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Student Loans

Delivered May 18th, 2019. Contributors: Emmanuel A., Erika O., Shannon L., Benjamin H., Olatunji O. and

Part
01
of seven
Part
01

Student Loan Customer Journey: Federal Loans

While there is limited information on the decision-making process for students looking to take out federal student loans, a survey report published by NERA Economic Consulting in 2012 suggests that students in the United States consider the college counselor and the college website their top sources of information for federal student loans. It also suggests students take out federal student loans because of the more favorable features of the interest rates of federal loans. Students who are choosing a loan program from a range of federal student loan options are expected to take into account the fees, the interest rates, the repayment terms, and the options for pausing payments in case of financial difficulties, but the NERA survey suggests that many students do not have a proper understanding of these loan parameters and that their decisions were not as informed as they should be.

METHODOLOGY

We commenced our search regarding the decision-making process for students looking to take out federal student loans that are serviced by lenders by looking for surveys of federal student loan borrowers, interviews of federal student loan borrowers, and students' accounts and reviews of their federal student loan experience. We scoured databases of scholarly literature as well as websites of concerned organizations such as the National Association of Student Financial Aid Administrators (NASFAA). This did not yield any useful result as we only found students' reviews of their federal student loan experience on Better Business Bureau and Best Company which did not include information on their decision-making process in the course of choosing the loans.

We also came across different articles about federal student loans, but none of them included information on the decision-making process or customer journey of students planning to get federal student loans. They only provide options, advice, or instructions. For example, personal finance company, NerdWallet offered advice and instructions on obtaining a federal student loan. The information obviously did not cover the actual decision-making process of students.

We expanded our search to include student loans in general. We hoped to find sources which discussed federal student loans in the course of providing information about student loans in general. We found a recent survey of American student loan borrowers, but the survey provided very little information with respect to the decision-making process for federal student loans.

We then decided to consider older sources. We typically use sources published within the last 24 months, but the lack of relevant information made it necessary for us to search beyond recently published sources. This strategy led us to NERA Economic Consulting's survey of student loan borrowers, which was the most relevant source we found in answering this request. Although the report was published in 2012, it is from a credible source and it contains relevant details about the decision-making process of federal student loan borrowers. We also found a 2016 survey on student loans but it only provided us with information on how information on student loans is obtained.

We determined that the loan servicers or lenders of federal loans are not chosen by the students but are assigned to them by the U.S. Department of Education. Hence, the selection of loan servicers or lenders is not part of the decision-making process of federal student loan borrowers.

SOURCES OF INFORMATION

In 2012, the sources of information of students looking to take out federal student loans only were the college counselor (58.9%), the college website (37.1%), either or both the college counselor and the college website (83.5%), the bank website (1.9%), the bank counselor (1.1%), either or both the bank website and the bank counselor (17.3%), mail solicitation (4.5%), advertising (0.9%), and others (17.5%).
In 2012, the sources of information of students looking to take out both federal and private student loans were the college counselor (60.9%), the college website (33.2%), either or both the college counselor and the college website (80.8%), the bank website (14.2%), the bank counselor (4.0%), either or both the bank website and the bank counselor (17.2%), mail solicitation (11.1%), advertising (2.8%), and others (15.9%).
As far as marketing or advertising was concerned, students looking to take out both federal and private student loans learned about their options through the following methods: private student loan materials provided by school (54.5%), mail solicitation (40.8%), email messages (30.8%), online advertisements (29.2%), newspaper or magazine advertisements (11.0%), phone marketers (9.2%), text messages (1.3%), and others (16.3%).
In 2016, 85.11% of students obtained information on student loan from their parents. In March 2019, 22% of students stated that their school offered them a range of loan options.

DECISION CRITERIA

In 2012, many borrowers were aware that fixed or low interest rates were more desirable than variable or high interest rates, so interest rates may have been a decision criterion for choosing a loan program among available federal student loan options.
Students selecting a loan program from a range of federal student loans are expected to consider the fees, the interest rates, the repayment terms, and the options for pausing payments in case of financial difficulties, but there were experiences in 2012 which indicate that many federal student loan borrowers had a poor understanding of these issues and that their decisions were not informed decisions at all.

MOTIVATIONS

In 2012, the features of the interest rates of federal loans, including either or both lower and fixed interest rates was the most commonly cited reason some borrowers took out federal student loans only. Around 40% of borrowers who took out only federal loans did so for the above reason.
The easy availability of federal loans was another frequent reason some borrowers took out federal student loans only. Federal loans were usually offered by their school authorities in the course of filling out the Free Application for Student Financial Aid (FAFSA). The borrowing process is streamlined by the FAFSA through the school of the borrower.

