009 8.2% 2009 5.6% 2009 6.5% 2009 8.2% 2010 6.9% 30-89DaysDelinquent(asa% ofbalanceinrepayment) 2010 5.4% 2010 5.5% 2010 7.1% 2011 6.1% 2011 4.7% Graduate 2.2% 3.3% 3.6% 2.5% 3.1% 3.9% 3.7% 3. 3.2% 3.8% 3.4% 2.8% 3.1% 3.4% 3.1% 3. 3. 3.1% 2.5% 2.3% 2.8% 2.3% 2.1% 1.9% 2.2% 2008 Undergraduate 4.1% 2008 4.2% 2009 6.7% 2009 7.3% 2009 6.4% 2009 6. 2010 6.3% 2010 2010 2010 2011 2011 Graduate 0.9% 1.1% 1.9% 2.4% 2.3% 2.5% 2.6% 2.6% 2.5% 2.4% 2.2% 2.1% 2.2% 2.2% 2.1% 2.1% 2.4% 2.1% 1.8% 1.6% 1.9% 2. 1.6% 1.4% 1.5% 2011 5.2% 2011 2011 6.4% 2011 2012 5.3% 90+DaysDelinquent(asa% ofbalanceinrepayment) 6. 5.3% 4.8% 4.6% 4.4% 4.5% 4.2% 2012 4.1% 2012 4.8% 2012 4.1% 2012 4.5% 2012 4.6% 2012 5.4% 2012 3.9% 2013 4.1% 2013 3.4% 2013 3.8% 2013 3.1% 2013 4.4% 2013 3.6% 2013 3.8% 2013 3.7% 2014 3.3% 2014 3. 2014 3.2% 2014 2.4% 2014 3.6% 2014 2.8% 30-89DayDelinquencies Continuingadownwardtrendindelinquencyrates,undergraduateloanearlystagedelinquenciesdecreasedfrom 4.4% in2013to3.6% in2014,ayoychangeof-19%. Graduateloanearlystagedelinquenciesdecreasedfrom 2.8% in2013to2.2% in2014,ayoychangeof-21%.theslightuptickin2014from 2014forbothgraduate andundergraduateloansisduetoseasonalefects. 90+DayDelinquencies Longterm delinquenciesexhibitadownwardtrendparaleltoearlystagedelinquencies.undergraduateloanlonger-term delinquenciesdecreasedfrom 3.6% in2013to2.8% in2014,ayoychangeof23%.graduateloanlonger-term delinquenciesdecreasedfrom 1.9% in2013to1.5% in2014,ayoychangeof21%.theslightuptickin 2014from 2014 forbothgraduateandundergraduateloansisduetoseasonalefects. ByProgram Type Graduateloandelinquencyratesareconsistentlylowerthanundergraduaterates. Thespreadbetweenundergraduateandgraduateloandelinquencyrateshasgradualynarowedsince2008. 5
DISTRIBUTION BY PROGRAM TYPE (BY QUARTER) Totalloanbalancesforthesixparticipantlendersincreasedto$64.2bilionin2014. DistributionbyProgram Type(% oftotaloutstandingbalance) AsofQuarterEnd2014 Undergraduate 84.99% Trend:Increasing 1 Asmalpercentageofotherprivatestudentloansoriginatedbythesixparticipantsinclude consolidationloansandloansthatwerenotcodedbythesixlenders,whichhavenotbeenincludedinthe chartabove. 1 Graduate 15.01% Trend:Decreasing Quarter Undergraduate Graduate OtherProgram Type 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 $33.468B $34.549B $35.881B $36.029B $37.329B $38.124B $39.290B $39.338B $42.124B $42.611B $43.554B $43.331B $44.379B $44.701B $45.708B $45.360B $46.516B $46.478B $47.551B $47.082B $48.243B $48.137B $49.297B $48.781B $49.726B $7.890B $8.011B $8.124B $8.197B $8.319B $8.368B $8.446B $8.468B $8.673B $8.659B $8.686B $8.650B $8.702B $8.669B $8.698B $8.643B $8.733B $8.650B $8.717B $8.653B $8.760B $8.675B $8.771B $8.729B $8.781B $4.918B $4.947B $4.962B $4.905B $4.966B $4.972B $5.048B $4.999B $5.336B $5.348B $5.413B $5.392B $5.448B $5.477B $5.537B $5.503B $5.524B $5.504B $5.531B $5.481B $5.528B $5.532B $5.584B $5.562B $5.655B Total $46.275B $47.507B $48.967B $49.131B $50.615B $51.463B $52.784B $52.806B $56.132B $56.618B $57.653B $57.373B $58.529B $58.848B $59.943B $59.505B $60.773B $60.632B $61.800B $61.216B $62.532B $62.344B $63.653B $63.072B $64.162B Outstandingloanbalancesincreasedslightlyto$64.2bilionin2014,a2.6% increasefrom 2013.Continuingthetrendfrom ourlastreport,growthslowedcontinuously throughoutthereportingperiodbutisstilpositive.previousannualgrowthrateswere10.9% from 2009to2010,4.3% from 2010to2011,3.8% from 2011to 2012,2.9% from 2012to2013and2.6% from 2013to2014. 6
