Private Student Loan Comparison Sheet: Fill & Download for Free

There is no student loan bubble to burst. Of the $1.5 trillion student loan debt, $1.1 trillion is held by the U.S. Government. The government does not depend on the payments for anything. The remaining 300–400 billion in private student loan debt is too small to matter. Federal student loans already have a default rate of 11%, private student loans have a default rate of nearly 25%. For comparison, the mortgage debt crisis was triggered when defaults went north of 5%.You could have a 100% default rate on federal student loans and the economy wouldn’t even notice. In fact, the economy might actually improve since the money that was feeding student loan debt would, arguably, go toward consumption.The difference is that student loans are not tied to the financial infrastructure like other debts (mortgages, etc.). The problem with the mortgage debt bubble was institutional liquidity. When you look at a balance sheet of a bank, it will list assets. Most of the assets are debt instruments. If those assets stop performing, the bank is unable to meet other obligations (like give us consumers the money in our accounts when we want to pay our bills).To answer your question, NOTHING would happen. The government collects about 50 billion annually from student loans. For perspective, the federal budget is 4 trillion. If the economy starts slowing for other reasons, that will likely increase student loan default rates, but nothing will come of that.

Thomas Johnson gets it about right. Even non-elite universities are in an arms race to seem attractive to students who might apply. You might argue, with some justice, that this is the university's fault, but it references a much larger problem. Today's students want dorm rooms that are at least as good (ideally better) than their bedroom at home, a new fitness center that looks great even if most students use it only a few times, and Internet speeds much better than at home. Parents also demand more from students services -- career centers, health and especially psychiatry availability, etc.Athletics are a financial problem. Only 5 or 10 universities actually break even or have a profit -- the usual suspects (Texas, Alabama, Ohio State, etc.). Donations that arguably would not go to academic purposes (although there's no good data that this is the case) make up part. But most universities are out of pocket a significant amount. Why? Because the alumni demand it, and guess what? Students like to attend schools with good jock teams. When you have a head football coach making more than the president, usually by a significant amount, you've got problems. Financial aid to jocks is a huge expense, partially covered by endowment and donations but a double cost to the university which has to come up with the scholarship money for the jocks and loses the opportunity to have tuition paying students fill their places.Universities need new buildings with new technology and in the case of science buildings to house the latest equipment. Classrooms that are often hard to fit into building plans are very expensive. Guess what? Universities that have smaller classes require more classrooms. Gone are the days when a builder came in, looked around and built a functional building that more or less matched the rest of the buildings. Architects (often famous ones) cost money; they build pretty buildings. I'm guessing that building supplies have risen more than the general cost of living.Utilities have risen dramatically, and again much more than cost of living generally.Library costs have gone up exponentially. It's not uncommon for major scientific journals to cost $3000 or $4000 a year as subscriptions. All institutions that sponsor journals charge far more for library subscriptions than for individual. Well, let's just go all electronic. Makes sense. Yes, except the charges for electronic subscriptions are usually the same as for paper and often require that the library purchase paper copies to get the on-line stuff. Has anyone noticed that books seem to cost a whole lot more now than then. Well they do, and the rise is more than inflation. Students who used to buy a semester's load of books for $100 now sometimes pay double that amount for one book -- science texts often even more (and, no, Kindle will not solve that problem) Book budgets for libraries have again risen faster than inflation, much faster.Most of a university's budget goes for salaries. Faculty are now paid a living wage, some would argue too handsomely. Some faculty get really high salaries, but it costs big bucks to get a famous person on board. Why does that matter? Arms race, again. On the other hand, famous faculty attract other famous faculty, and more research money, and better graduate students, and, also, better undergraduates, perhaps for the wrong reasons. Many students (and their parents) like the possibility that they can take a class with a Nobel Prize winner, but in many places will never lay eyes on him or her. And while we're on salaries don't forget to add in contributions to retirement and health care, which seems to be going up at a rapid rate.Administrative costs at universities have risen dramatically as they have at almost all other organizations. Partially that's because of increased reporting responsibilities, more regulations, etc. At my former university when I arrived in 1989 the legal staff was one half time person borrowed from a major law firm in town. Now there is a whole office with several lawyer, all paid living wages I assume. I frankly have no idea what they do, but I'm pretty sure that they're busy. In fact I know they are.Several people have pointed to research costs. That's difficult to access. In most major universities research is largely funded by outside grants and is therefore self-supporting. In addition most grants come with indirect costs theoretically to support utilities, library costs etc. It's a big source of income, and major research universities would fold without indirect costs. There are other research costs, of course. Some graduate students may not have stipends that are fully covered by grants. and the university picks up the tab. Typically graduate students pay no tuition or it is paid by a funding agency. That makes graduate education very expensive as faculty devote more time to non-tuition paying students than those who pay (like undergraduates). Labs are built and remodeled by the university. New faculty off get substantial start-up costs to get their research off and running. There are, of course also research costs in the humanities although not nearly as much.Computer costs. Don't get me started. Faculty typically get a personal computer, but usually not top of the line. But the big expense is in maintaining the campus network and connections to the Internet. Gotta have it for research, for instruction, and to appeal to students. Classrooms have to be wired with the latest and greatest.And speaking of graduate education most law schools and business schools are self-supporting although not necessarily when utilities, maintenance., etc is included. Medical school lose incredible amounts of money although you need a PhD in accounting to try to figure out what medical education costs. It's complicated, but no matter how you do the spread sheet, medical schools are money swamps.Tuition costs a lot, but at most elite and semi-elite places something between one-third and one half of tuition is given back by scholarships, some externally funded, but at most places the university simply eats the expense. Some financial aid is in the form of loans or work, but many places put a cap on how much scholarship aid can be loans.As others have pointed out American universities not only look better (and often for good reasons), have better labs and libraries, what I'll call amenities are much better, dorms exist (which is often not the case in other countries) and are generally pretty nice, and faculty salaries relative to averages are higher. Of course, in US universities students actually attend classes (well at least sometimes) and don't end up in crowded lecture halls with little chance of access to instructors or even the ability to be able to take courses they need because they are over-enrolled.. Kids here have it much better, perhaps that's good, perhaps not. But that's what the market demands. And it's probably good generally.It has become a mantra of conservatives that the problem is the easy availability of loans. Because students can get easy money to pay for their expenses universities have no incentive to curtail costs. That's is very simplistic and mostly wrong. Universities don't run on money provided by student loans. Tuition (whether from loans or parents) typically pays about 25% of the cost of universities. The part supported by loans is some fraction of that and although it's not a trivial part of the budget, it's not a major part either. The fantasy (and it is that) seems to be that if we didn't give students loans, suddenly kids would stop applying and colleges would be forced through some logic of supply and demand to lower costs. Unfortunately it simply won't work generally. If everyone had to pay the full cost state universities and less elite ones probably would suffer a decline in applications and enrollments. However, most costs are not easily lowered. The easiest place would be in terms of building maintenance and salaries. The former means just kicking a can down the street, and if faculty salaries were frozen or, god forbid lowered, many would leave the profession or gravitate to places where they could make more money. Good riddance? Well, not really. We really don't need that kind of brain drain, already a major problem in