2004 Annual Report

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2004 Annual Report A s Governor of Kentucky, higher education is one of my top priorities. A college education or technical training plays a critical role in determining ones success in todays fast-paced,
technology-driven economy. Kentucky offers excellent higher
education opportunities throughout the state, with public and
private colleges and universities, community and technical colleges,
trade schools and online programs.
Higher education can be a costly endeavor, but student nancial aid helps thousands of Kentuckians pursue a higher education every
year. The Commonwealth offers our citizens a unique balance of
need-based grant and merit-based Kentucky Educational Excellence
Scholarships (KEES), both of which are funded by Kentucky
Lottery proceeds. Besides state grants and KEES, the Kentucky
Higher Education Assistance Authority and The Student Loan
People administer teacher and osteopathic medicine scholarships,
work-study, savings, and Kentuckys lowest-cost Federal Stafford
Loans through the BestStart, Best in Class and Best in Care
programs.
Todays investment in higher education and student nancial aid will generate substantial returns in the coming years. Working
together, we will achieve a brighter future for individual Kentuckians
and all of the Commonwealth. Sincerely, Ernie Fletcher, Governor Commonwealth of Kentucky A message from Gov. Ernie Fletcher 1 Board of Directors (as of June 30, 2004) Joey B. Bailey, Louisville Marcia Kuegel Carpenter, Owensboro Austin B. Carroll, Hopkinsville Janis G. Garr, Lexington Ronald L. Green, Louisville Shirley A. Huelsmann, Fort Mitchell Dr. Jim A. Jackson, Frankfort Albert A. Kirkpatrick, Louisville Bobbie D. Powell, Louisville John G. Prather, Jr., Somerset Ex Of cio Members Dr. Gary S. Cox, President, Association of Independent Kentucky Colleges and Universities Dr. Thomas D. Layzell, President, Council on Postsecondary Education Jonathan Miller, State Treasurer Robbie Rudolph, Secretary, Finance and Administration Cabinet Gene Wilhoit, Commissioner, Kentucky Department of Education Senior Leadership Dr. Joe L. McCormick, Executive Director and CEO Janice C. Ernst, Chief of Staff Charles Robinson, Chief Financial Of cer Blake Tanner, KHEAA Chief Operating Of cer Roger B. Tharp, KHESLC Chief Operating Of cer Scotty Bryan, Chief Information Of cer Ted Franzeim, Senior Vice President for Customer Relations Rick Casey, General Counsel Dr. Joe L. McCormick Executive Director McCormick was appointed Executive Director of KHEAA and The Student Loan People in October 2001 following a nationwide search. Dr. McCormick is a graduate of the Leadership Kentucky
Class of 2004; is a member of Kentuckys Cradle to College Com-
mission and P-16 Council; and serves on the Boards of Directors
of Kentuckys Affordable Prepaid Tuition, the National College Access Network and the National Council of Higher Education Loan Programs (NCHELP). Previously, he was Vice President for
National Affairs for the Apollo Group and a faculty member of
the University of Phoenix Online. Other prior positions include
Chair of the Direct Loan Task Force within the U.S. Department
of Education, Executive Director of the Alaska Commission on Postsecondary Education, and President
and CEO of the Texas Guaranteed Student Loan Corporation. Over the years, he was elected president
of NCHELP and the National Association of Student Financial Aid Administrators. He earned his Ph.D.