BALANCE BY PROGRAM TYPE (BY QUARTER) Growthinundergraduateloanbalancesaccountformostoftheincreaseintotalbalances($49.7bilion,or77.5% oftheoveraloutstandingbalances asof2014),withgraduateloanbalancesremainingstablenear$8.8bilion. OutstandingBalancebyProgram Type 60B 50B 40B 30B 20B 10B 0B 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 CurentBalance Undergraduate Graduate OtherProgram Type 1 1 Otherprogram typeprivateloansincludeconsolidationloansandloansthatwerenotcodedbythesixparticipants. UndergraduateBalances Loanbalancesheldbyundergraduateborowersincreasedto$49.7bilionin2014,representing85. ofbalancesheldbyeitherundergraduatesorgraduates,or77.5% ofloanbalancesoveral. Thisreflectsanincreaseof$1.5bilion(3.1%)from theprioryear,withthelongerterm trendreflectingslowergrowthinmorerecentyears,consistentwithoveraltrends. GraduateBalances Loanbalancesheldbygraduateborowersremainedat$8.8bilionin2014,averyslightincreasefrom theyearbefore.moregeneraly,graduateloanbalanceshavebeenstablesincethemiddleof 2011.Sinceundergraduatebalancescontinuedtoincrease,graduateloansrepresentasmalershareofthemarketeachyear. OtherBalances Balancesfrom otherloansrepresentedjustover$5.6bilionofthemarketin2014andhavebeenstableataroundthatlevelthroughoutthereportingperiod.consolidationloansareincludedinthis category,butthebreakoutsarenotavailabletofurtherdefinethe OtherProgram Type category. 7
DISTRIBUTION BY LOAN STATUS (BY QUARTER) Asof2014,morethan74% oftheoutstandingprivatestudentloansforthesixparticipatinglendersareinrepaymentstatus. At2.41% ofoveralbalances,forbearanceincreasedslightlyyear-over-year,butremainswelwithinthe2-3% rangeseenoverthepast4years. DistributionbyLoanStatus(% oftotaloutstandingbalance) AsofQuarterEnd2014 74.27% Repayment 4.53% Grace 18.8 Deferment 2.41% Forbearance Quarter Repayment Deferment Grace Forbearance 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 CurentBalance(% oftotaloutstandingbalance) 48.53% 56.48% 55.09% 58.26% 55.83% 61.68% 60.9 64.15% 63.24% 68.59% 67.78% 70.64% 69.04% 73.02% 71.76% 74.27% 72.63% 75.63% 74.09% 75.9 73.91% 75.55% 34.8 33.26% 35.48% 28.89% 30.72% 29.52% 31.1 24.97% 25.69% 24.42% 25.67% 20.3 21.32% 20.73% 22.54% 18.14% 19.82% 19.3 21.26% 17.56% 19.3 20.1 11.15% 6.3 5.43% 8.86% 9.89% 5.12% 4.47% 7.53% 8.51% 4.16% 3.61% 6.11% 6.88% 3.38% 2.85% 4.91% 5.45% 2.6 2.29% 4.21% 4.62% 2.11% 5.52% 3.97% 4.0 4.0 3.57% 3.68% 3.53% 3.34% 2.56% 2.84% 2.94% 2.95% 2.76% 2.87% 2.85% 2.68% 2.1 2.48% 2.36% 2.32% 2.17% 2.23% 73.68% 21.87% 2.03% 2.42% 2014 75.63% 17.87% 4.19% 2.31% 2014 74.27% 18.8 4.53% 2.41% Thebalanceofloans Inrepaymentwas$47.7Bin2014,representing74.3% ofoveralbalances. Indefermentwas$12.1Bin2014,representing18.8% ofoveralbalances. Inforbearancewas$1.5Bin2014,representing2.4% ofoveralbalances. Inagraceperiodwas$2.9Bin2014,representing4.5% ofoveralbalances. YoYchangeinloanstatus- Repaymentincreasedslightly,withYoYchangeof0.5%. Defermentdecreased,withYoYchangeof-2.6%. Forbearanceincreased,withYoYchangeof11.1%. Gracedecreased,withYoYchangeof-2.. 8