the sciences. But the major solution, already occurring, is that instead of paying professors say $100,000 a year we'll hire adjuncts or graduate students to do the teaching. So let's do the math. Our mythical tenured professor teaches say 5 classes (although most teach fewer especially at the more elite universities) so that works out to $20,000 a class. But we can hire an adjunct for maybe as low as $5000 a class (what my previous university paid), and you don't have to have a degree in higher math to see where that's going. Also you don't have to pay retirement or health insurance, which adds something on the order of 20% to the salary of our professor. Now I should be very clear that many adjuncts work harder at teaching that tenure-track faculty and some are actually more effective at it. But they can't write effective letters of recommendation, provide research opportunities or even spend much time with students out of class as they rush from one teaching assignment to another.If we reduced loan opportunities the Harvards and Stanfords would still flourish quite nicely although they would probably be even more populated by rich kids. There are always going to be parents who are willing to pay almost anything so that they can have bragging rights about where their children go. It's hard to predict what might happen at state universities, but certainly the general consensus has been that education at such places has generally worsened once states stopped contributing as much. Cutting costs isn't going to make things better -- just cheaper. There seems to be some assumption that university administrations raise tuition on what amounts to a whim without worrying about the effects on their students. Nothing could be further from the truth. Raising tuition is usually an agonizing decision,, and one not taken lightly.Cutting down loan possibilities as a way of putting pressure on universities is about the same as cutting government spending to reduce the deficit. In principle that sounds great, but in practice it's hard to get agreement on what to cut and most of the items that are easiest to cut have little impact on over-all spending. For better or worse in some important respects higher education is beyond the laws of supply and demand. In that it's like American medicine.There's much more to be said, and I agree that in some ways higher education is out of wack or at least has screwy priorities. But it's hard to make education cheaper, and college administrators spend a huge amount of their time trying to figure out ways to lower costs within the various constraints they have. There are some things we could do to make education cheaper, but most would decrease the perceived and probably real benefits. What we might do is for a different discussion but curtaining loans is not a good idea because it would not solve the problem and would make it harder for poor kids, who most need the education, to go to college.ADDITION 3/12/19: Recently Rice University announced a policy of free tuition for children from families that make less than $130,000/yr, and no tuition or room and board fees for those making less than $65,000/yr. Students who come from families making less than $200,000/yr will also not be required to take out loans although they will be expected to earn money during the summer or while on campus. Most elite universities have adopted similar programs. At Rice tuition is $47000, room & board $14000, fees are $745, and books $1200. Harvard, Stanford, etc. are slightly greater.Of course, many private colleges are more dependent on tuition income and cannot afford to be so generous, but even there financial aid often covers a substantial part of costs. State universities, of course, are much cheaper and generally have fewer resources to offset tuition. In that regard it’s important to note that one reason tuition has risen so fast at state universities is because almost all state legislatures have cut their support of higher education dramatically. As one example, in 1984 the state of Texas paid 47% of the costs of the budget at the University of Texas, with tuition accounting for 5%; in 2018 the state paid 12% and tuition revenues 21%. Now there is a legitimate argument that students who benefit from a college degree should pay for it rather than the state. But that is short-sighted since the entire state benefits from having well educated folks around and about. By the same logic, I who have no children in elementary and high school should not be “forced” to pay for the education of the children across the street who go to public schools. Historically Americans have always believed that support for education provided general benefits and should be paid by all. At any rate, the primary reason for rising costs at state universities has been the decreasing support from the state. Whether that is fair or wise can be debated.

