Deutsche Bank and ITT Team Up for New Loan Program

Posted by: Alison Damast on January 25, 2010

Deutsche Bank is making significant inroads in the private student loan market, continuing to fill a void that was left by the hasty departure of many private lenders in the past year. Bloomberg BusinessWeek reported back in early January about the new Affiliated Loan Program for Students (ALPS) for international students financed by Deutsche Bank, a pilot that makes it easier for international student to come study at U.S. business schools and other graduate institutions. Now, the bank said it will be a key player in yet another private loan program, this one geared at students who attend schools run by the for-profit education provider ITT Education Services Inc., the country’s fourth largest for-profit university.

The new loan program – called the PEAKS Private Student Loan Program – is expected to generate $300 million in loan volume, said Kevin Modany, Chairman and Chief Executive Officer at ITT/ESI, in a telephone interview last week. The loan program will have a wide audience; there are approximately 70,000 students who attend the 105 ITT Technical Institutes scattered through the country’s 37 states. Modany said the program will help students pay for the remainder of the cost of their education that federal and state financial aid does not cover; it is designed primarily for second-year students and above. “The program is only available to students who have demonstrated a commitment to complete their education,” he said, noting that graduates are less likely to default on their students loans than those who do not complete their education.

This new loan program will bear many similarities to the structure of ALPS; Deutsche Bank will facilitate the purchase of ITT loans by the PEAKS trust and then will be bundling the loan into securities, which are then sold on the capital markets. Both programs were created “to provide financing to deserving students unable to find loans as a result of the credit crunch,” said Elad Shraga, the Global Head of the Credit Solutions Group at Deutsche Bank.

“Our PEAKS program, which follows our successful ALPS offering, is designed to provide a bridge from the capital markets directly to students and schools. In both programs, we identified underserved student populations and designed funding solutions for them,” Shraga said.

Business school students currently make up just a small percentage (5%) of ITT’s student body; the majority of students are enrolled in one of the school’s technical programs. In the future, the PEAKS Program may also be offered to students attending ITT/ESI’s Daniel Webster College, Modany says. Daniel Webster College is an accredited school owned by ITT that offers several MBA degree program to students, including an MBA for Aviation Professionals and an MBA in sports management. “We’re not utilizing PEAKS yet for that organization, but there certainly is an opportunity,” Modany said.

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