LOAN STATUS BY QUARTER Thepercentageofloansindiferentstatuseshasremainedrelativelystablesince2012,withrepaymenthoveringnear75%,defermenthoveringnear2,andgraceand forbearanceeachfluctuatingbutconsistentlyremainingbelow 5%.Thisreflectsanaturalseasoningoftheloans. 10 CurentBalancebyLoanStatus(% oftotaloutstandingbalance) 5 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 Balance(% oftotal) 2014 2014 Repayment Deferment Grace Forbearance LoanStatus Repayment Forbearance Deferment Grace Total 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 $28.3B $31.7B $32.1B $33.9B $35.5B $38.8B $39.1B $40.5B $40.4B $43.0B $43.0B $44.2B $44.1B $45.9B $45.8B $46.5B $46.2B $47.1B $46.9B $47.7B $47.7B $1.8B $1.9B $1.9B $1.8B $1.4B $1.6B $1.7B $1.7B $1.6B $1.7B $1.7B $1.6B $1.3B $1.5B $1.5B $1.4B $1.4B $1.4B $1.5B $1.5B $1.5B $15.5B $15.2B $16.4B $13.2B $14.4B $13.8B $14.8B $11.6B $12.5B $12.2B $13.5B $10.8B $12.0B $11.7B $13.1B $10.8B $12.1B $12.5B $13.9B $11.3B $12.1B $5.0B $2.6B $2.4B $4.0B $4.8B $2.4B $2.1B $3.5B $4.0B $2.0B $1.7B $2.9B $3.3B $1.6B $1.4B $2.6B $2.9B $1.3B $1.3B $2.6B $2.9B $50.6B $51.5B $52.8B $52.8B $56.1B $56.6B $57.7B $57.4B $58.5B $58.8B $59.9B $59.5B $60.8B $60.6B $61.8B $61.2B $62.5B $62.3B $63.7B $63.1B $64.2B Thepercentofloansinrepaymenthasbeenrelativelysteadysince2012,thoughyear-over-yeargrowthinrepaymentbalancestiloutpacesthegrowthrateoftotalbalances.(Seepage5,Performance ImprovementSincetheFinancialCrisis.)Thistranslatesintoamodestannualincreaseinactualloanbalancesinrepayment,withaYoYchangefrom 2013to2014of$1.4bilion(3.1% annual increaseinabsolutevalue). Thepercentofloansindeferment(astatusthattypicalyindicatesaborowerisinschool)continuesapaternthathoveredbetween17% and22% since2011.inthelasttwoquarters,percentages havecomedowntothelowersideofthisrange,representingatransitionoutofschoolandtheincreasedimplementationofimmediaterepayprograms.outstandingbalanceindefermentisalmost unchangedfrom 2013to2014withadecreaseof$10milionYoY. Forbearancebalancesheldsteadynearcurentlevelssince2012.Thepercentofloansinforbearancethuscontinuesapaternwhereforbearancerepresentsbetween2% and3% ofoveralbalances andvariesslightlyaroundthataveragefrom yeartoyear.forexample,theyoychangefrom 2013to2014was$190milion(14% annualincreaseinabsolutevalueandan11.1% increaseasa shareoftotalbalance). Thepercentofbalancesingraceregularlyfluctuatesfrom yeartoyearandquartertoquarter,reflectingenrolmentandprogram completionpaterns,respectively.gracelevelstendtobehighestinthe 3rdquarterandalsohighinthe2nd,andlowerinthe1stand4th,and2014continuesthispatern.However,bothinpercentageandabsolutevalueterms,therehasbeenanoticeabledownward trendofbalancesingracesince2013,with2014beingthelowestvaluefora3rdquarterfortheentirereportingperiod. 9