Part
02
of seven
Part
02

Student Loan Customer Journey: Private Loans

Information on the subject matter is very limited, but a report published by NERA Economic Consulting in 2012 suggests that students in the United States consider the college counselor and the college website their top sources of information for private student loans. It also suggests students take out private student loans because they are ineligible for federal loans or federal loans were not enough to cover all costs. Students selecting a loan program from a range of private student loan options should take into account the fees, the interest rates, the repayment terms, and the options for pausing payments in case of financial difficulties, but NERA's report suggests that students have a poor understanding of these loan parameters and that decisions made are not as informed as they should be.

METHODOLOGY

Since our answer should come from the perspective of students looking to take out private student loans, we looked for surveys of private student loan borrowers, interviews of private student loan borrowers, and students' accounts of their private student loan experience. We quickly found, however, that none of these could be located among recently published sources. We came across a recent survey of American student loan borrowers, but the survey results do not provide any information specific to private student loans. There are numerous articles about private student loans, but none of them cover the decision-making process or customer journey of students planning to get private student loans. They only offer options, guidelines, or instructions. For example, personal finance company NerdWallet offers a few guidelines on how to choose a private student loan. These guidelines, of course, are not indicative of the actual decision-making process of students.

We scoured databases of scholarly literature and websites of concerned organizations such as the National Association of Student Financial Aid Administrators (NASFAA) as well. Our efforts were fruitless, however, so we decided to consider older sources. We typically use sources published in the past 24 months, but the lack of information made it necessary for us to look beyond recently published sources. This change in tactic proved helpful as it led us to NERA Economic Consulting's survey of student loan borrowers, which was the source we found most relevant in answering this request. Though the report was published in 2012, it contains details particular to private student loan borrowers and the report appears authoritative as well. We also came across a 2016 survey suggesting that students remain unknowledgeable about important student loan matters.

SOURCES OF INFORMATION

  • In 2012, the sources of information of students looking to take out private student loans only were the college counselor (45.7%), the college website (17.9%), the college counselor, the college website, or both the college counselor and the college website (59.9%), the bank website (11.1%), the bank counselor (6.8%), the bank website, the bank counselor, or both the bank website and the bank counselor (17.3%), mail solicitation (8.6%), advertising (1.9%), and others (22.8%).
  • In 2012, the sources of information of students looking to take out both federal and private student loans were the college counselor (60.9%), the college website (33.2%), the college counselor, the college website, or both the college counselor and the college website (80.8%), the bank website (14.2%), the bank counselor (4.0%), the bank website, the bank counselor, or both the bank website and the bank counselor (17.2%), mail solicitation (11.1%), advertising (2.8%), and others (15.9%).
  • As far as marketing or advertising was concerned, students looking to take out private student loans only learned about private student loans through the following methods: private student loan materials provided by school (35.2%), mail solicitation (37.7%), email messages (22.8%), online advertisements (35.2%), newspaper or magazine advertisements (12.3%), phone marketers (6.2%), text messages (0.6%), and others (23.5%).
  • As far as marketing or advertising was concerned, students looking to take out both federal and private student loans learned about private student loans through the following methods: private student loan materials provided by school (54.5%), mail solicitation (40.8%), email messages (30.8%), online advertisements (29.2%), newspaper or magazine advertisements (11.0%), phone marketers (9.2%), text messages (1.3%), and others (16.3%).
  • In 2016, 85.11% of students relied on parents for student loan information.
  • In March 2019, 22% of students indicated their school provided them a selection of loan options.

DECISION CRITERIA

  • In 2012, many borrowers were aware that fixed or low interest rates were more desirable than variable or high interest rates, so interest rates may have been a decision criterion for selecting a loan program among available private student loan options.
  • Students selecting a loan program from a range of private student loans should consider the fees, the interest rates, the repayment terms, and the options for pausing payments in case of financial difficulties, but there were accounts in 2012 indicating that private student loan borrowers had a poor grasp of these things and that the decisions that were made were not informed decisions at all.

MOTIVATIONS

  • In 2012, ineligibility for federal loans was the most commonly cited reason some borrowers took out private student loans only. Thirty-five percent of pivate-student-loan-only borrowers explained the ineligibility had something to do with family income, program attended, school attended, or residency status. Of these factors, family or parents' income was the most frequently mentioned reason.
  • There were indications in 2012 that some private-student-loan-only borrowers took out private student loans only because they were given the impression that private loans were the only options. Of private-student-loan-only borrowers, 70% indicated they were not informed by their school, bank, or loan company about federal loan options, and 56% indicated they were offered private loan options.
  • In 2012, 50% of dual borrowers (i.e., students taking out both federal and private student loans) explained they took out private loans to cover expenses not covered by federal loans.

Part
03
of seven
Part
03

Student Loan Application Process: Federal Loans

Once a student and their family have decided apply for a federal student loan in the United States, there are six steps necessary for completion. Using the official U.S. Department of Education Federal Student Aid website and supplementing that information with tips and suggestions from a variety of financial websites like NerdWallet, StudentLoanHero, and ValuePenguin, we have determined the following process must be followed to apply for federal student loans.

