Transcript Marketing Overview August 27, 2008

Default Management
Suggestions for Your Campus
Materials developed and provided by
College Foundation, Inc. (CFI)
Objectives
• Regulatory Requirements
• The Value of a Campus Default Management and
Prevention Plan
• Developing Your Plan
• Analyzing Data
• Plan Components
• Questions to Ask Yourself
• Additional Resources
Regulatory Requirements
Schools participating for the first time or that have
undergone a change in ownership that resulted
in a change of control are required to use a
default prevention and management plan to
participate in Title IV programs
(34 CFR 668.14(b)(15)).
Regulatory Requirements
• All schools are required to comply with
regulations concerning
– Entrance Counseling
– Exit Counseling
– Timely reporting of accurate enrollment
information to the U. S. Department of
Education
Department of Education Recommendation
• The Department recommends that every school
implement a default prevention and
management plan to:
– Promote student and school success
– Preserve the integrity of the loan programs
– Reduce costs to taxpayers
Value to Your School
• Default Management promotes student and
school success by
– Increasing retention
– Reducing delinquency and default
Value to Your School
• Default Management preserves the integrity
of Loan Programs
– Public perception is important
– Avoid limitations on participation in aid
programs due to excessive cohort default
rates
Value to Your School
• Default Management reduces costs to
taxpayers
– It is the taxpayers’ money we are spending
– Schools have a fiduciary responsibility to
comply with regulations and protect the
public’s interest in student financial aid funds.
Value to Your Students
• Default Management helps your students
– Learn good debt management practices
– Establish a healthy credit history
• Everyone wins!
Consequences of Default
• Borrower Consequences:
– Loan balance increases
– Default is reported to credit bureau
– Wages may be garnished
– Federal income tax refund may be seized
– Ineligible for additional federal student aid
Consequences of Default
• School Consequences
– Loss of participation in Title IV student aid
programs (FFEL, Direct Loan, Pell, etc.)
– School may be provisionally certified for
participation
Consequences of Default
• TIV participation is in jeopardy if
– Federal Perkins Loan default rate ≥ 15%
– FFEL or Direct Stafford default rate ≥ 40% in
most recent fiscal year
Or
– FFEL or Direct Stafford default rate is ≥ 25%
in three most recent fiscal years
Consequences of Default – HEOA
• FY 2012 – the 25% threshold becomes 30%
• Beginning with Fiscal Year 2009, the new CDR
formula will include students who default by the
end of the second fiscal year after beginning
repayment
– Includes a longer repayment history
– Most schools will likely see in increase in their
cohort default rates (CDR)
Consequences of Default - HEOA
• Expect to see CDR based on longer period of
time after October 2013
• Borrowers entering repayment this fiscal year
(Oct 1, 2008 to Sept 30, 2009) who default on or
before Sept 30, 2011 will be the first group in the
CDR based on the longer period of time
Consequences of Default - HEOA
• If a low percentage of school’s students borrow
loans, the school is exempt from the default
threshold requirement.
– Participation rate index measures the number
of students who borrow compared to the
number of regular students at the school
– The participation rate index will increase from
.0375 to .0625 per HEAO
Consequences of Default - HEOA
• US Department of Education will report
– Life Cohort Default Rates as well as the
currently reported Fiscal Year CDR
– Listed for each category of institution
• CDRs will be listed on the U S Department of
Education’s College Navigator Website
Developing Your Plan
• Consider
– Staff and resources
– Peer institutions’ activities
– Partners (lenders, servicers, guarantors)
– Evaluation of success
• It takes a campus to develop and implement a
successful default management plan.
Developing Your Plan
• A comprehensive plan begins at the early stages
of enrollment and continues after a student
leaves your campus.
• A comprehensive plan involves more than the
financial aid staff.
Analyzing Default Data
• Who is defaulting?
• Types of data you might analyze:
– High school attended
– Program of study
– Demographic information
– Grades
• Why are they defaulting?
• Remember that you cannot discriminate against
groups of students.
Who Defaults?
• Major indicators that default is more likely:
– Students who do not graduate
– Students who perform poorly and do not make
effort to improve their performance
X
Who Defaults?
• Other characteristics of those likely to default
include:
–
–
–
–
Failure to provide updated contact information
Face poor job prospects
Have other financial burdens
Marriage to another student with debt
Identifying Delinquent Borrowers
• NSLDS Date Entered Repayment Report
– Available upon request
– Dept recommends that schools compare the
DER Report to their records bi-monthly.
– Benefit: Borrower enters repayment in the
correct cohort year and school’s cohort default
rate is more accurate
Analyzing Default Data
• Review the draft and official Cohort Default Rate
data - Loan Record Detail Report (LRDR)
– Is your rate accurate?
– Does it include the correct borrowers and
loans?