GROSS CHARGE ŌFFRATES BY QUARTER Grosscharge-ofratesareattheirlowestlevelsincebeforethecreditcrisis.Thecurent2014rateof2.4% isa22% YoYdecline from 2013anda74% declinefrom 2009. Quarter Annualized Charge-ofs (% ofrepay) 2008 3.09% 2008 3.45% 9% 2009 2009 4.37% 7.42% 2009 9.41% AnnualizedCharge-ofs(% ofrepay) 8% 7% 6% 5% 4% 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 6.19% 5.68% 6.23% 6.2 5.61% 4.85% 4.64% 4.62% 4.47% 3.54% 3.73% 3.84% 4.79% 3.5 2013 3.23% 3% 2013 2013 3.11% 3.41% 2014 3.18% 2014 2.56% 2009 2010 2011 2012 2013 2014 2015 2014 2.42% Periodicgrosscharge-ofrates areattheirlowestlevelssincethecreditcrisis. generalydeclinedsincethepeakin2009,withacumulative5yeardecreaseof74%. 2014YoYdeclineis18%;from 3.2% in2013to2.6% in2014. 2014YoYdeclineis22%;from 3.1% in2013to2.4% in2014. Notethatgrosscharge-ofsaredefinedasthetotaldolaramountoftheloanatthetimeofcharge-ofduringthequarterdividedbythequarterendbalanceinrepayment.Toobtain annualizedcharge-ofsasapercentofrepayment,wemultiplythequarterlycharge-ofrateby4. 10
DELINQUENCY BY ACADEMIC YEAR OFORIGINATION (BY QUARTERS SINCE ORIGINATION) Privatestudentloandelinquenciesdecreasedwitheachsuccessiveoriginationcohort.Thisprimarilyreflectstheimprovingunderwritingstandardsbutalso reflectsgeneralimprovementsintheeconomyovertime. 30-89DaysDelinquent(% ofoutstandingbalanceinrepayment) ByQuartersSinceOrigination 90+DaysDelinquent(% ofoutstandingbalanceinrepayment) ByQuartersSinceOrigination 5% 5% 4% 4% 30-89(% ofrepay) 3% 2% 90+(% ofrepay) 3% 2% 1% 1% 1 3 5 7 9 11 13 15 17 19 1 3 5 7 9 11 13 15 17 19 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY OneapproachMeasureOnehastakeninthisreportinmeasuringdelinquenciesistogrouploansbyvintage-loansoriginatedduringthesameacademicyeararegroupedtogether.Performanceofeach vintageisevaluatedrelativetotheperformanceofloansofsimilarageoriginatedduringdiferentacademicyears. Theimprovementbyoriginationvintageisextremelyclear:Early-stagedelinquenciesdecreasedforeverysinglesuccessivecohortsinceorigination.Forexample,early-stagedelinquenciesat4 quartersafteroriginationwentfrom 4.5% to2.3% to1.5% to1.2% to1.1% to0.9% fortheay2008/09throughay2013/14vintages.thisanalysisimpliesthatthedecliningtrendsofdelinquenciesare likelytoacceleratebecauseloansoriginatedinmorerecentacademicyearsshowlowerdelinquencyratesthanthosefrom previouscohortsatthesamestageofrepayment,andthosecohortswilbe alargerproportionoftheoveralmarketinrepaymentaswemoveforwardintime.late-stagedelinquenciesshowalmostthesameexactpatern,demonstratingthatitisnotashort-term phenomenon, butratherarobustone. In2014,early-stagedelinquenciesforAY2012/13aremarginalyhigherthanAY2011/12.Wewilmonitorthiscohortinsubsequentreportstodetermineifthisisaoneofsituationorifitisthe borowercompositionthatisdrivingperformance. 11