Step 1 — Gather personal information

The first step toward applying for a federal student loan in the United States is for students (or parents) to gather the necessary information required for the application. Applicants will need:

  •  Two years of tax returns for both the parents and the student (if the student has filed taxes).
  • The adjusted gross income for the parents and the student (if the student has filed taxes) for the two years prior to the academic year the loan will be for.
  •  Asset information including investments, businesses owned, and real estate for the parents and the student.
  • Information on untaxed income from child support, maintenance, and retirement savings plans.
  •  Dates of birth and social security numbers for both parents and students.
  •  Names of the schools to which the student is applying.
  • Information on grants or scholarships that the student has received.

Step 2 — complete the Free application for Federal Student Aid (FAFSA)

Once all necessary information has been gathered, students and parents must begin the application process by completing the Free Application for Federal Student Aid (FAFSA), which can be found on the Federal Student Aid website. They can also request a paper copy of the FAFSA by calling 1-800-433-3243. As indicated by the title, there is no charge for completing this application; however, there are deadlines that must be met that depend on when the student plans to start college. The current deadlines are the following:

  • If a student plans to attend college from July 1, 2018 to June 30, 2019, they need to complete the 2018-19 FAFSA between October 1, 2017 and June 30, 2019 using income and tax information from 2016.
  • If the student plans to attend college from July 1, 2019 to June 30, 2020, they need to complete the 2019-20 FAFSA between October 1, 2018 and June 30, 2020 using income and tax information from 2017.
  • Note that individual schools and states often have their own application deadlines that are often before the federal deadlines, so it is critical to research deadlines well before beginning the process.

The application does not need to be completed in one sitting since applicants are required to create an account that automatically saves progress on the application. It will take between three and five days for an online application to be processed and between seven and 10 days for a paper application to be processed. However, one out of every three applications are selected for verification, which can extend the process for weeks or even months. As such, it is important to apply as early as possible.

Dependent students are required to have their parents' information when they complete the FAFSA, but independent students may be able to apply for aid without their parents' information. Independent students have specific criteria to meet. To be considered an independent student, an applicant must:

  • Be 24 years or older by December 31 of the year for which they are applying for assistance; or
  • Be working toward an advanced degree; or
  • Be married or separated, but not divorced; or
  • Have children who receive more than half their support from the applicant; or
  • Have dependents other than children or a spouse who live with the applicant and receive more than half their support from the applicant; or
  •  Since age 13, have lived in foster care, been a ward of the court, be an emancipated minor, be homeless or potentially homeless; or
  • Be currently on active duty as a member of the U.S. armed forces (other than for training); or
  • Be a veteran of the U.S. armed forces.

Step 3: Receive and review student aid report

Within five days of completing an online FAFSA application or within 10 days of completing a paper version, the Federal Student Aid department will issue a Student Aid Report based on the information provided in the FAFSA application. This report will include a summary of the applicant's financial information and the student's Expected Family Contribution. The report should be carefully inspected to ensure accuracy and if any errors are found, the applicant should log back into their FAFSA application and make the necessary corrections.

The Student Aid Report will also be sent to any college or career school a student lists when applying. The schools will use the report to make "a financial aid offer, which may include federal student loans." This offer, which will come in the form of an official letter from the school, will vary from institution to institution, but may include the following:

Step 4: Accept financial aid offer

Once an applicant decides to accept a financial aid offer from a school, they will need to follow the school's instructions to formally accept the aid. Typically, the school requires the offer letter to be signed and returned by U.S. mail. However, some schools offer the ability for applicants to accept a financial aid offer through a secure online portal. Again, this will vary from school to school.

Step 5: Complete Entrance counseling

Prior to paying out a federal student loan, most applicants will need to complete "entrance counseling," which is designed to help students "understand what it means to take out a federal student loan." Each school determines what entrance counseling looks like, but many schools use the StudentLoans.gov online counseling course, which can be found here. The course will take between 20 and 30 minutes to complete and must be finished in a single session.

Step 6: Sign a master promissory note

After a financial aid offer is accepted and entrance counseling has been completed, applicants must sign a Master Promissory Note (MPN) to receive their student loan funds. This is a document that outlines the terms and conditions of the loan and is a legal document that serves as a promise from the applicant that they will repay the loan "and any accrued interest and fees to the U.S. Department of Education." The MPN also includes "information on how interest is calculated, when interest is charged, available repayment plans, and deferment and cancellation provisions."

Applicants will typically sign an MPN through the secure portal on the StudentLoans.gov website, but they also have the option of signing a paper copy if they feel more comfortable doing so. Not all schools will use the online portal, so students are advised to consult with their school's financial aid office for instructions on how to complete this step. Signing the MPN through the StudentLoans.gov website takes approximately 30 minutes and involves four actions:

Information on federal student loan servicers

Even though "loan servicers play an essential role in student loan repayment," applicants are not able to select their servicer when they obtain a federal student loan. The U.S. Department of Education assigns a contracted servicer when the loan is dispersed. Even if the borrower is dissatisfied with their service provider, they are unable to change it at any point during the loan's term, except in certain situations.

