Self Case - Student Educational Loan Fund, Inc. - 6096 Words

Case 2: Analysis of Alternatives Student Educational Loan Fund, Inc. Institution: University Gadjah Mada Program: Master of Management Course: Risk Management Tutor: Mrs. Erni Ekawati, PhD. Title: Case 2: Analysis of Options Subtitle: Student Educational Loan Fund, Inc. Date: November 17, 2008 Place: Yogyakarta Authors: Martin Koopman Doddy Handaryadi Anindito Prabowo Gumirlang Wicaksono Introduction This report describes the situation which Rick Melnick faces in the fall of 1995, when assuming the responsibilities as Associate Director of Financial Management at Harvard Business School (HBS) (Ekawati, 2008). Rick had to oversee the Student Educational Loan fund (SELF), analyze a†¦show more content†¦Student would still permited to make prepayment at any time without penalty. Problem The changes in the student loan are not without consequences for SELF. Since the new terms of the student loans does not allow SELF to reset the interest rates semi-annually, there is a possibility that the interest rate charged to students is lower than the interest rate which is charged by the bank. The funding will be more expensive than the income. This is clear from the schematic overview of the situation: Before the restructuring, SELF only had to deal with the following two problems: 1. Default risk of students 2. Larger than principle repayments of students The first problem means that students can be unwilling or unable to meet the requirements of the loan terms. That would mean that SELF has to write-off some assets, without receiving cash flow from this, thus creating a gap between income and expenses. Currently, 1,40% of the students will possible default on their loan. However, we believe that with the new structure, this risk will be reduced because students will have a fixed rate and monthly payments, which is in better line with their future income. Therefore, we will in the assume that the interest rates charged to the students can in the future be moreShow MoreRelatedSelf Case - Student Educational Loan Fund, Inc.6103 Words   |  25 PagesCase 2: Analysis of Alternatives Student Educational Loan Fund, Inc. Institution: University Gadjah Mada Program: Master of Management Course: Risk Management Tutor: Mrs. Erni Ekawati, PhD. Title: Case 2: Analysis of Options Subtitle: Student Educational Loan Fund, Inc. Date: November 17, 2008 Place: Yogyakarta Authors: Martin Koopman Doddy Handaryadi Anindito Prabowo Gumirlang Wicaksono Introduction This report describes the situation which Rick Melnick faces inRead MoreStudent Education Loan Fund, Inc (Abridge)1409 Words   |  6 PagesStudent Education Loan Fund, Inc (Abridge) Introduction Background of case Study Rick Melnick is an Associate Director of Financial Management at Harvard Business School (HBS). He had decision to make regarding the new funding policy under the management of Student Educational Loan Fund (SELF). SELF was established in 1961 to fund loans to HBS. Traditionally, HBS student loans required the borrower to pay semi-annually with variable interest rate policy. Under the new plan, the studentsRead MoreHow Financial Aid Awareness Affects College Access and Success14272 Words   |  58 Pagessuccess. 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