EFC Legal Conference

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EFC Legal Conference

Matthew Myers – SVP, Private Loan Services [email protected] 858-248-1372

Goal Structured Solutions Largest third party student loan administrator ($19.4b AUM) Largest third party student loan special servicer ($4.5b AUM) Clients include: not-for-profits, hedge funds, investment

banks, colleges and universities, insurance companies, private equity and asset-backed trusts

Manage lifecycle of assets from origination to collections We traffic in data – forecasting, modeling and valuation

experts utilizing two decades of loan-level data

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Data Limitations

There are two certainties when it comes to data:1. Data is valuable2. That value is limited by the experience and expertise of the

entity analyzing the data, and the additional they have available at their disposal

This can be illustrated by two real world examples of how data would suggest one outcome yet the actual result is dramatically different, with significant implications for various parties

Pool APool B

Asset Type Private Student LoansPrivate Student Loans

Issuer Issuer XIssuer X

Average FICO 719712

Cosigner % 84%84%

Average Balance $11.5k$14.4k

Average Loan Rate L+4.49L+5.10%

Undergrad Share 84%85%

But underneath the surface…

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Surface Similarities

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...Dramatically Different Results

Pool A Pool B

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Gross Charge-Off Rate 6 Years Post-Issuance%

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Pool APool B

Asset Type FFELP Student LoansFFELP Student Loans

Loan Type ConsolidationConsolidation

Issuer Issuer YIssuer Z

Average Balance $39k $52k

Average Loan Rate 4.42%5.14%

Average Term 24.1 years 26.4 years

Channel DTCDTC

Also comparable using standard loan-level data…

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FFELP Assets

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...Widely Disparate Performance

Pool A Pool B0.00%

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On-Time Rate Reduction Borrower Benefit Qualification Rates

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Attributes that play a vital role in asset performance that are not always contained in loan-level data: Program guidelines Non-credit worthy borrower quality Non-FICO underwriting criteria School type Area of study Origination channel Servicer and contractual SLAs Use of supplemental third parties Geographic concentration

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Not All Similar-Looking Assets Are Created Equal

While data can inform, an overreliance on incomplete data can have serious adverse consequences: Originators – Unprofitable products Issuers – Overestimate residual value Investors – Buy worthless subordinate bonds and/or resids Service providers – Overestimate fee streams Insurers – Underpriced premiums on wraps

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Implications of False Security

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Data is an Input, Like Fuel

You can put the same fuel in a Yugo and a Ferrari and get very different results

At GS2 our data, experience and expertise ensures the Ferrari and not the Yugo