from the University of Texas at Austin. Marcia Kuegel Carpenter Board Chair Carpenter was appointed to the KHEAA Board of Directors in January 1999. In 2003-2004, she was the rst person to serve as
Board Chair of both KHEAA and The Student Loan People sm after the Kentucky General Assembly rati ed Executive Orders in 2003
making the membership of the Boards identical. She is a Guid-
ance Counselor at Daviess County High School, graduate of the
Leadership Kentucky Class of 2004 and member of the Kentucky
Association of School Counselors and Kentucky Association of
Secondary and College Admissions Counselors. She has 23 years
of education-related experience and earned her Master of Arts
degree from the University of Kentucky and Master of Instruction from the University of Delaware. 2 The Kentucky Higher Education Assistance Authority (KHEAA) was created in 1966 by the Kentucky General Assembly to improve access to college and technical training by guaranteeing student loans, providing student nancial aid and distributing information about college opportunities. In 1978, The Student Loan People was created as the
Kentucky Higher Education Student Loan Corporation (KHESLC), an independent corporation, to make, nance, service and collect educational loans. KHESLC assumed the
trademark name of The Student Loan People in 1999. The two organizations have combined their efforts to: Secure full funding of state grant and scholarship programs. Fully utilize technology to modernize and simplify student nancial aid processes. Expand and improve outreach to positively impact the college-going population. KHEAA: Administers 10 state student aid programs, including the Kentucky Educational Excellence Scholarship (KEES), and assists with administration of two other programs. Administers Federal Family Education Loans for Kentucky and Alabama. Provides an extensive, multifaceted outreach program to distribute nancial aid information to positively impact Kentuckys college-going rate. The Student Loan People: Provides low-cost loansFederal Stafford Loans, Federal PLUS Loans (for parents) and Federal Consolidation Loans. Offers borrower bene ts that signi cantly reduce the cost of student loans. Provides thousands of free college planning and nancial aid publications. Assists KHEAA in providing outreach services, including GoHigherKY.org, the new comprehensive web portal on higher education. Contributes millions of dollars to Kentuckys need-based student aid programs. Who We Are What We Do 3 Why Its Important to Kentucky As state-created entities that do not operate for pro t, KHEAA and The Student Loan People recycle their revenue into these bene ts for Kentucky and its students: Cost-free administration of state student nancial aid programs and services for 25 years. $3 million in FY 2004 for student awards from the states need-based College Access Program (CAP) Grant and Kentucky Tuition Grant (KTG). Free college planning and nancial aid publications for high school students and adults. Development and maintenance of Kentucky's one-stop higher education websiteGoHigherKY.org. Outreach counselors who make presentations and participate in college fairs and nancial aid workshops all across the state. Borrower bene ts offered by KHEAA and The Student Loan People: Waive the guarantee fee (1%) and origination fee (3%) for all Kentucky students. Address Kentucky's critical shortage areas in teaching and nursing. Encourage students who enter these professions to remain in Kentucky. Since the mid-1980s, KHEAA and The Student Loan People have generated suf cient revenue to cover all FFELP administrative
costs. Without using state tax dollars, KHEAA and The Student Loan People support Kentuckys economy through employment of approximately 500 staff. 4 Improving Kentuckys Economy . . .
One Citizen at a Time T

he Kentucky Higher Education Assistance Authority (KHEAA) and The Student Loan People pursued their mission with new vigor and determination
in FY 2004, taking to heart that higher
education is the key to improving the
lives of Kentuckians. Studies clearly show
those who pursue and complete a college
education or technical training enjoy a wide range of personal, nancial and other lifelong bene tshigher earnings, more career opportunities and a more comfortable
lifestyle. The bene ts of higher education, however, are not purely personal. Higher education
bene ts the entire Commonwealth in the
form of lower unemployment, increased tax revenue, less dependence on social programs,
lower incarceration rates and higher levels of
civic participation. The future economic well-being of Kentucky and Kentuckians is directly tied to increasing the educational
attainment of our citizens. During 2004, our staff worked tirelessly
with many partners to improve our programs and services to make higher
education more accessible for Kentucky
families; help the state meet its goal of
increasing the college-going rate; and, as a