First, borrowers can choose to refinance their loan with a private lender once they start making payments, but federal loan servicers have fewer complaints than private loan servicers, so many experts recommend staying with a federal loan servicer until the loan is paid in full. Second, borrowers can apply for public service loan forgiveness, which, if granted, would automatically switch the loan servicer to FedLoan Servicing, the "only servicer that processes forgiveness applications. Third, the U.S. Department of Education can transfer loans from one service provider to another. However, this is not a process that can be requested or rejected. Once a loan is transferred, the only option is for the borrower to make their payments to their new servicer.

The only other way to switch servicers is to apply for total disability discharge, but this option is only for "borrowers who cannot work due to being totally and permanently disabled, physically or mentally." In the event that this application is approved, the discharge process is managed exclusively by Nelnet. This servicer will monitor the borrower's finances and condition for three years and will reinstate the loan if the requirements for total disability are no longer met during this time frame.

Pain Points

Although the process of completing the FAFSA appears to be fairly straightforward, parents and students often "get stuck on what can be a complicated sequence of questions" (more than 100 questions about the applicant's finances and demographics), while others "miss deadlines or skip the process entirely." The U.S. Department of Education admits they process for applying for federal student loans is "complex, fragmented and difficult for students and their families to navigate and understand" due to the "numerous systems, vendors, processes and interfaces across multiple brands and user experiences." As such, borrowers are often confused by the process, which can lead to higher delinquency and default rates.

In August 2018, the federal government introduced its mobile app, myStudentAid, which was designed to help families navigate the task of applying for all federal student loans through the FAFSA. Although the app allows students and parents to fill out the application and check their student loan status, they still are not able to use it to "correct a previously filed FAFSA, renew an application or access family tax data from the Internal Revenue Service." As such, this is still a pain point for applicants who must use the online portal to perform these actions. A fuller version of the app is expected to debut for fall 2019 applicants.

The mobile app is also meant to address another pain point, which is access to aid because it will allow parents and students to complete the FAFSA even if they do not have a computer. Students can start the process themselves, whereas using the online version requires parents be present. Students are also now encouraged throughout the application process, whereas many used to get discouraged and quit before submission due to the "infamously long and detailed" FAFSA.

Other than being long, tedious, and complicated, the other major pain point for federal student loan applicants is the verification process. Not all applicants are confronted with this additional challenge, but about one-third of them are "selected each year for verification," which means they undergo an "audit-like process to prove the information [they] provided is correct." Applicants are then required to submit additional documentation to each school to which they applied and the schools must validate the information on the FAFSA. Many applicants (25%) simply choose not to go through the process and lose out on aid for which they qualify. Others "lose out on awards due to the lengthy vetting process," which can take "weeks or months."
Part
04
of seven
Part
04

Student Loan Application Process: Private Loans

In the US, students can apply for private loans online within three to ten minutes. If the application is approved, and the college or university certifies the authenticity of the information provided by the student, funds are disbursed to the school and student. This entire process is typically completed within two to ten weeks.

METHODOLOGY

In order to provide an overview of the application process for student loans, we leveraged the websites of private student loan providers such as College Ave, as well as student loan advice platforms like Edvisors and The Student Loan Report. Here we were able to extract details on the typical application process and timelines for private student loans. We then went further to determine the pain points experienced by these borrowers by examining LendEDU's analysis of the latest Consumer Financial Protection Bureau (CFPB) survey. The LendEDU report is an analysis of 8,340 student loan-specific complaints which were filed with the CFPB in 2018. Here, we were able to identify the most complained about pain points experienced by private loan borrowers in the US. Please read further for details on the private student loan application process.

HOW TO APPLY

Private loans are either disbursed to students directly, or through a school certified means. The most common loan type is the school-certified loan; this is as a result of the high fraud rate associated with direct loans. Before commencing the application process, the student first determines exactly how much he/she needs to borrow by reviewing the financial aid award letter received from the school.

Next, the student will provide his/her contact information, personal information, loan details, and school information. US-based applicants are required to provide their social security number, but this is not applicable to international students. After the required information is provided, before submitting the application, the student will be sent a general disclosure document with information such as interest rate range and repayment options.

Once the application is submitted, an approval process begins. Within this time, the lender will evaluate criteria such as the student's credit history; this evaluation is used to determine whether the loan will be approved or not. There are typically three responses that a student may receive after applying: denied, approved, or eligible with a cosigner. If approved, the student may then review and accept the loan terms.
If a student is eligible with a cosigner, it means such a student must add a creditworthy cosigner who will take equal responsibility for the loan. The lender will contact the student's school for certification, after which the loan will be scheduled for disbursement.

