Doubling SLFC’s Business Volume by Applying CSC’s End-to-End Expertise

Client: Student Loan Finance Corporation

Challenge: SLFC needed to upgrade its legacy system to capitalize on business opportunities.

Solution: Automation and a new data warehouse allowed the team to build a student loan pipeline that positioned SLFC to be noticed by players in the national market.

Results: Automation and a data warehouse positioned SLFC to be noticed by national players such as U.S. Bank.

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An ambitious business plan usually requires some behind-the scenes work that is just as ambitious. When the Student Loan Finance Corporation decided it wanted to double its business in one year and multiply it by five in the next five years, it knew it had to do two things: change the way it did business and adopt the technology needed to enable that change. The company did both. SLFC has already attained its first goal and is confident of attaining the second.

Expanding into the national market

By 1999, twenty years after the formation of the company, SLFC had become one of the major firms in the Midwestern secondary market for student loans. That was when the company began developing a business strategy that would make it a player in the national market.

The national market is dominated by such large firms as Sallie
Mae and Student Loan Corporation, whose tens of billions of dollars in loan portfolios far outstrip smaller companies like SLFC. There is plenty of opportunity, though, as the market is growing rapidly. Among the reasons for this growth are the counter-cyclical nature of the business — many people go back to school during economic downturns — and the increase in flexible and non-traditional degree programs.

SLFC knew there was enough opportunity to allow it to double its business in a year, and to multiply it five times in five years without adding any employees. In 1999 and 2000, the company developed a business plan to attain those ambitious goals.

Business process integration

If that plan was to succeed, the company would have to
substantially upgrade its 20-year old legacy system. That system had been more than adequate to handle the increased business SLFC took on when it expanded from South Dakota to the rest of the upper Midwest. The dramatic jumps in volume called for in the new business plan, however, were well beyond the capabilities of SLFC’s old system.

Working with CSC, the company tightly integrated information technology with its business processes. To put this business process integration approach into effect, a joint team operating through a program management office decided to: build a new IT architecture; use that architecture to develop a “student loan pipeline” to integrate SLFC’s processes and systems with those of the lenders they partnered with; and enhance the company’s ability to originate student loans as well as service them for other lenders.

Rather than replacing or extensively modifying the company’s legacy system, the joint team selected an EAI platform from Vitria that would integrate process automation tools with legacy applications. Automation was crucial to the success of SLFC’s business plan.

When the company used to buy a portfolio of loans from a lender, employees had to manually convert data into their system one loan at a time. Name and address changes also had to be done manually, and required an employee to log onto five different systems to make a change. Using the old processes, there was no way SLFC could have doubled its portfolio volume year after year without adding staff. Automation greatly speeded up the loan acquisition process while still permitting manual intervention in cases where that is called for.

Student loan pipeline

Automation and a new data warehouse allowed the team to build a student loan pipeline that positioned SLFC to be noticed by players in the national market. The big test came when U.S. Bank, in search of a partner in the origination and servicing of student loans, issued an RFP.

U.S. Bank’s $1 billion in student loans was a small part of its business, but not a part it wanted to do without. Like many other banks, it continues to make student loans to satisfy existing customers who are the parents of students, or in the hope that the students themselves will become customers. On the other hand, it’s not such an important part of U.S. Bank’s business that it wanted to handle it in-house.

For SLFC — whose entire portfolio of student loans amounted to $1 billion —taking on U.S. Bank’s student loan business meant achieving the 100 percent increase called for in the first step of its new business plan. Thanks to its new architecture, streamlined processes, and a student loan pipeline that can integrate those processes with those of its new partner, SLFC won U.S. Bank’s business.

The time and effort saved by automation allows SLFC’s partner, U.S. Bank, to originate student loans more efficiently. Anyone who goes to the student loan section of U.S. Bank’s Web site is really using SLFC’s system.

In 2004 SLFC will focus on finding new lending partners and on providing even better service to existing customers. To attain those goals, the company is considering sales force automation and customer relationship management applications.

Looking further ahead, SLFC wants to put the final pieces of the pipeline together, linking students to the college and university financial aid offices, linking those offices to lenders, and lenders to SLFC. As the company expands its presence nationally, it will have to develop a sales culture on top of its operational efficiency culture. Considering how much they have changed their business so far, there is every reason to believe they will make the changes necessary to make the rest of their business plan succeed.