Download Topics – Student Loan Market – Financial Risk – Enrollment Risk

Topics
• FOCUS 2011
• JWU Approach to Enterprise Risk Management
– Student Loan Market
– Financial Risk
– Enrollment Risk
FOSTERING STUDENT SUCCESS AT
JOHNSON & WALES UNIVERSITY
• External Conditions
• JWU Assessment and Proposal
Tom Dwyer & Marie Bernardo
December 3, 2008
JWU Strategic Plan
•
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Strengthening Student Potential
FOCUS 2011
Johnson & Wales University will be the destination of choice
for individuals seeking career education who are highly
motivated and demonstrably capable of success in J&W
programs. The university will endeavor to establish
tuition at affordable levels, and offer financial assistance
that support improvement of retention and graduation
rates.
– Strengthening the EXPERIENCE
• Academic and Student Life
– Extensive program assessment
•
Strengthening STUDENT POTENTIAL
– Admissions and Enrollment
•
•
• Selectivity
• Affordability
International Recruitment
Strengthening CAREER OPPORTUNITIES
– Career Development
•
• Career Progression Study
Strengthening the FOUNDATION
– Resource Development
• Organized to achieve objectives
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Concentration of Risk
Reputation
Portfolio Risk
Graduation Rates / Retention
ƒ Academic Rigor
ƒ Pricing / Debt Burden
ƒ Career Progression
ƒ Food Safety
ƒ Succession Planning
ƒ External Validation
ƒ Student Enrollment Team
ƒ Investment Policy
ƒ Market Risk
ƒ Asset Allocation
ƒ External Validation
ƒ
•
Business Continuity
Enterprise
Risk Management
At JWU
Concentration of Risk
ƒ Policies & Procedures
ƒ Financial Controls
ƒ Segregation of Duties
ƒ External Validation
Loan Generated Revenue
– $143,142,152 system wide
Internal Controls
ƒ
•
• Net Billable $267,580,757 system wide
Loan Summary
– Stafford Subsidized and Unsubsidized
ƒ Financial Security
ƒ Data Security
ƒ Network Security
ƒ Business Continuity Plan
ƒ External Validation
• $79,473,828
0708 vs 0809 Changes in Borrowing
– Perkins
Overall
• $11,498,911
Regulatory Concerns
– Federal Plus
Crisis Contingency Plan
ƒ Title IV
ƒ Accreditations
ƒ 501 (c) 3
ƒ State Licensing
ƒ FERPA
ƒ External Validation
ƒ Financial Market Turmoil
ƒ Natural Disasters
ƒ Security Concerns
ƒ Insurance
ƒ Integrated Contingency Plan
ƒ External Validation
75%
70%
65%
Stafford
– Private
Private
-30%
• $26,610,942
5
80%
PLUS
• $25,558,471
-20%
Charlotte
-10%
Denver
0%
10%
North Miami
20%
Providence
30%
40%
University
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Cumulative Change in Inflation Adjusted College Cost of Attendance,
Family Income, and Financial Need
Cumulative Change in Inflation Adjusted Dollars
20.0%
Family Income
COA
Remaining Need
Tuition and Fees
Financial Need
Remaining Need
After Grant, Work,
Achievement Loan
and EFC
Remaining Cost
15.0%
60%
55%
50%
45%
Financial Need
10.0%
40%
Cost of Attendance
35%
30%
5.0%
Tuition and Fees
25%
20%
Family Adjusted
Gross Income
Cost of
Attendance
15%
Financial Need
0.0%
2004
10%
2005
2006
2007
2008*
5%
Family income
0%
-5.0%
-5%
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1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
8
Source: Bureau of Labor Statistics - CPI
2
JWU Average Family Adjusted Gross Income
Band Comparisons to National Average
Financing the GAP
•
40%
35%
30%
25%
20%
15%
10%
5%
0%
Less then
30k
Charlotte
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30,00 59,999k
Denver
60,000 99,999k
North Miami
•
100,000 - Greater
149,999k then 150k
Providence
University
USA
Federal Loans
– Stafford (Subsidized and Unsubsidized)
• No Credit Check
• Based on need amounts range from $3500 - $5500 subsidized
• Interest rate 6% subsidized, 6.8% unsubsidized
• Additional Unsubsidized $2,000
– PLUS LOAN
• Credit qualification loosened until December 2010
• No 180 day delinquency on mortgage or medical bills
• No 90 day delinquency on all other credit worthy accounts
• Interest rate 8.5%
• Deferment options
Private Loans
• 2009-20010 loan access unknown due to liquidity issues
• Expect increase in FICO score minimums in 0910
• Lender specific credit qualifications
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Source: Census.gov - American Community Survey – USA Households 45-64
Distribution of Student Aid
Distribution of Student Aid
0708 Distribution of Undergraduate Aid - JWU
Federal WorkStudy
4%
State Grants
2%
0809 Distribution of Undergraduate Aid - JWU
Outside Grants
1%
Pell
6%
Private Loans
15%
Federal Loans
39%
Federal WorkStudy
4%
Institutional Aid
31%
Private Loans
10%
Federal Grants - other
