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KeyBank to Acquire TMS to Grow Educational Services

TMS acquisition could help KeyBank stake a bigger claim in the growing educational lending market.

This summer, Cleveland-based KeyBank ($94 billion in assets) signed a letter of intent to acquire Tuition Management Systems (TMS), a Warwick, R.I.-based provider of outsourced tuition planning, billing, counseling, payment and related technology services for educational institutions. If the deal is approved, the union would round out the offerings provided by Key Education Resources (KER), a KeyBank business unit that provides education financing products to undergraduates, graduate students and parents.

According to KER president Rick Vonk, with TMS in the KeyBank fold, KER can provide customers with a more complete education financing and payment solution set. While KER offers payment plans to customers along with an array of lending products, TMS concentrates on the payments and customer counseling side, he explains. "TMS has built technology around this so that its customers can do payments by phone, online, ACH or check," Vonk relates. "They've also backed this up with counselors for those with questions about how the payment program works. TMS took things to the next level in terms of customer service and ease of use."

Currently, KER uses its loan-origination system to accept and process all loan applications. Although he declines to name the vendors, Vonk says that the core functionality is from third-party providers, but the front end is homegrown. "This includes the differentiators, such as the Web interface, CRM and data-aggregation capabilities," he notes. Servicing is handled by a third party, a common practice in the educational loan industry, Vonk adds.

TMS brings to the table the ability to do online fulfillment -- including registration and transactions -- for schools to perform account servicing. "TMS has the infrastructure in place for multiple payment options," Vonk says. "Also, their call center is integrated with all this."

Vonk admits that KER does not leverage the payments technology from KeyBank as much as one would think. "We can't really leverage our loan systems with the payment systems at the bank because the documentation and reporting would take too much customization in the legacy systems to achieve this," he explains.

"TMS solves this problem," Vonk adds, noting that as KER is a relatively small business unit at Key, it made sense to acquire the technology rather than build it. "We'll leverage what they do from a payment plan perspective with technology we have from the lending side."

Targeted Services

According to Nancy Atkinson, a senior analyst with Boston-based Aite Group, KeyBank's courting of TMS will help KER stand out. "In this credit-challenged ... market environment, banks need to find ways to differentiate themselves," she says. "One important way is to focus on a particular industry. ... They are staking a claim to [the education] market."

The TMS acquisition will help the bank in its efforts to acquire new customers, says KER's Vonk. "This is a great opportunity to get a life-long customer from their first transaction," he states.

Both Vonk and Aite's Atkinson agree that the educational lending area will continue to grow as tuition costs increase. "Education is highly desired and will continue to be something for which students and parents are willing to borrow, finance in some way and make payments over time to afford it," states Atkinson.

A Thriving Business

• Overall tuition and fees at four-year public colleges rose 57 percent over the past five years.

• Over the same period of time, loan aid grew faster than grant aid.

• Nearly 65 percent of 1999-2000 bachelor's degree recipients had borrowed for college, up from 49 percent for 1992-93 graduates. Over this time period, the average amount borrowed increased from $12,100 to $19,300.

• Between 2000-01 and 2005-06, private student loan volume grew at an average annual rate of about 27 percent to a total of $17.3 billion in 2005-06.

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