After tuition is paid to the school from the disbursed loan, the final step in the private student loan process is repayment. This process varies; it is dependent on the lender's loan terms and the specific repayment plan which the student selected while applying.

Application Timeline

Applying for a private student loan, which is the first step, typically takes place online within as little as three to ten minutes. That usually means that a student will be notified immediately if the loan is denied. However, if it is approved, the student receives an initial notification of success, after which a secondary review will be conducted to confirm eligibility.

Upon receiving final approval, funds are typically disbursed to the school within two weeks to two months. One of the contributing factors to this delay is the school certification process which private student loans undergo. When the student's college or university receives the loan proceeds, any extra funds borrowed in order to cater for other expenses will then be sent directly to the student by the school. This final disbursement usually happens within one to two weeks. Overall, the entire private student loan process is completed within two to ten weeks from the date of application.

Pain Points

According to a LendEDU report, 8,340 student loan-specific complaints were filed with the Consumer Financial Protection Bureau (CFPB) in 2018. 36% of these complaints were related to private student loans. Within this time Navient was the student loan company that was most complained about. The most common pain points identified from the complaints lodged by borrowers are highlighted below.

  • Dealing with lender or servicer: 57% of the complaints filed under private loans were associated with challenges in dealing with loan servicers and lenders.
  • Struggling to repay the loan: 31% of US students who received private loans expressed concerns over the difficulties encountered while trying to repay their loans.
  • Problem with a credit report or credit score: This challenge was common with 6% of the students who filed complaints against lenders.
  • Getting a Loan: Obstacles encountered in the process of applying for a private loan accounted for 6% of the pain points expressed by US students. This pain point is also the only challenge that is entirely unique to private loan borrowers. All other pain points identified for private loans were experienced by federal loan applicants as well.

Part
05
of seven
Part
05

Student Loan Market Breakdown: Federal Loans

The top four federal student loan lenders based on market share are the Pennsylvania Higher Education Assistance Agency (PHEAA) at 24%, Great Lakes at 17%, Navient at 16%, and Nelnet at 13%. Our methodology and findings are below.

Methodology

Our research began with an attempt to locate a direct answer through financial websites such as Nerd Wallet, Credible, and College Investor. This led us to a full list of federal loan servicing companies and an article that discussed the acquisition of Great Lakes by Nelnet in February 2018. This article indicated that the market shares of the top student loan lenders are the following:

Pennsylvania Higher Education Assistance Agency (PHEAA or AES Federal Loan Servicing): 31.07% 
Great Lakes: 22.99% 
Navient: 20.95% 
Nelnet: 17.59% 

However, the article pointed out that with the acquisition, the Nelnet/Great Lakes market share would increase to 40.58% (22.99% + 17.59%), making it the largest student loan lender in the country. This data appeared to come directly from the U.S. Department of Education, so we decided to go directly to that source to confirm our initial findings. We discovered that the outstanding amount for student loans is readily available, as are the outstanding amounts for the top four student loan lenders and all non-profit lenders (combined). This data is presented in Excel format on the StudentAid.Ed.gov website, so we copied the relevant charts from Excel and pasted them into Google sheets to use as our sources. We have also linked to the web page where these spreadsheets (and others) can be downloaded to Excel.

However, the market share for each lender was not calcuated on these spreadsheets, so we had to manually perform the calculations to arrive at the individual market shares for PHEAA, Great Lakes, Navient, and Nelnet. We added all outstanding loan amounts for each company in the categories of "in-school," "grace," "repayment," "deferment," "forbearance," and "other" and divided the sum by the total amount of outstanding federal loans. Note that we used the 2018 Q4 outstanding amount instead of the 2019 Q1 amount because the lastest data available for the lenders is from December 2018. All calculations are presented immediately following our findings.

We also noted that as if December 31, 2018, Great Lakes and Nelnet are still listed as separate lenders, so we chose to present our findings in that manner. However, we also provided an alternate scenario after our primary findings in the event that Great Lakes and Nelnet are considered a single entity.

Total amount of outstanding federal student loans

As of December 31, 2018, there was $1.439 trillion in outstanding federal student loans.

Pennsylvania Higher Education Assistance Agency (PHeAA)

In-School Outstanding: $23.10 million 
Grace Period Outstanding: $5.60 million 
In Repayment: $236.60 million 
In Deferment: $31.00 million 
In Forbearance: $49.40 million 
Other Outstanding: $2.80 million 

Total Outstanding: $348.50 million ($23.10 +$5.60 + $236.60 + $31.00 + $49.40 + $2.80)

Market Share: 24% ($348,500,000 / $1,439,000,000)

Great Lakes

In-School Outstanding: $31.00 million 
Grace Period Outstanding: $5.90 million 
In Repayment: $153.60 million 
In Deferment: $27.20 million 
In Forbearance: $26.50 million 
Other Outstanding: $1.90 million 