Of course. That’s exactly what “due diligence” is all about. How thorough an investor will be depends to some extent on the professionalism of the investor, the size of the investment, and the stage of the company, but the checking will almost certainly entail requesting and reviewing all of the startup’s financial accounts and projections, customer contracts, cap table, IP filings, etc. (That’s one reason that a platform like Gust Launch can be so useful, because it ensures that everything is appropriately tracked and recorded.)Here is a typical business diligence checklist for an angel or venture investment:Company OverviewArticulate the “equity story” here (i.e. why the company is on to something and why its stock will appreciate greatly). Is it compelling?Does the company engage in thorough business planning?Does management have a clear understanding of the challenges it faces and a realistic plan to address them?Are there any skeletons in the company’s closet from previous activities (e.g. outstanding liabilities, unassigned IP)?Management TeamAre all resumes and personal references available?What key strengths does the management team have collectively and individually?What holes are there in the team and how/when might they be filled?Have there been any disgruntled employees and, if so, why? Do these employees cause any tangible risk going forward?What strengths does the Board bring to the company? How might it be augmented?Is there a Board of Advisors, and, if so, how active is it?MarketingDoes the company have a well-defined sense of what its true market is?·Is this market sufficiently large and fast-growing to be attractive?Is the company’s market generalized or niche?If generalized, does the company stand out from competitors?If niche, will the company dominate sufficiently to either build attractive cash flow or be bought by a larger firm?Is the company the leading firm in its market? Market share?What barriers to entry does the company enjoy? How long lasting are they?Does management understand the key metrics to measure its business and does it track its progress effectively? How do the metrics compare to similar firms?Does the company have a sensible business model?SalesDo customer reference calls bear out claims management make about demand for their products/services?Is the company pipeline attractive? What is the probability that it will hit its targets?Does the sales strategy make sense? What could be done to improve it?Can the company acquire customers profitably?Is the company’s sales cycle better or worse than its competitors and is it attractive?CompetitionDoes the company know who its competitors are, including indirect competitors?Where does the company stack up vs. competitors? Can it win business from them?Has the company focused its business plan narrowly enough to limit its competition?How well-funded is the competition?Product DevelopmentIs the product a need-to-have, a nice-to-have, or a luxury? Does it solve a critical problem or enable growth (if B2B)/provide entertainment (if B2C)?Describe the customer demand in detail?Has the company proven adept at product development? Does it have an adequate technical team?Did product development flow from perceived (or better yet researched) customer demand or from some other impetus? Explain.Intellectual PropertyDoes the company have an appropriate IP strategy? Explain.Are there any issues relating to patents or intellectual property?Production / Operations (HR, Customer Support, Fulfillment, Returns, Distribution Logistics)Do the management team and other employees enjoy appropriate incentives to run the company for the long term?Are the interests of management aligned with ours?Are total labor costs appropriate?Does the company have a realistic plan for managing its back office and customer support? Will it be able to handle customer growth while maintaining customer satisfaction?Financing StrategyIs the valuation attractive? What is the projected times money returned and IRR (if calculable)? Is the risk-adjusted return attractive?Does the company have a thorough plan as to what it will do with our money? Is it sensible?Is the company raising the right amount of money?What financing risk exists in the business plan? How much additional money must they raise and how flexible (in amount and timing) can they be in raising it?FinancialsDoes the company have a realistic set of projections based on reasonable assumptions?Are the projections bottom-up (good) or top-down (not so good)?Does the company have good operating leverage?Are the margins attractive (absolutely and relative to competitors)?Has the company met, exceeded or fallen short of its previous budgets? Analyze variances.Assets and PropertyAre there any issues here?Customer ReferencesWrite up summary of reference calls.Do customer reference calls bear out claims management make about demand for their products/services?Are there any issues flagged by customers? Does management recognize and admit to (without prompting) these issues?Contracts and AgreementsReview all contracts with legal counsel and flag any issues, risks or omissions.Corporate DocumentsReview all corporate documents with legal counsel and flag any issues, risks or omissions.TaxesReview company tax situation and analyze effects on cash flow over next several years.InsuranceAssess adequacy of insurance coverage and analyze risk to investment thesis of any insurance gaps.And here’s the legal/financial due diligence checklist that would accompany it in the case of a full venture or strategic round:“Please furnish for our review copies of the following