result, move the Commonwealth forward. Higher education is critical to Kentuckys competitiveness and success in todays
global economy. Kentucky is on the right track supporting both the need-based College Access Program (CAP) Grant and Kentucky
Tuition Grant (KTG) and the merit- based Kentucky Educational Excellence
Scholarship (KEES)while most states
choose to support one type of student aid
at the expense of the other. CAP provides grants to Kentucky students whose families demonstrate the amount they should be able to contribute to their higher education expenses is not enough to cover the cost of college. KTG seeks to equalize tuition of Kentuckys private colleges and offers students with demonstrated 5 We hope you will take a look at our
FY 2004 report to see other activities and accomplishments made possible by our staff,
our boards of directors, state legislators and
the Governor as well as our many school
and lender partners. What an honor and
privilege it is to serve Kentuckians and help
build better lives and a better future for the Commonwealth. Marcia K. Carpenter Board Chair Dr. Joe L. McCormick Executive Director By now, many Kentucky students
and families are aware of the
importance of making good grades
and ACT scores to earn KEES awards
to help them pay for college or
technical training. Since 1999,
more than 220,000 students have
earned scholarships totaling over $170 million, which can generally be used by each student for four years of higher education. KHEAA and The Student Loan People, in collaboration with several other education
agencies and organizations, developed the
comprehensive, statewide higher education website, GoHigherKY.org, to provide
Kentuckians a single, powerful source for information about higher education in Kentucky. KHEAA and The Student Loan
People employ a variety of other methods to spread the word about higher education and
student aidoutreach counselors who make
school visits and presentations statewide;
free hard-copy and online publications
for high school students and adults; and joint sponsorship, along with the Kentucky Association of Student Financial Aid
Administrators, of free College Goal Sunday workshops to help families complete the Free Application for Federal Student Aid (FAFSA). nancial need a choice of attending a broad
range of independent Kentucky schools.
KEES rewards high school students with scholarships for good grades and ACT (or SAT-equivalent) scores.
To ll the gap between student nancial aid and the cost of higher education, KHEAA and The Student Loan People provide exceptionally low-cost loans (BestStart) for all students and aggressive loan forgiveness programs (Best in Class
and Best in Care) to encourage teachers
and nurses to remain in Kentucky when
they graduate and enter the workforce.
Opportunities to save are extremely
important since more students than ever
before must borrow to pay college expenses. To ensure students are aware of higher education options and student nancial aid, 6 KHEAA Highlights Disbursed $148.8 million in state aid in FY 2004more than double the amount disbursed in FY 2001. Guaranteed $960.9 million in FFELP loansa 21% increase over FY 2003 making KHEAA 10th in volume among the nations 36 guarantors. Staff project KHEAA will guarantee $1 billion in student loans in FY 2005. Increased new loan guarantee volume 22% to $672 million, including: $363 million for Kentucky. $287 million for Alabama.* $22 million for other states across the U.S. Increased guarantees outstanding to $2.9 billion and original principal outstanding totaled $3.6 billion. Lowered the default recurrence rate to 50.77%a 4.5% reduction from FY 2003. Paid $1.9 million in annual administrative costs of Kentucky's student nancial aid programs with agency-generated revenue , allowing
General Fund appropriations to go directly to students in the form of awards. Collected more than $60 million in defaulted student loansthe fourth-best rate in the nation among agencies that guarantee student loans. * The U.S. Department of Education authorized KHEAA to be the designated guarantor of the FFELP in Alabama in 1996. Student Aid Disbursements Loan Guarantee Volume by Type (Net of Cancellations) Loan Guarantees (Gross) 7 Improved market share from 46% to 66%. Increased loan portfolio serviced 36% to $5.7 billion. Increased FFELP originations 83% to $229 million. Increased FFELP consolidations 51% to $92 million. Improved ranking among FFELP loan holders from 38th in 2002 to 37th in 2003 (latest rankings). Improved ranking among FFELP originators from 40th in 2002 to 32nd in 2003 (latest rankings). Ranked the 8th fastest-growing student loan originator in the nation in The Greentree Gazette, May 2004. Provided Kentuckians the best borrower bene ts package. Earned the Greater Louisville, Inc., Work/Life Alliance Award for the eighth straight year. The Student Loan People Highlights Loan Portfolio Growth FFELP Originations and Consolidations FFELP Market Share in Kentucky 8 Outreach Services www.GoHigherKY.orgA higher education website developed in collaboration with Kentucky education agencies and organizations for use by students of all ages. Students can plan their high school classes, explore career options, choose a college, apply online, take online campus tours, learn about nancial aid, search for scholarships,