GROSS CHARGE ŌFFS BY ACADEMIC YEAR OFORIGINATION Aswithdelinquencies,charge-ofsstronglydecreasedwitheachsuccessiveoriginationcohort,improvingtobelow pre-economic-crisislevelssincethe AY2009/10originationvintage.Again,thisprimarilyreflectstheimprovingunderwritingstandardsbutalsoreflectsgeneralimprovementsintheeconomyovertime. AnnualizedCharge-ofs(% ofoutstandingbalanceinrepayment) ByQuarterSinceOrigination 5% AnnualizedCharge-ofs(% ofrepay) 4% 3% 2% 1% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY Generaly,charge-ofspeakaround4yearsafterorigination,andthisremainedthecaseacrossoriginationvintages.However,charge-ofsbyquartersinceoriginationconsistently decreasedforeachsuccessiveoriginationvintageacrossalquartersafterorigination,averystrikingpatern.forexample,charge-ofs7quartersafteroriginationwentfrom 4. to2. to1.4% to1.2% to1.1% from theay2008/09throughay2012/13vintages. Alsoofnoteisthatcharge-ofsreachedpre-AY2008/09levelsoneyearafterorigination,implyingarobusttrend. 12
REPAYMENT TRENDS BY ACADEMIC YEAR OFORIGINATION Theentryofprivatestudentloansintorepaymentstatus,bothwhileinschoolandafterprogram completion,hasremainedsteadyforthepast3originationvintages, afterreachingpeaklevelswiththeay2010/11originationvintage. Repayment(% oftotaloutstandingbalance) ByQuartersSinceOrigination 8 7 Repayment(% oftotal) 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY UpthroughtheAY2010/11originationvintages,thebalanceofloansinrepaymentrelativetotheoveralcurentbalanceincreasedsteadilyineachquarterafterorigination.This reflectedabehavioraltrendinwhichagrowingpercentageofborowerschosetomakeregularlyscheduledpaymentswhileinschool,andatthesametimetheprivateloanmarket startedtoprovideborowerswithfinancialincentivestomakesuchpaymentswhilein-school. However,repaymentpaternsstabilizedsinceAY2010/2011.Forexample,repaymentratesfortheAY2011/12,AY2012/13,andAY2013/14vintages4quartersafterorigination were44%,42%,and35% forthesethreevintages,respectively,showingnoevidencethatrepaymentrateincreaseswilcontinue.infact,repaymentratesfurtherafterorigination generalydecreasedsincetheay2010/11vintage,sotheremaybeareversiontopreviouslevelsaswemoveforward.furtherobservationofrecentvintagesisnecessary todetermineifthisisthecase. 13
ORIGINATION VOLUME AND DISTRIBUTION BY PROGRAM TYPE BY ACADEMIC YEAR OFORIGINATION Thevolumeofnewlyoriginatedprivatestudentloansstarklydeclinedfrom theay2008/09originationvintagetotheay2010/11vintage,buthasgeneralygrownsince then. OriginationVolumebyAcademicYear OriginalBalance($Bilions) 6.99 5.76 5.64 6.03 6.63 7.04 4.32 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY 2014/2015AY 2 10 OriginationVolumebyProgram Type (%oftotaloriginations) 1 OriginationVolumebyProgram Type (%oftotaloriginations) AcademicYear Undergraduate Graduate % oftotaloriginations 5 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 88.8 87.0 87.52% 87.0 86.05% 11.2 13.0 12.48% 13.0 13.95% 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY 2014/2015AY 2 2013/2014AY 85.55% 14.45% 2 2014/2015AY 89.07% 10.93% Undergraduate Graduate 1 Otherprivatestudentloansoriginatedbythesixparticipantsincludeconsolidationloansandloansthatwerenotcodedbythesixlenders,whichhavenotbeenincludedinthetableandchartbyProgram Typeabove. 2 Theoriginationvolumeforthe2014/2015AYisonlythrough2014,whichisonlyonequarterandnotafulacademicyear. Forthefirsttimesincetheeconomicdownturn,originationsexceededAY2008/09.At$7.04bilion,originationsgrew6.2% from AY2012/13toAY2013/14and25% from theirlowest point inay2010/11. 14
