Presentation on MHESAC and SAF

1. Student Assistance Foundation Presentation on MHESAC and SAF January 2007

2. Montana Student Loan Borrowing • FFELP Stafford and PLUS- $130-140 million annually (estimated FY 07) Current borrower interest rate set by Federal govt.- 6.8% fixed • Federal Consolidation Loans – Provided in Montana by MHESAC Fixed borrower interest rates ranged from 2.85%-6.8% over last three years $450 million of MHESAC’s Montana portfolio has consolidated in last three years ■Estimated $4-8 million of Private Education Loans also made annually to Montana students and families

3. Montana Higher Education Student Assistance Corporation (MHESAC) • MHESAC is a Montana not-for-profit corporation organized under Section 150(d) of the U.S. Tax Code in 1980. MHESAC is governed by a seven member Board of Directors. • MHESAC’s business is providing student loans and borrower benefits (as a 150(d) entity this is all MHESAC can do).

4. Student Assistance Foundation (SAF) • SAF is a separate Montana not-for-profit corporation that was organized in 1999. SAF is governed by a nine member Board of Directors. • SAF’s business is servicing student loans, managing MHESAC’s activities, and generating and warehousing loans for MHESAC. SAF’s public benefit activities include providing grants to students and providing programs that help Montanans understand that post- secondary education is valuable, accessible and, affordable.

5. MHESAC MISSION To assure access to student loans for Montana students and lowering the cost of financing post-secondary education

6. MHESAC (cont.) • MHESAC and its 35 Montana lending partners provide in excess of $130 million in capital annually to Montana citizens for FFELP Stafford and PLUS student loans. • MHESAC also provides FFELP consolidation loans for Montana citizens. In FY 07, Montana consolidation volume will exceed $100 million. • MHESAC also purchases student loans across the nation.

7. MHESAC (cont.) ▪ MHESAC presently holds more than $1.37 billion in FFEL student loans. $826 million – Montana nexus (tax-exempt funded) $200 million – Stafford & Plus (27%) $626 million – Consolidation (73%) $542 million – Non-Montana loans (taxably funded) Mostly Consolidation loans ▪ All of these loans are guaranteed to at least 97% if a student defaults on their payments (99% guaranteed if serviced by an exceptional performer, which SAF is.)

8. MHESAC (cont.) • On tax-exempt funded loans all earnings on the loans above a 2% spread must be returned to federal government or returned to borrowers. • MHESAC has provided in excess of $28 million in borrower rebates to help Montana students lower the cost of financing their higher education endeavors since 1995. • More than $22 million additional is committed to existing Montana rebate programs in the future. • Current projections show as much as $48 million additional can be generated for Montana borrower benefits from existing loans and tax-exempt financings.

9. MHESAC (cont.) • In 2000, MHESAC commenced student loan activity outside of Montana. In FY 05-06 MHESAC and SAF generated $400 million in non-Montana loan volume. • Surpluses from MHESAC’s non-Montana activities will be available to support Montana loan activity and provide Montana borrower benefits as these financings mature. • Furthermore, growing MHESAC’s loan portfolio will lower MHESAC’s administrative costs for its tax-exempt activity.

10. MHESAC (cont.) • MHESAC is not a part of state government and receives no state monies. All of MHESAC’s revenue is generated by the assets associated with its student loan financings. • The State of Montana has no obligations relative to MHESAC’s Bonds • MHESAC Senior Bonds (tax-exempt or taxable) all have AAA ratings, the highest possible ratings from S& P, Moody’s and Fitch. MHESAC’s Subordinate Bonds are rated A. All Bonds are secured solely by the assets pledged to them.

11. MHESAC (cont.) Since 1983, MHESAC has helped more than 110,000 Montana citizens pursue their post-secondary education dreams. MHESAC raises its capital in both the tax-exempt and taxable bond markets including its first LIBOR based financing with investors from Europe in 2005.

12. Student Assistance Foundation MISSION To provide students with the knowledge and tools to finance and pursue their post-secondary education.

13. Student Assistance Foundation Goal – for Montana to be a state where higher education is within reach of all Montanans, no matter their economic status. We will achieve this goal when all Montanans know about and utilize the wide range of funding options available for college, trade school, technical school and other higher education aspirations.

14. SAF’s Business • The earnings from SAF’ s business activities are the major sources for SAF’s public benefit programs.

15. SAF’s Business • Major business is the servicing of student loans and the management of companies that provide student loans. MHESAC is currently SAF’s largest business partner. • SAF currently manages > $2.0 billion in assets • SAF currently services > $3.0 billion in student loans- 35 Montana lenders and 5 non-Montana lenders • Vision is to be servicing $4 billion in student loans by the end of the current fiscal year and $8 billion in student loans within seven to ten years

16. SAF Public Benefit Purpose • Since 2000,SAF has provided more than $7.4 million in public benefits. • SAF has delivered more than $3.3 million in Access Grants to Montana students • SAF provides grants to students and schools as well as outreach and education on paying for school.

17. SAF Public Benefit Outreach Services • SAF has implemented numerous outreach programs such as College Goal Sunday and the Foster Care Education and Training Voucher Program and assisted in making Montana Career Information System (MCIS)available to all Montana citizens • Embarking upon establishing several new outreach programs to help students – Knowhowtogo2 empowerment campaign, College Summit and ACT/SAT Test Prep

18. SAF Public Benefit Outreach Services (cont.) ■ SAF Outreach offices are located on the campuses of the following schools: • The University of Montana – Missoula • Montana State University – Bozeman • Montana State University – Billings • Miles Community College- Miles City • Soon to be in Kalispell and Butte • Provide student loan exit and entrance counseling, debt management counseling and support services to Montana financial aid offices • Supports several other awareness and readiness programs in Montana – Gear-Up, Webwriters,Talent Search, Newspapers In Education, Scholarship Fairs and Financial Aid Nights, Indian Nation Tribal Youth Leadership Forum

19. About SAF • Primary office is located in Helena • Employs more than 230 employees • Annual SAF loan servicing operations and programs budget exceeds $23 million annually

20. Future Business Growth • SAF is continuing to expand its student loan services in the national market and expects to grow by an additional 125-150 employees over the next 3-5 years. • It is anticipated that loans serviced will exceed $8 billion by June 30, 2010.

21. Student Assistance Foundation • Major Issues and Initiatives • Expanding its Strong Partnership with the Higher Education community to include K-12 and the Executive Branch • New Facility • Managing Growth

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23. Student Assistance Foundation Montana Higher Education Student Assistance Corporation • In summary, MHESAC and SAF are two separate and distinct mid-sized non-profit entities that work in a very strong partnership. They are both: COMMITTED TO HELPING STUDENTS SUCCEED