transfer information to the FAFSA and transfer high school transcripts. www.kheaa.comA higher education website that is a warehouse of college nancial aid information. Students can access their KEES accounts, learn more about nancial aid programs,
estimate their expected family contribution and read KHEAA publications online. Free college planning publications for high school studentsA series of hard-copy and online publications based on grade level, which includes Getting Started, Getting Set, Getting Ready
and Getting In. Guidance counselors distribute the books to students each fall. Affording Higher EducationA nancial aid reference book listing more than 3,200 scholarships, grants, loans and other programs speci cally for Kentucky students. Adults Returning to SchoolAn excellent source of college planning information of speci c interest to adult students. Regional OutreachNine outreach counselors, who are assigned to and live in regions across the state; participate in college and career fairs, nancial aid workshops, classroom presentations,
and media interviews; and make personal, on-site visits to those who can assist in providing higher
education and nancial aid information. College Info Road ShowA traveling classroom with onboard outreach staff and laptops to access GoHigherKY.org and other websites, identify higher education institutions that meet speci c
educational goals, locate sources of nancial aid for which the student is eligible and assist in the aid
application process. Borrower AdvocatesStaff who counsel borrowers on repayment options as well as deferments, forbearances and other ways of keeping student loan accounts in good standing. KHEAA and The Student Loan People administer a variety of free outreach initiatives to apprise Kentuckians about higher education and student nancial aid. 9 Direct Student Bene tsFY 2004 Kentucky Educational Excellence Scholarship (KEES)For encouraging and recognizing students based on their GPAs and ACT scores. College Access Program (CAP) GrantFor nancially needy students to attend Kentucky postsecondary schools. Kentucky Tuition Grant (KTG)For nancially needy students attending one of Kentuckys independent higher education institutions to help equalize tuition
with that of public schools. Teacher ScholarshipFor highly quali ed, nancially needy students seeking initial teacher certi cation. Osteopathic Medicine ScholarshipFor students attending Pikeville College School of Osteopathic Medicine to equalize tuition with that of other state
medical schools. Kentucky National Guard Tuition AwardFor active Guard members in good standing. Early Childhood Development ScholarshipFor students working at least 20 hours weekly in an early childhood setting. KHEAA Work-Study ProgramFor students attending participating schools to earn wages to help pay higher education costs. Federal Stafford LoanFor undergraduate, graduate and professional students to ll the gap between other student aid and the cost of attendance. Federal PLUS LoanFor parents who borrow on behalf of the student. Federal Consolidation LoanFor borrowers in repayment. Kentuckys Affordable Prepaid Tuition (KAPT)For families to prepay tuition and guarantee the cost of tomorrows tuition at lower prices today for their bene ciary. Kentucky Education Savings Plan Trust (KESPT)For families to save for future tuition, fees, room, board, books, supplies and equipment of their bene ciary. State Aid Program Funds Recipients Amount Kentucky Educational Excellence Scholarship (KEES) 60,450 $72,363,300 College Access Program (CAP) Grant 40,080 45,420,200 Kentucky Tuition Grant (KTG) 10,870 23,012,900 Teacher Scholarship/Osteopathic Medicine Scholarship
Conversion Loan Service Cancellation and Write-off 1,240 3,764,900 Kentucky National Guard Tuition Award 1,210 2,541,900 KHEAA Work-Study 1,100 919,100 Early Childhood Development Scholarship 1,000 771,300 Total 115,950 $148,793,600 Federal Family Education Loan Program Guarantees* Loans Amount Subsidized Stafford 115,800 $391,196,000 Unsubsidized Stafford 85,790 334,248,800 PLUS 7,390 52,880,600 Consolidation 12,420 182,580,800 Total 221,400 $960,906,200 Other Bene ts Recipients/Loans Amount Teacher Scholarship/Loan** 563 $2,025,700 Osteopathic Medicine Scholarship/Loan** 90 1,023,500 Kentucky Education Savings Plan Trust (KESPT) Payments 440 1,203,600 Kentuckys Affordable Prepaid Tuition (KAPT) Payments 2 2,600 Insurance Premium Waiver 167,050 6,248,100 Total 168,145 $10,503,500 * Represents original amounts guaranteed.