than Pell
2%
Federal Loans
43%
0708 Distribution of Undergraduate Aid - Nationwide
Pell
12%
Federal WorkStudy
1%
State Grants
7%
Private Loans
14%
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State Grants
2%
Outside Grants
1%
Pell
6%
Institutional Aid
33%
Federal Grants - other
than Pell
1%
Outside Grants
6%
Institutional Aid
20%
Federal Grants - other
than Pell
3%
Federal Loans
37%
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Picture of a Private Loan Borrower at JWU
Retention of a Private/PLUS Loan Borrower
one year retention model – not official calculation
• Undergraduate enrollment 14,372
– Private borrowers account for 15% of our
student population (2107)
– Average annual loan is $12,608
• Median EFC is $10,656 which is $5000 more than the
median EFC at JWU
• Median AGI is $88,543 which is $16,624 more than
the median AGI at JWU
– At risk $17,702,673 in federal aid
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Entering Class
of Sept. ’06
Entering Class
of Sept. ’07
PLUS
Private
69.3%
68.7%
73.1%
74.4%
+3.8%
+5.7%
No PLUS or
Private
63.5%
68.3%
+4.8%
Overall
67.3%
73.1
+5.8%
Difference
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Legislative Impact on Student Loans
Access to Education Legislation
Signed as of 5/7/08 extended through 2009
• College Cost Reduction Act of 07 (HR 2669)
• H.R. 5715 – extended for an additional year
– Increase of Stafford by $2000
– Created a less desirable market for lenders
(increased origination fees, percentage of federal
guarantee reduced; a cut of 20 billion in federal
subsidies)
• Independent students; Plus Denial
• New Amounts will range from
– $5,500 -7,500
– Increase in aggregate loan amount from $23,000 $31,000
– PLUS Qualification adjusted until December 2009
• Volatility in the Student loan market
–
–
–
–
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Liquidity concerns
A smaller marketplace
Borrower benefits limited or non existent
A movement towards direct lending
• No more than 180 days delinquent on a mortgage payment
• No more than 180 days delinquent on a medical bills
• No more than 90 days delinquent on any other debt
– Deferment options
– Impact on Study on College Costs - GAO
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Focus 2011 Awarding Strategies
Institutional Grant Total – University Freshmen
$9,000
$8,067
• Freshman and Sophomore
$8,215
$8,177
– Increase affordability by maintaining 4 year
awards at a consistent level
– Awards are determined based on a family’s need
– Awards include: Academic/Merit, Johnson &
Wales Grant, Pell, SEOG, Stafford Loan and State
grants (each is set to meet a percentage of need)
– Average institutional awards for freshmen $8215
• Junior and senior awards determined based on need,
EFC, and scholarships
• Average discount rate of 30.7% for tuition and fees
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$7,911
$7,877
$8,000
$7,301
$7,557
$7,322
$7,000
$6,133
$6,000
$5,653
$5,359
$5,157
$5,000
2006
2007
2008
$4,000
$3,000
$2,000
$1,000
$0
yr1
yr2
yr3
yr4
On average the freshman class in 0809 received $2856 more in total
Institutional grant aid than in September 2006.
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What we thought was going to happen
Projected Student Debt by Total Enrollment University
$40,000
$35,140
$35,627
$40,000
$35,000
$34,495
$35,000
$35,312
$30,000
$25,955
$25,704
$30,000
$25,000
$24,596
$25,324
$25,000
$17,107
$20,000
$17,107
$18,851
$15,629
$20,000
$8,487
$15,000
$8,487
$12,614
$25,506
$16,638
$15,000
$6,413
$10,000
$6,413
$10,000
$5,000
$7,189
2006
$5,000
2006
2007
$yr1
$-
2007
yr2
yr1
yr3
yr4
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2008
yr2
yr3
2008
2007
yr4
2006
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Solutions to Mitigate Enrollment Risks
Strengthening the EXPERIENCE
• Award Adjustments ($2.4 million)
– Maximize Perkins awards
– Increase awards by $1000 - $4000 for students <75k
previously denied PLUS
•
Financial Planning Grants ($2 million)
– Customized planning grants ranging from $1,000 - $6000
– Increase institutional caps
– Discount for annual payers
• Access to Education Grants ($2 million)
– Reports on loan denials will be run on a daily basis
– Institutional funds will be provided to reduce individual
balances to minimum of $3,000
Entering Class
of Sept. ’06
Entering Class
of Sept. ’07
PVD
NMI
DEN
CLT
68.4%
62.6%
64.2%
69.4%
73.2%
67.8%
74.5%
75.7%
+4.8%
+5.2%
+10.3%
+6.3%
University
67.3%
73.1%
+5.8%
Difference
• These awards will be reviewed for renewability in 2009
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