Total Outstanding: $246.10 million ($31.00 + $5.90 + $153.60 + $27.20 + $26.50 + $1.90)

Market Share: 17% ($246,100,000 / $1,439,000,000)

Navient

In-School Outstanding: $18.90 million 
Grace Period Outstanding: $4.10 million 
In Repayment: $145.30 million 
In Deferment: $22.90 million 
In Forbearance: $29.80 million 
Other Outstanding: $2.40 million 

Total Outstanding: $223.40 million ($18.90 + $4.10 + $145.30 + $22.90 + $29.80 + $2.40)

Market Share: 16% ($223,400,000 / $1,439,000,000)

Nelnet

In-School Outstanding: $23.50 million 
Grace Period Outstanding: $4.90 million 
In Repayment: $120.50 million 
In Deferment: $22.40 million 
In Forbearance: $16.10 million 
Other Outstanding: $1.20 million 

Total Outstanding: $188.60 million ($23.50 + $4.90 + $120.50 + $22.40 + $16.10 + $1.20)

Market Share: 13% ($188,600,000 / $1,439,000,000)

Note that these market share calculations vary from the shares presented in the Credible article; however, since the Credible article is from February 2018 and the calculated data is from December 2018, this is an expected discrepancy. However, without taking the acquisition of Great Lakes into account, the companies remain in the same order as they are presented in the February 2018 article.

Alternate scenario

If the acquisition of Great Lakes by Nelnet results in the two companies being counted as one, the market shares would then be the following:

Nelnet/Great Lakes: 30% (13% + 17%)
PHAA: 24%
Navient: 16%

There would be no fourth company that has a significant market share of the total federal student loan market.
Part
06
of seven
Part
06

Student Loan Market Breakdown: Private Loans

Based on our estimates, the top four private student loans lenders based on market share are Navient (18.61%), Sallie Mae Bank (17%), Wells Fargo (9.4%), and Citizens Bank (7.46%). Our methodology and findings are below.

Methodology

We commenced this research by searching for primary sources on the United States student loans market. While we found multiple articles on the subject matter on publications such as Nerd Wallet, Credible, and College Investor, we were unable to locate reports and news articles that discussed the market share of private student loan lenders. Since student loans are regulated by the Department of Education, we performed a thorough search of its website, which led us to the StudentAid.Ed.gov. Unfortunately, the data on the StudentAid.Ed.gov portal was dedicated to federal student loans only.

Our next strategy was to conduct a press search on the subject matter. Our search led to two useful sources, The Bureau of National Affairs, and MeasureOne a consortium/data cooperative. According to The Bureau of National Affairs, a Bloomberg company, the largest private student lenders and loan holders are Citizens Bank, Discover Bank, Navient, PNC Bank, Sallie Mae Bank, and Wells Fargo without stating their market share. MeasureOne provides regular research and insight into the private student loans market. Our search through news reports and annual reports did not reveal any market share data for any of the companies.

In light of no other database, data or reports that ranked the private student loan by any comparable metrics, we have estimated the market share of the companies listed as the largest by The Bureau of National Affairs. As such we calculated each company's market share using their total private student loan portfolio/outstanding and divided the sum by the total amount of outstanding private student loan. All private student loan portfolio data were taken from each company's annual reports.

Calculations

  • According to MeasureOne, the total private student loans outstanding was $119.31 billion in 2018.
  • Sallie Mae's total private student loan outstanding as at the end of 2018 was $20.29 billion.
  • Wells Fargo's total private student loan outstanding was $11.22 billion as of the end of 2018.
  • Discover Financial Services' total private student loan outstanding as at the end of 2018 was $7.73 billion.
  • Citizens Bank's total private student loan outstanding as at the end of 2018 was $8.9 billion.
  • PNC Bank's total private student loan outstanding was $3.82 billion as of the end of 2018.
  • Navient's total private student loan outstanding as at the end of 2018 was $22.2 billion.

Therefore, the market share of each company is:

Therefore, based on the above calculations, the top three lenders based on private student loan outstanding are Navient (18.61%), Sallie Mae (17%), and Wells Fargo (9.4%).

Part
07
of seven
Part
07

Student Loans Market: Minnesota

The total outstanding student debt in Minnesota is estimated at $26.73 billion, with federal student loans occupying the largest share. In the 2015-2016 season, students in Minnesota received over $1.3 billion. Our methodology, calculations, and findings are below.

Methodology

While we found the total outstanding federal and state student debt in Minnesota, we were unable to find any publicly available data on the total outstanding private student loans in Minnesota. We commenced this research by searching for primary sources on the United States student loans market. While we found multiple articles on the subject matter on publications such as Nerd Wallet, Credible, and College Investor, we were unable to locate reports and news articles that discussed the market share of private student loan lenders. Since student loans are regulated by the Department of Education, we performed a thorough search of its website, which led us to the Federal Student Aid website. Unfortunately, the data on the Federal Student Aid portal was dedicated to federal student loans only.