– Challenge incorrect data
Identifying Delinquent Borrowers
• Check with your lender partners for on-line
tools available for financial aid
administrators to:
– Identify students who are at various
stages of repayment or delinquency
– Provide updated contact information to
the lender
Plan Components: Entrance Counseling
• Enhance your entrance counseling
– Delivery method: In person or on-line or both?
– Gather additional information:
• Additional references
• Other family members (beyond those requested on
the loan application)
• Cell phone numbers
• Email addresses
Reminder: Entrance counseling is a school
responsibility.
Plan Components: Financial Literacy
• Provide financial literacy information to your
borrowers
– Increase knowledge about being financially
healthy, budgeting, avoiding debt, managing
debt, repaying student loans
Plan Components: CFNC’s Financial Literacy 101
CFNC’s Financial Literacy 101
interactive on-line
course is
available to all
North Carolina
students.
Unless stated otherwise, the tools shown in the presentation are
available to ALL students, regardless of their lender choice.
Plan Components: Limit Access to Credit Card
Companies
• Consider limiting credit card companies’ access
to your students and to their information
• Adult students may already have accumulated
significant consumer debt.
Plan Components: Interim Counseling
• Require annual entrance counseling
• Review lender disclosure statements to the
student (cumulative debt)
• Remind student about available tools
– Loan repayment calculators
– Calculators that consider debt and career choices
– Budgeting tools and calculators
• Provide contact information for their lender,
servicer, guarantor
• Encourage them to use NSLDS for students
Plan Components: Calculators and Tools
Stafford Loan Repayment Calculator
– CFNC.org
– Paying for College Tab
Available to all students
Plan Components: Calculators and Tools
Smart Borrower
Calculator
Available to all students
Plan Components: Calculators and Tools
Budget Calculators
Available to all students
Plan Components: Calculators and Tools
Real World
Calculator
Available to all students
Plan Components: Calculators and Tools
Lenders often provide
on-line services that allow
borrowers to check their
loan status, balance due,
etc.
Example for CFI Borrower
Plan Components: Calculators and Tools
NSLDS for Students
Plan Components: Communication Across Campus
• Information about borrower’s academic
progress and enrollment status
– Required to report enrollment status to
Department of Education
• Student receives full grace period
• Lender and servicer can communicate with
borrower appropriately
– Adhering to a monthly reporting schedule
keeps data up to date -- and you in
compliance.
Plan Components: Communication Across Campus
• Combine efforts with academic advisors, and
faculty
• Increased retention and improved graduation
rates could lead to reduced default rates
Plan Components: Communication Across Campus
• Students who withdraw
– Students who do not successfully complete
their programs are more likely to default
– Proper and timely R2T4 calculations
• Reduce student debt by returning loan
funds
– Exit Counseling
• Required when student is no longer
enrolled, not just at graduation
Plan Components: Using Your Default Data
• Additional activities for those borrowers most
likely to default
• Provide data to administration for evaluation and
planning
• Evaluate the effectiveness of strategies
Plan Components: Exit Counseling
• Enhance your exit counseling
– Delivery method: In person or on-line or both?
– Gather additional information:
• Additional references
• Other family members (beyond those requested on
the loan application)
• Cell phone numbers
• Email addresses
Reminder: Exit Counseling is a school
responsibility
Plan Components: Communication with Former
Students
• How long are student email accounts active after
the student leaves or graduates?
• Can students use job placement/career services
after leaving school?
• Collect as much contact information as you can
during exit counseling
• Phone calls and letters
• Communicate in evenings or on the
weekend
Plan Components: Communicating With Delinquent
Borrowers
• Early Stage Delinquency Assistance
– Highly focused effort
– Work with those who withdrew or failed to
complete academic program
– Work with those who fall into particular
categories of “likely defaulter” based on your
school’s research
Plan Components: Communicating With Delinquent
Borrowers
• Late Stage Delinquency Assistance
– Help lender/servicer/guarantor get in touch
with the delinquent borrower
– School contact may have a positive impact on
the situation
Questions to Ask Yourself
1. What does our default data tell us?
2. What resources do we need for this effort to be
successful?
3. Which campus offices will be involved in this
effort?
4. What are our peer institutions doing?
Questions to Ask Yourself
5. Will we enhance our loan counseling efforts? If
yes, how?
6. How will we communicate with former students?
7. How will we measure success?
Additional Resources
• CFNC.org
– A service of the state of North Carolina provided by Pathways, CFI, and
NCSEAA
• ifap.ed.gov
– Tools for Schools includes information about default management under
“FSA Assessments”
– DCL ID Gen 05-14 (Posted 09/30/2005) – Sample Default Prevention and
Management Plan (the basis for this presentation) also lists additional
resources
• mappingyourfuture.org
• Ensuring Student Loan Repayment: A National
Handbook of Best Practices
– The Student Loan Repayment Symposium, October 2-4, 2000 – US Dept
of Education)
Materials provided and developed by College
Foundation, Inc.