COSIGNED VS.NON-COSIGNED LOAN DISTRIBUTION BY ACADEMIC YEAR OFORIGINATION Cosignerratesconsistentlyremainedhighacrossalvintages,withratesrisingfrom 75% fortheay2008/09vintage,andthenremainingbetween85% and9 from thatpointonward. Undergraduate Graduate % oftotaloriginations % oftotaloriginations 10 5 10 5 OriginationVolumebyCosignedvs.Non-Cosigned(%ofTotalOriginations) 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY 2014/2015AY 1 Cosigned Non-Cosigned AcademicYear Cosigned Undergraduate Non-Cosigned 2008/2009AY 76.73% 23.27% 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY 2014/2015AY 90.69% 90.79% 92.02% 91.04% 91.2 94.28% 9.31% 9.21% 7.98% 8.96% 8.8 5.72% OriginationVolumebyCosignedvs.Non-Cosigned(%ofTotalOriginations) Cosigned 57.19% 60.35% 60.93% 65.67% 61.51% 56.83% 53.87% Graduate Non-Cosigned 42.81% 39.65% 39.07% 34.33% 38.49% 43.17% 46.13% OtherProgram Type Cosigned 74.66% 82.58% 74.67% 71.42% 81.39% 78.15% 78.43% Non-Cosigned 25.34% 17.42% 25.33% 28.58% 18.61% 21.85% 21.57% 1Theoriginationvolumeforthe2014/2015AYisonlythrough2014,whichisonlyonemonthandnotafulacademicyear. Cosigned 74.55% 86.42% 85.95% 87.07% 86.54% 85.6 89.36% Total Non-Cosigned 25.45% 13.58% 14.05% 12.93% 13.46% 14.4 10.64% Theprimarydriverofthegrowingtrendincosignerratesisthestrongincreaseinthepercentageofcosignedloansforundergraduateprograms,whichremainedabove85% since AY2009/10.Conversely,theproportionofcosignedGraduateloansdecreasedforthemostrecentcohort(AY2014/15).AsGraduateLoansmakeupasmalshareofthemarket comparedtoundergraduateloans,thisdecreaseingraduatecosignerrateshasminimalimpactonthetrendoveral. Sincepayingforcolegeismostoftenafamilyresponsibility,cosignersplayavitalroleinensuringstudentshaveaccesstofinancingandtypicalyhelpobtainlowerinterestrates. Cosignersenablelenderstoextendcredittheyotherwisewouldnotextend,basedonadocumentedabilitytorepay,andsupportrepaymentoftheloanobligation.Cosignerrates, then,areassociatedwithhigherloanperformanceoutcomes. 15
SCHOOLCERTIFICATION BY ACADEMIC YEAR OFORIGINATION Therehasbeenvirtualyuniversaladoptionofschoolcertificationforprivatestudentloans. % oftotaloriginations 10 8 6 4 SchoolCertified NotSchoolCertified Other 2 2008/2009 AY 2009/2010 AY 2010/2011 AY 2011/2012 AY 2012/2013 AY 2013/2014 AY 2014/2015 AY 2 AcademicYear SchoolCertified NotSchoolCertified Other 2008/2009AY 2009/2010AY 2010/2011AY 2011/2012AY 2012/2013AY 2013/2014AY 90.05% 91.76% 91.26% 92.22% 95.81% 94.42% 2014/2015AY 97.32% 0.83% 1.85% 1 Otherprivateloansincludeconsolidationloansandloansthatwerenotcodedbythesixparticipatinglenders. 