documents or indicate in writing on a copy of this list that none exist. In addition, please provide a written summary of each oral agreement or arrangement which is responsive to the requests set forth below. Any documents identified as originals will be returned to you promptly.Unless otherwise indicated, (i) all requests are for any matters which are currently existing and in effect or which occurred at any time since the Company’s incorporation but which are not now existing or in effect, and (ii) each request applies to all past and present direct or indirect subsidiaries (if any), and all predecessors, whether corporations, partnerships or joint ventures. For purposes of this request, all such entities are included in the term “Company.” Where there is no information responsive to the request, please so indicate by writing “N/A” or the equivalent in the margin.I. Corporate Records.Chart showing, or a narrative description of, the corporate, partnership, limited liability company structures (parents, all subsidiaries and other financially or legally related entities) and ownership (including the number of shares and/or percentage of ownership) of the Company.Copies of the certificates of incorporation, by-laws, partnership agreements, operating agreements and other similar organizational documents of the Company.Stock record books and copies of all stock certificates, including reverse sides, of the Company and affiliates.List of all subsidiaries and affiliates of the Company, if any.List of jurisdictions in which the Company is qualified or has applied for qualification to do business and evidence of such qualification or application.List of jurisdictions where the Company has substantial contacts (e.g., real or personal property owned or leased, employees, sales representatives, etc.).List of the Company’s current shareholders, the numbers of shares owned and the consideration paid for such shares.Warrants, stock options, agreements relating to any warrants or options to purchase securities, any convertible security and other rights to subscribe for or purchase securities.Schedule of all outstanding stock options and warrants, including name of individual, grant date, expiration date and exercise price, of the Company.Voting agreements, voting trusts, shareholder agreements or other similar arrangements with or among shareholders or equity owners of the Company.Stock purchase and repurchase agreements.Stock restriction agreements.Registration rights agreements.Minutes or other records of meetings of the Board of Directors, committees of the Board of Directors or shareholders of the Company.All materials distributed to members of the Board of Directors, committees of the Board of Directors or shareholders of the Company since incorporation or organization (or written consents in lieu of meetings).II. Employee Benefit Plans and Other Employment Matters.Employment, consulting, compensation or other agreements or arrangements to which any director, officer or employee of the Company is a party.Copies of any provisions of any contract or arrangement, pursuant to which any director or officer (or other applicable principals, partners or members) of the Company is insured or indemnified in any manner against liability.All documents relating to pension, deferred compensation, stock option (including SARs), profit sharing and any other similar plans of the Company, all IRS determination letters relating to the foregoing and the most recent actuarial report for any defined benefit pension plan for the Company.All other employee compensation, bonus, incentive, benefit (e.g., life or health insurance) or similar plans of the Company, including plan evaluation and actuarial evaluation reports.Any standard form employment agreements used by the Company as well as any agreements that deviate in any material respect from such standard forms, and all severance or special termination agreements with senior management of the Company.Information with respect to any pension benefit plan subject to Title IV of ERISA maintained by an entity other than the Company which is, or was within the past five years, in a single controlled group with the Company.All collective bargaining agreements to which the Company is a party or by which it is bound, including any side letters.Any policy manuals or materials with respect to trade or employment practices of the Company.Confidentiality, proprietary rights, and non-competition agreements (i) between the Company and any officer, director, employee, consultant, representative, supplier or customer or (ii) which the Company’s employees or consultants have entered into with a prior employer.Information as to employment arrangements and/or compensation plans where any benefits or rights are triggered by a change in control of the Company, including any so called “golden parachute” or similar arrangements.Information as to employment arrangements and/or severance plans where any benefits or rights are granted upon severance or termination of an employee, whether or not in connection with a change in control of the Company.Any contracts for consulting or management services.III. Regulatory MattersAll applications, filings, findings, reports, registration statements, correspondence, complaints, consent decrees, determinations, orders, etc., relating to federal regulatory agencies and all foreign, state and local agencies performing similar functions. Include all exhibits for all filings, unless duplicative of material requested elsewhere.IV. Properties, Assets, and Leases.List of all real property owned, leased (as lessee or lessor) or