** These programs are scholarships if service requirements are ful lled; otherwise, they are repayable loans with interest. KHEAA administers a variety of student nancial aid programs, Federal Family Education Loans, and 529 plans to help families pay higher education expenses. 10 The Student Loan People has created three unique programs to help borrowers save on their student loansBestStart, Best in Class and Best in Care. Borrowers who choose The Student Loan
People as their lender enjoy no fees, credits to loan principal for consistent on-time payments and
interest rate reductions for automatic payments. Almost all Kentucky schools participate in the Federal Family Education Loan Program (FFELP) administered by KHEAA and The Student Loan People and can offer these savings. 0% origination fee 0% insurance fee 3.5% credit to the original loan principal after the rst 30 consecutive, on-time payments .25% interest rate reduction for automatic payments For Kentucky Teachers, Guidance Counselors and Libarians Quali ed Kentucky teachers with BestStart loans
can receive additional repayment bene ts on any
loan held by The Student Loan People, including
Consolidation (except spousal consolidation) and
PLUS Loans. Interest forgiveness at the end of each academic year for each year of service at public or nonpro t Kentucky elementary or secondary schools (any interest paid is credited to the loan principal) Up to 20% loan forgiveness each year for teachers in the following critical shortage areas at public or nonpro t Kentucky elementary or secondary schools: Special education Math Science English as a Second Language (ESL) Kentucky nurses with BestStart or PLUS Loans can
receive additional repayment bene ts. Only inter-
est forgiveness applies to Consolidation Loans. Interest forgiveness at the end of each scal year for nurses working in Kentucky (any interest paid is credited to the loan principal) Up to 20% loan forgiveness for RNs, LPNs and LVNs for each year of service in Kentucky Borrower Bene ts For All Stafford Loan Borrowers For Kentucky RNs, LPNs and LVNs 11 Loans Savings Cumulative BestStart for all FFELP Stafford Borrowers 70,000 $10,072,100 $14,323,400 Subtotal $10,072,100 $14,323,400 Best in Class Forgiveness for Teachers Interest Forgiveness Teachers, Counselors, Librarians 3,360 $729,200 $1,591,100 Interest and 20% Principal Forgiveness Special Education Teachers 3,300 4,657,200 8,205,800 Science Teachers 620 779,400 1,787,700 Math Teachers 770 790,500 1,635,200 ESL Teachers 20 65,000 145,000 Subtotal $7,021,300 $13,364,800 Best in Care Forgiveness for Nurses Interest Forgiveness for Registered Nurses 1,880 $451,000 $1,121,500 Interest and 20% Principal Forgiveness 230 321,800 322,300 Subtotal $772,800 $1,443,800 Contributions to State Aid Programs Contributions College Access Program (CAP) Grant $1,181,900 $2,227,600 Kentucky Tuition Grant (KTG) 927,200 1,881,500 KHEAA Work-Study 890,900 1,890,900 Subtotal $3,000,000 $6,000,000 KHEAA Waiver of 1% Guarantee Fee since 1996 $6,248,100 $33,252,500 Subtotal $6,248,100 $33,252,500 Total Bene ts to Students $27,114,300 $68,384,500 Bene t Savings to Students FY2004 12 Selected Financial Information To request a copy of KHEAAs audited financial statements, call (502) 696-7421. To request a copy of The Student Loan Peoples audited financial statements, call (502) 329-7145. as of June 30, 2004, and for the scal year then ended Statement of Net Assets Current assets $ 4,137,823 $ 16,539,316 $ 14,761,471 $ 52,472,982 $ 12,344,190 $ 112,872,422 Loans, net 978,578,931 