Since we were also considering state-level data we examined government agencies in Minnesota and found that the Minnesota Office of Higher Education (OHE) oversees the state's loan program. While a thorough examination of the reports and data present by the OHE yielded multiple results, including the total private student loans during the 2015-2016 season, but not the total outstanding private student loans in the state. Other available information on OHE's website includes the total amount of loans issued through the SELF Loan program during the 2016-2017 season.

Our next strategy was to search through organizations that provide data on the private student loan market, including MeasureOne and The Institute for College Access & Success (TICAS). MeasureOne is a consortium/data cooperative of the six largest private student loan lenders, while TICAS "is an independent, nonprofit, nonpartisan organization working to make higher education more available and affordable for people of all backgrounds." These organizations regularly publish reports on the student loan market, with MeasureOne specifically focused on the private student loan segment. An extensive search of these platforms proved unsuccessful.

A general press search on the subject matter shows that the prevailing premise of the discussion as it relates to states was their average student loan debt. In light of the unavailability of data on the private student loan segment, we used available data points to provide an estimate of the total outstanding private student loan in Minnesota.

Total outstanding student loans in Minnesota

  • According to OHE's budget presentation for the 2020-2021 budget, the state's SELF Loan program had 50,000 borrowers with approximately $500 million in outstanding debt.
  • The state's SELF Refi program also has 900 borrowers owing approximately $25 million.
  • According to data from Federal Student Aid, there are 775,900 student loan borrowers from Minnesota with a total outstanding federal student debt of $24.2 billion.

According to MeasureOne, federal student loans make up 92.37 of the total student loan debt. Assuming that the national breakdown is the same as the breakdown in Minnesota, we calculated the total outstanding private student debt as:

Total student debt: (100* $24.2 billion)/92.37 = $26.2 billion

The outstanding private student loan debt is: $26.2 billion - $24.2 billion = $2 billion

Therefore, the total student debt including state loans = $26.2 billion + $500 million + $25 million = $26.725 billion.

LOANS ISSUED IN MINNESOTA DURING THE 2015-2016 SEASON

The Minnesota Office of Higher Education also publishes the loans issued per year, However, the latest available data is from 2016.

The total loans issued to Minnesota students during the 2015-2016 season was $1,362,871,003.

Sources
Sources
From Part 01

Federal Student Aid (Studentloans.gov) - Real Customer Reviews

bestcompany.com
Publication Year: 2019

StudentLoans.gov | Manage & Repay Your Student Loans

studentloans.gov

MyFedLoan

myfedloan.org
n

High Debt, Low Information: A Survey of Student Loan Borrowers

nera.com
Publication Year: 2012

Federal Student Loans: 2019 Review

nerdwallet.com
Publication Year: 2018

Federal Student Loan Center | Complaints | Better Business Bureau® Profile

bbb.org
Publication Year: 2019

Federal Student Loans Review - The Pros and the Cons of Federal Loans

studentloansherpa.com
Publication Year: 2017
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Loan Servicers/Lenders

studentaid.ed.gov

Three Quarters of Student Borrowers Say Obtaining a Student Loan Was Easy

prnewswire.com
Publication Year: 2019

NERA - About

nera.com

January 2016 Student Loan Borrower Survey | LendEDU

lendedu.com
Publication Year: 2016

NASFAA.org Home

nasfaa.org
From Part 02
n

High Debt, Low Information: A Survey of Student Loan Borrowers

nera.com
Publication Year: 2012
Quotes
  • "Only about 60 percent of private-only borrowers, however, reported obtaining information about their loans from their college, as compared to over 80 percent for borrower groups with federal loans. "
  • "Private borrowers were at least 6 times more likely than those with federal loans only to obtain student loan information from a bank counselor or website."
  • "Although respondents also reported receiving solicitation to take out private student loans from other sources (e.g., mail, email, web or print advertisements), the school was the most frequently mentioned source of private loan materials. Here again, though, we see that only 35 percent of private-only borrowers reported receiving student loan materials from their schools, as compared to 55 percent for dual borrowers. "

January 2016 Student Loan Borrower Survey | LendEDU

lendedu.com
Publication Year: 2016

Three Quarters of Student Borrowers Say Obtaining a Student Loan Was Easy

prnewswire.com
Publication Year: 2019
Quotes
  • "Borrowers also indicated having limited loan options presented to them, which potentially prohibited them from being aware of better terms or products that might have been available from other lenders. Just 22% said their school provided a range of lender options, both through the academic institution and outside lenders. But more than 40% said they had only one option, while 9% said they had options through the school but no information about outside lenders."