used by the Company including all documentation of ownership, leasehold interest, any encumbrances or restrictions against transfer on such property, and any title insurance policies or title searches.List of all intangible or intellectual property e.g., patents, trademarks, copyrights, trade names, trade secrets and customer lists owned, leased, licensed or used by the Company and any patent or trademark registrations or similar documents in any domestic or foreign jurisdiction. Please include any required permits, licenses, approvals, related regulatory reports, or agreements and any actual or threatened claims of infringement or misappropriation.List of all fixed assets, personal property and equipment owned, leased or used by the Company including all documentation of ownership, leasehold interest or any encumbrances or restrictions against transfer of such property.With respect to all of the properties and leases described in this Item IV, please identify any officers, Directors, shareholders or employees of the Company holding an interest in such properties or leases.V. Material Agreements and Financing Documents.Loan agreements, lines of credit, indentures, revolving credit agreements, note purchase agreements, notes, other evidence of indebtedness and all related documents concerning any debt financing.Venture capital financing documentsAny agreements in principle or otherwise with respect to mergers, acquisitions, divestitures or sales of material assets of the Company, whether or not consummated.Mortgages, security agreements, pledges and other evidence of liens or letters of credit securing any obligations of the Company.Corporate and personal guarantees of any obligations and powers of attorney executed in the Company’s name.Schedule and copies of all contracts, agreements, arrangements or understandings under which the Company (i) has any surviving representations or warranties or any ongoing obligation to indemnify, defend or hold harmless any party, (ii) is subject to any other material commitment, contingency or liability or (iii) which restrict in any manner the right of the Company to conduct its business or to compete with any partyList of bank accounts belonging to the Company and its affiliates.Correspondence and internal memoranda relating to any documents requested in this Item V.VI. Marketing, Sales and Operations.Licensing agreements (including inter-company).Patents, patent applications, trademarks, trademark applications and copyrights (domestic and foreign), service marks (domestic and foreign) and documents relating to know-how, trade secrets, and other proprietary information used by the Company.Promotional material, sales literature and other advertising documents distributed to potential customers.Agreements with any educational institutions or relating to the Company’s provision of private student loans.Joint venture, partnership and limited partnership agreements.Agency, commission, distribution, franchise or sales representative agreements.Governmental contracts, agreements or purchase orders.Agreements under the which the company is obligated to provide or purchase a material amount of goods or servicesAll other contracts (including executory contracts) material to the Company.VII. Accounting, Financial and Insurance Matters.2004 annual and 2005 year to date monthly financial statements (including balance sheet and income statement).All documentation relating to any transaction between the Company and any director and officer including any loans or similar arrangement.Budgets, fiscal projections and strategic plans, together with a review of or comparison with actual results, if available.Summary of federal, state, local and foreign income tax status, including consents and agreements with any tax authority or any pending or threatened disputes concerning tax matters and all audit papers and communications between the Company and the Internal Revenue Service.Any documents relating to liabilities and obligations, including material contingent liabilities, write-downs or write-offs of notes or accounts receivable, incurred otherwise than in the ordinary course of business since formation.Copies of all insurance policies and a history of insurance claims, with details of any pending claims or incidents which may arise in claims.VIII. Legal Proceedings.List and description of all material litigation, administrative proceedings, arbitration proceedings, investigations, claims or disputes (including pending or threatened litigation or claims) involving the Company or any principal shareholder, officer, director, principal, partner or member of the Company as a plaintiff or defendant.All consent decrees, judgments, other decrees or orders, settlement agreements, injunctions or similar matters (continuing or contingent) to which the Company is a party or involving any person in his capacity as a shareholder, officer, director principal, partner, member or employee of the Company.Documentation with respect to any pending or threatened disputes with any governmental agency to which the Company is or may become a party.All correspondence dealing with actual or alleged infringement of patents, trademarks and copyrights.Any waivers or agreements canceling claims or rights of substantial value other than in ordinary course of business.IX. All other materials and documents involving the Company, not otherwise covered by the foregoing items, which, in your judgment, may be material to the business of the Company or which should be reviewed in making disclosures regarding the business and financial condition of the Company.”