Among the many results of the international financial crisis was a squeeze on the availability of college loans. Most lenders scaled back on overall student lending. Essentially, all traditional lenders eliminated the ability of international students to borrow without US credit-worthy co-signers.
At the request of member schools that were facing this challenge, GMAC helped facilitate the development of a new source of student aid, the Affiliated Loan Program for Students. Though not a stakeholder in the program, the Council served as a convening authority, bringing interested parties together for the first time late last year. Less than a year later, about a dozen schools are already participating, and the ALPS model is providing some US$100 million in financing.
ALPS delivers low-cost loans—up to the total cost of education for international students —without requiring established credit or co-signers. The program leverages a participating school’s credit rating, not its cash, to meet a level of student financing needs that the school determines. Eligible schools incur no up-front expenses and do not need to commit to any minimum or maximum loan volume level. The program linked to any other lending on campus.
As the program has expanded, economies of scale have enabled a reduction in program costs for students. Another measure of the new financing model’s success is that investors have demonstrated a strong appetite for acquiring securities backed by ALPS loans.
Moehn Management (kevinmoehn@aol.com; +1 (703) 242-3591) provides program administration for ALPS. The group’s principal, Kevin Moehn, says that as the program was being developed, “business schools sought a reliable, long-term program that was not dependent on a single lender, would be of sufficient size to meet the total need, and would mitigate the school’s financial risk.” Accordingly, he says, dependable program partners were selected to deliver the ALPS program. Deutsche Bank is providing loan capital. The Access Group provides loan origination, servicing and collection support.
According to data from GMAC’s 2008 Alumni Perspectives survey, more than a third of international students attending US schools reported using loans to meet the costs of their education. Moehn says the availability of resources through ALPS can help business schools recruit and retain more students.
Importantly, too, Moehn says, the program’s reach now extends beyond international business school students—foreign and domestic students at both the graduate and undergraduate levels are now eligible for ALPS.
“Some schools view ALPS as an ‘assured access’ lender for their international and domestic students,” Moehn says, “knowing that the program’s loan funds will be available for virtually any and all of their students.”