How to Pick a Student Loan for College — NerdWallet

nerdwallet.com
Publication Year: 2019
Quotes
  • "When federal aid and family contributions combined won’t cover everything, you may need to take out private loans to fill the gap.Compare private loans from multiple lenders, including banks, credit unions and online platforms. Consider factors such as fees, interest rates and length of repayment, along with options to pause payments if you run into financial trouble."
From Part 03

Need College Loans? Here’s Your Guide to Applying for a Student Loan | Student Loan Hero

studentloanhero.com
Publication Year: 2018
s

FAFSA®: Apply for Aid

studentaid.ed.gov

Complete Counseling

studentloans.gov
s

Entrance Counseling Information

studentaid.ed.gov
s

MPN Information

studentaid.ed.gov

Closer Look at Federal Student Loan Servicers: How Does Navient Compare?

valuepenguin.com
Publication Year: 2018

How to Switch Student Loan Servicers - NerdWallet

nerdwallet.com
Publication Year: 2019
s

Loan Service Provider Information

studentaid.ed.gov
s

How to Apply for a Federal Student Loan

studentaid.ed.gov
w

Going mobile: The government’s most crucial financial aid form

washingtonpost.com
Publication Year: 2018

FAFSA Renewal: 3 Steps to a Pain-Free Application

nerdwallet.com
Publication Year: 2018

What to Do If Your FAFSA Application Gets Flagged for Verification

consumerreports.org
Publication Year: 2019
From Part 04
c

How the Private Student Loan Process Works & How to Apply | College Ave

collegeavestudentloans.com
Publication Year: 2019

Private Student Loan Application Process

internationalstudentloan.com
Publication Year: 2019

How Long Does It Take to Get a Student Loan?

edvisors.com

How Long Does It Take to Get a Private Student Loan? | SLR

studentloans.net
Publication Year: 2018

Report: 2018′s CFPB Student Loan Complaints | LendEDU

lendedu.com
Publication Year: 2019
From Part 05
s

Federal Student Loan Portfolio

studentaid.ed.gov
Publication Year: 2019

Federal Student Aid Portfolio Summary

docs.google.com
Publication Year: 2019

PHEAA: One of the Nation’s Leading Student Aid Organizations

pheaa.org

Great Lakes Student Loans

mygreatlakes.org

Nelnet

nelnet.com

Navient

navient.com

The Complete List of Federal Student Loan Servicers

thecollegeinvestor.com
Publication Year: 2018

‘Big four’ student loan servicers now ‘big three’ | Credible News

credible.com
Publication Year: 2018

Federal Loan Servicer Portfolio

docs.google.com
Publication Year: 2018
From Part 06

Backed by Banks, Private Student Lending Grows Despite Concerns

bna.com
Publication Year: 2018
d

The MeasureOne Private Student Loan Market

docs.wixstatic.com
Publication Year: 2018
s

Sallie Mae Annual Report 2018

salliemae.com
Publication Year: 2019
w

Wells Fargo Q4 2018 Report

www08.wellsfargomedia.com
Publication Year: 2019
s

Discover Financial Services Annual Report 2018

s21.q4cdn.com
Publication Year: 2019
i

Citizens Financial Group Inc. Annual Report 2018

investor.citizensbank.com
Publication Year: 2019

PNC Bank Annual Report 2018

drive.google.com
Publication Year: 2019
n

Navient Annual Report 2018

navient.com
Publication Year: 2019

‘Big four’ student loan servicers now ‘big three’ | Credible News

credible.com
Publication Year: 2018
d

MeasureOne Private Student Loan Report

docs.wixstatic.com
Publication Year: 2018
s

Federal Student Loan Portfolio

studentaid.ed.gov
Publication Year: 2018
From Part 07

Portfolio-by-Location-by-Debt-Size

docs.google.com
Publication Year: 2018

Portfolio-by-Location

docs.google.com
Publication Year: 2018

Search Financial Aid Awarded to Undergraduates at Minnesota Institutions

ohe.state.mn.us

SELF Loans Data

ohe.state.mn.us
Publication Year: 2018

Graduate Debt - Minnesota

ohe.state.mn.us
Publication Year: 2017
l

Minnesota Office of Higher Education Budget Proposal

leg.state.mn.us
Publication Year: 2018
Quotes
  • "We effectively collect money owed on defaulted loans resulting in net default rates of less than 3%. Low default rates help keep interest rates low for students, since people not repaying their loans is a program expense."
  • "Over 50,000 borrowers currently have loans through the SELF program, which offers low-interest loans for Minnesota residents or students enrolled at a Minnesota school, and owe nearly $500 million."
  • "Over 900 borrowers currently have loans through the SELF Refi program, a low-interest student loan refinance program available to Minnesota residents, and owe nearly $25 million."
s

Federal Student Loan Portfolio

studentaid.ed.gov

Backed by Banks, Private Student Lending Grows Despite Concerns

bna.com
Publication Year: 2018
t

TICAS

ticas.org
Publication Year: 2018

Financial Aid Awarded to Undergraduates Attending Minnesota Institutions

ohe.state.mn.us
Publication Year: 2017