Student loan consulting

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Milliman’s student loan consulting team helps loan servicers, financial institutions, schools, and investment banks analyze the default risk of a student loan portfolio. Our student loan analyses are valuable because of:

  • Improved default prevention. By identifying loans that have a higher propensity for default risk, targeted prevention programs can be created to improve loan performance.
  • Response to FASB changes. In April 2016, FASB announced that it voted to proceed with the new current expected credit loss standard. This standard will require that banks and other financial institutions modify recognition of impairment from an “incurred loss” or “probable loss” basis to a “lifetime of loss” basis. Milliman’s default model can be implemented to determine lifetime of loss estimates.
  • Enhanced transparency. Greater transparency puts your institution in a better position to access financial markets.
  • Reduced overhead. Our expertise helps companies avoid the onerous and expensive task of acquiring or developing in-house expertise.
  • Better decision making. Understanding the terms of your risk is critical for making decisions regarding the profitability of your student loan portfolio.

By analyzing the default risk of your student loan portfolio, you will be in a better position to understand your financial health. Our model melds actuarial-based methodologies with economic variables and implements the following components to determine student loan default risk:

  • Performance to date. Collateral prepayments, loss, and delinquencies help gauge performance thus far and can be used in actuarial projections to estimate future performance.
  • Loan-level underwriting characteristics. Specific characteristics of borrowers, co-signers, and schools quantify credit performance by individual loans.
  • Economic environment. The default model leverages economic variables such as unemployment to capture external risk in the market.