2 Theoriginationvolumeforthe2014/2015AYisonlythrough2014,whichisonlyonemonthandnotafulacademicyear. Withschoolcertification,theschoolcertifiestheamountofastudent sneedandreceivesloanproceedsdirectlyfrom thelender.thus,certificationactsasanimportantprotection againstoverborowingbymatchingcoststofunding.theactiveoriginatinglendersintheconsortium universalyrequireschoolcertificationasacorepartoftheirprivateloan programsforbothundergraduateandgraduatestudents,whichcomprisethevastmajorityofthemarket.asaresult,schoolcertificationrateshaveconsistentlybeenabove9 for theentirereportingperiod.inthemostrecentacademicyear(ay2014/15),schoolcertificationrateincreasedtoabove97%. Consolidationloans,refinancingloans,barexam loans,andresidencyloansareexamplesofloanswhereschoolcertificationisnotapplicable,andthisexplainstheremaining 2-6% ofloansthatarenotschoolcertified. 7.81% 4.9 3.2 2.24% 0.78% 1.04% 2.14% 3.34% 5.53% 5.55% 3.41% 4.54% 1 16
GLOSSARY OFTERMS 30-89(% ofrepay):balanceofloansthatare30to89dayspastdueonpaymentsasofquarterend,dividedbybalanceofloansinrepayment(loanstatus)asofquarterend. 90+(% ofrepay):balanceofloansthatare90ormoredayspastdueonpaymentsasofquarterend,dividedbybalanceofloansinrepayment(loanstatus)asofquarterend. 90+DaysDelinquent:Aloanthatis90ormoredayspastdueonpaymentsandbeforeitisreportedascharged-oftocreditreportingagencies.Alsoreferedtoasa seriously delinquentloan. AcademicYear:AloanisdefinedtobeoriginatedinanAcademicYear,ifitsfirstdisbursementisbetweenJuly1ofayearthroughJune30ofthefolowingcalendaryear. AnnualizedCharge-ofs(% ofrepay):grosscharge-ofsforaquarterdividedbythequarterendbalanceinrepayment(loanstatus),multipliedby4(orannualized). CosignedLoan:ALoanwithacosigner. DelinquentLoan:Aloanthatisinacashflowingstatus,paymentsarerequiredtobemade,andtheborowerislateinmakingthosepayments. DirectLoans:EducationalloansprovidedbytheWiliam D.FordFederalDirectLoanProgram,tostudentsandparentborowersdirectlythroughtheU.S.DepartmentofEducation, ratherthanthroughabankorotherlender. FederalLoans:FFELP,DirectandPerkinsloans. FFELP:TheFederalFamilyEducationLoanProgram,aprogram thatwasdiscontinuedinjuly2010. GraduateLoans:LoansmadetoborowersenroledatleasthalftimeinGraduateprograms. GrossCharge-ofs:Thetotaldolaramountoftheloanatthetimeofcharge-ofduringtheQuarter. LoanStatus:Atypicalprivatestudentloanlifecycleconsistsofnumerouscashflowingandnon-cashflowingstatuses: 1. Repayment:forpurposesofthisReport,repaymentincludesborowersinschoolwitharepaymentobligation(i.e.,interestonlypayments); 2. Deferment:paymentsarenotrequiredduringtheinitialin-schoolperiod,andduringsubsequentperiodswhenaborowerreturnstoschool; 3. Grace:paymentsarenotrequiredduringashortperiodoftimefolowingwithdrawal/graduationfrom school(typicalyatleast6months);and 4. Forbearance:paymentsaretemporarilynotrequiredforborowersfacingfinancialhardship. OriginalBalance:Totalamountdisbursedontheloan. OtherProgram Type:Consolidationloansorloanswithanuncodedprogram type. Program Type:Program ofstudyforwhichtheloanwasobtained. Quarter:ReportingQuarter.BalancesaredefinedasofQuarterendwhilecharge-ofsarethosethatoccuredduringtheentireQuarter.ThisreportcoversReportingQuarters startingfrom 2008to2014. Repayment(% oftotal):balanceofloansinrepayment(loanstatus)asofquarterend,dividedbytotaloutstandingbalanceofalloansasofquarterend. SchoolCertifiedLoan:Aloanforwhichtheschoolatendedbythestudentcertifiestheamountofthestudent sneedandreceivesloanproceedsdirectlyfrom thelender. UndergraduateLoans:LoansmadetoborowersenroledatleasthalftimeinUndergraduateprograms.Thesecouldbe>2yearor<=2yearUndergraduateprograms. 17
