Kevin Moehn
Chief Executive Officer
Moehn Management Inc
Kevin Moehn is a student-loan-savvy entrepreneur who helps well-branded campuses create affordable student loan offerings with the help of quality partners. Having crafted more than a dozen offerings in the past year, he shares what he's learned about student loan risk and risk mitigation.
Is there a dual risk involved in every student loan?
Yes. The lender risks that the borrower won't repay the loan either because he will not - or that he cannot because of inability to do so. The borrower's risk is that his investment of time and money may not return value. So there is risk associated with both the borrower and with the borrower's purchase.
Explain the phrase 'risk mitigation.'
Risk mitigation involves taking reasonable steps to eliminate or reduce or compensate for risk in a transaction. Fire sprinklers mitigate property insurance risk. Seat belts mitigate death and injury risk in driving.
What risk factors are mitigated by your ALPS loan program, and how?
ALPS selects schools whose track records testify to the economic value of the education they offer. Borrower repayment risk is mitigated by the school providing a contingent guarantee on their overall loan portfolio's performance. In fact ALPS's servicer Access Group is in part compensated commensurate with its performance as well.
How might an ALPS loan borrower evaluate the value of what he or she is purchasing?
In certain areas of higher education ROI is calculable, and will produce a realistic forecast. Return on investment on a degree may be computed as follows. The investment is the sum of the out-of-pocket cost of the education plus the lost earnings during the time enrolled in school plus the financing costs (interest and fees). The return on that investment is the additional lifetime earnings that the investment produced as a percentage of the amount invested.
What is more important for mitigating risk - the school's brand or the academic program selected?
Both are important. Yes, there are marquee schools with some weaker majors. But the marquee schools' strong alumni networks are nationwide, even worldwide. Those networks enhance employment and earning opportunities. Brand matters.
How is the school involved in mitigating risk?
Choose any of the following. Rigorous admissions criteria. Strong academic offerings. Borrowing limits that curtail debt, particularly in the first year. Tuition payment procedures and borrowing limits that require students to have skin in the game. Then, after structuring the program and participants, we work to mitigate the risk on each participating campus. In addition, ALPS' schools participate in the loan pricing so that the program can absorb a significant level of defaults. The school's liability then is mitigated and occurs only after eventual defaults exceed that level.
Your ALPS program is one year old. Have you experienced any surprises?
Yes, two surprises actually. We're pleasantly surprised at the creativity with which schools are deploying ALPS on their campuses. We're also pleasantly surprised at the enthusiasm with which ALPS is received in the admissions and financial aid offices as well as by senior campus executives.
For more information on ALPS, visit http://www.moehnandassociates.com/