Other noncurrent assets 9,971,802 4,838,027 73,618,279 25,958,499 81,335,113 Total assets 14,109,625 21,377,343 88,379,750 52,472,982 38,302,689 1,172,786,466 Current liabilities 269,709 6,306,848 945,367 76,607 3,886,624 104,698,194 Noncurrent liabilities 99,323,706 7,735,000 967,742,839 Total liabilities 269,709 6,306,848 100,269,073 76,607 11,621,624 1,072,441,033 Total Net Assets $13,839,916 $15,070,495 $(11,889,323) $52,396,375 $26,681,065 $100,345,433 Statement of Activities Program revenue/additions $146,468,072 $44,231,046 $10,228,911 $18,044,668 $20,017,167 $81,977,715 Direct expenses/deductions 148,793,614 47,945,673 12,624,003 2,191,149 14,140,153 62,220,539 Indirect expenses 3,729,807 Total (6,055,349) (3,714,627) (2,395,092) 15,853,519 5,877,014 19,757,176 Interfund transfers 2,964,707 (2,964,707) Transfer to KAPT (119,136) Transfer from Internal Service Fund 119,136 Transfer from KHESLC 3,000,000 (3,000,000) Change in net assets (90,642) (3,714,627) (2,275,956) 15,853,519 2,793,171 16,757,176 Net assets at beginning of year 13,930,558 18,785,122 (9,613,367) 36,542,856 23,887,894 83,588,257 Net assets at end of year $13,839,916 $15,070,495 $ (11,889,323) $52,396,375 $26,681,065 $100,345,433 Governmental and Fiduciary Funds Proprietary Funds KHEAA The Student Loan People Federal Student Loan Reserve Fund Kentuckys Affordable Prepaid Tuition Kentucky Education Savings Plan Trust Agency Operating Fund and Internal Service Fund 2004 Operating Fund and Education Finance Funds Governmental Fund Kentucky Higher Education Assistance Authority Kentucky Higher Education Assistance Authority
P.O. Box 798, Frankfort, KY 40602-0798 P.O. Box 798, Frankfort, KY 40602-0798
Toll Free 800.928.8926 Toll Free 800.928.8926
www.kheaa.com www.kheaa.com The Student Loan People The Student Loan People
P.O. Box 24266, Louisville, KY 40224-0266 P.O. Box 24266, Louisville, KY 40224-0266
Toll Free 888.678.4625 Toll Free 888.678.4625
www.studentloanpeople.com www.studentloanpeople.com KHEAA and The Student Loan People do not discriminate on the basis of race, color, national origin, sex, religion, age or disability in KHEAA and The Student Loan People do not discriminate on the basis of race, color, national origin, sex, religion, age or disability in employment or services and provide, upon request, reasonable accommodations to afford individuals with disabilities an equal employment or services and provide, upon request, reasonable accommodations to afford individuals with disabilities an equal opportunity to participate in all programs and activities. Printed 12/04. opportunity to participate in all programs and activities. Printed 12/04. KHEAA and The Student Loan People are
pleased to introduce GoHigherKY.org, a free
one-stop website to help Kentuckians
learn how to plan and pay for college
or technical training. GoHigherKY.org
guides students of all ages from early
planning, application and admissions to
applying for nancial aid. GoHigherKY.orgs
powerful tools include online scholarship
searches, career explorationeven touring
campuses. Saddle up with GoHigherKY.org,
and harness all higher education has to offer. College planning at full gallop! Race toward the future
with GoHigherKY.org GoHigherKY.org is sponsored by the Association of Independent Kentucky Colleges and Universities, Council on Postsecondary Education, Kentucky Community and Technical College System, Kentucky Department of Education, GEAR UP, Kentucky Adult Education, KHEAA and The Student Loan People sm .

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