ERIC Number: ED338155
Record Type: Non-Journal
Publication Date: 1991-Apr
Reference Count: N/A
Lender Profitability in the Student Loan Program.
This report provides results of a study that measured lender profitability in the Guaranteed Student Loan (GSL) program and compares these results with the profitability of other types of lending. Data analysis reveals credit card lending to be the highest average level of profitability over the 5-year period considered. Other lending types, in order of profitability, are commercial and industrial loans, student loans, automobile loans, mortgage-backed securities, adjustable-rate mortgages, fixed-rate mortgages, and U.S. Treasury securities. The relative high level of student loan profitability is due to their guaranteed yield, as well as their low level of credit and liquidity risk. The profitability of student lending is also found to have less variability when compared to other types of bank lending. The study is divided into five sections: the first briefly presents the theoretical basis for the measurement of risk-adjusted returns used in the study; section 2 discusses the data used to measure risk-adjusted returns; section 3 presents the estimates of lender profitability for each asset class, as well as future trends; section 4 outlines several limitations to the analysis; and section 5 outlines a methodology for estimating scale economies in the commercial banking sector and applies it to student lending. (GLR)
Publication Type: Reports - General
Education Level: N/A
Authoring Institution: Regional Financial Associates, Inc., West Chester PA.; Department of Education, Washington, DC. Office of Planning, Budget, and Evaluation.