MEASUREONE METHODOLOGY FOR DATA COLLECTION AND VALIDATION 1) MeasureOneemployedarigorousdatadefinition,colectionandvalidationprocesstoensurethatthedataandrelatedmetricsprovidedinthePrivateStudentLoanPerformance Reportareaccurateandconsistentacrossparticipatinglenders. 2) Uponinitiationoftheproject,MeasureOneandthesixparticipantsformedadatacommiteecomposedofbothdataexpertsandbusinessleadersfrom theparticipants.this commiteebothensuredtechnicalaccuracyofthedataandprovidedkeydecisionmakersanopportunitytovalidatetheresultsforreasonableness. 3) MeasureOnewentthoughadetailed,multi-stepdatacolectionprocess: a. MeasureOneandparticipantsdiscussedandagreedondatafieldstobeprovided,includingagreementonappropriatedefinitions b. MeasureOneprovidedamockdatafilelayouttoparticipants c. Participantsagreedtheformulastobeusedtocalculateeachfieldandmetric d. ParticipantssuppliedthebaseinputnumbersthatMeasureOnerequiredinordertocalculateeachmetric. 4) EachparticipantvalidatedMeasureOne scalculationsofeachmetric,includingtheinputsintoeachcalculation. 5) Oncethedataexpertsfrom eachparticipantvalidatedtheirdataset,measureonesenttheinformationtoparticipant sbusinessleaders,whoreviewedthenumbersforrelativeto otherinternaldatasources. 6) Aftereachparticipant sdatasetwasvalidated,measureoneaggregatedtheparticipant sdataintoacombineddataset,andthedataexpertsandbusinessleadersfrom the participantsreviewedthecombineddataset. 7) WhentheparticipantscompletedtheirreviewoftheCombinedDataSet,MeasureOnerequiredeachparticipanttosignandcertifytheaccuracyofthedataviaadocumentcaled themeasureonedatavalidationandcertification.participantsrepresentedinwritingthat: a. TheparticipantcarefulyreviewedtheirspecificDataSetandtheCombinedDataSet,andexplicitlyconfirmedthateachdatasetwasmaterialyaccurate b. TheparticipantexplicitlyapprovedincorporationoftheirdatasetintotheMeasureOneCombinedDataSetforfinalinclusionintheReportandReport sdatasupplement. 8) OtherSecuritizedPrivateLoans:MeasureOnestandardizedstudentloansecuritiesdatabuiltusingpubliclyavailableremitancereports,whichincludesdatafrom AccessGroup, FirstMarblehead(thenon144AsecuritizedportfoliosthatFirstMarbleheadnolongerhaslegalcontroloftherelatedtrusts),KeyCorpandothernon-profitissuers.Itdoesnot includedatafrom thesixparticipantsinthereportandotherbankprivatestudentloanholdersthatdidnotparticipateinthisreport,suchasjpmorganchasebank,n.a.andus Bancorp. 9) Inordertoreportthemostup-to-datefiguresineachPrivateStudentLoanReport,MeasureOnechecksthehistoricaltimeseriesdataforeachreleaseofthereportandthemost up-to-datefiguresarereported.asaresult,historicalfiguresinthisreportmayshowslight,nonmaterialdiferencesfrom previousreports. 18