Transcript Document

Default Prevention
* What’s New,
* What’s Still True,
* What Your Colleagues
are Doing to Keep Their
Rates Down
PASFAA Conference, October 2014
Cohort Default Rates Decrease
OFFICIAL COHORT DEFAULT RATES
PUBLIC
PRIVATE
PROPRIETARY
NATIONAL
AVERAGE
FY 10
13%
8.2%
21.8%
14.7%
FY 11
12.9%
7.2%
19.1%
13.7%
The 3-Year Cohort Default Rate
 First year at 30% or more
– Default prevention plan and task force
– Submit plan to FSA for review
 Second consecutive year at 30% or more
– Review/revise default prevention plan
– Submit revised plan to FSA
– FSA may require additional steps to promote student loan
repayment
 Third consecutive year at 30% or more
– Loss of eligibility: Pell, DL
– School has appeal rights
Your Current Active 3-year CDR Timeframes
CDR
Denominator:
Enter
Repayment
Numerator:
Default
Publish Rates Cohorts used for
Sanctions
FY 2012
10/1/11-9/30/12
10/1/11-9/30/14
September
2015
FY 10, FY 11, FY 12
@ 30%
FY 2013
10/1/12-9/30/13
10/1/12-9/30/15
September
2016
FY 11, FY 12, FY 13
@ 30%
FY 2014
10/1/13-9/30/14
10/1/13-9/30/16
September
2017
FY12, FY 13, FY 14
@30%
FY 2015
10/1/14-9/30/15
10/1/14-9/30/17
September
2018
FY13, FY14, FY15
@30%
Did You Know?
Of borrowers who defaulted, the majority withdrew
without completing their academic programs.
Source: Federal Student Aid 2012
Did You Know?
Borrowers who do not receive their full six-month
grace period have a greater risk of defaulting.
Source: Federal Student Aid 2012
Did You Know?
There is a strong correlation between increased
financial literacy and decreased default risk
Source: Federal Student Aid 2012
Characteristics of Defaulters
• Older (median age of 38 years old)
• Pell recipient/low-income
• Undergraduate loans only
• Median loan balance: $5,800
• Poor financial literacy
• Did not complete degree
SOURCES: NSLDS, June 30, 2013; The Student Loan Default Trap: Why Borrowers Default and What Can Be Done
About It, National Consumer Law Center, July 2012; What Matters in Student Loan Default: A Review of the Research
Literature, Jacob P. K. Gross, Osman Cekic, Don Hossler, and Nick Hillman; Journal of Student Financial Aid, 2009;
Calculating the Contribution of Demographic Differences to Default Rates, Mark Kantrowitz, May 2010.
9
Understand Who Is Defaulting at Your
School and Why
This will provide
the right target
population to
focus on.
(Photo credit: pixabay, public domain images)
Nelnet Trends in Borrower Repayment
Nelnet Trends in Borrower Repayment
• Borrowers who get into a good early repayment habit are
less likely to default.
• Intervention efforts are more successful within the first 90
days of delinquency. From then on, there is a higher
likelihood of eventual default.
• Setting up auto-pay is a good determinant of repayment
success, as well as signing up for an online account.
Nelnet Trends in Borrower Repayment
• Good contact information for a borrower is critical. Schools
who collect updated contact information after entrance or exit
are encouraged to share with servicers.
• Students in skip-trace status are much more likely to default.
• Much of the default or late delinquency groups are made up of
borrowers with small balances.
• Late Stage Delinquency – Borrowers in this category are very
difficult for servicers to reach since they have avoided contact
from us for so long.
Nelnet Trends in Borrower Repayment
Many borrowers have a knowledge gap when they go into repayment. They are
unaware of:
• Who their servicer is
• What a servicer does
• That they have options in addition to the standard ten-year
payment plan
• What deferments/forbearances are
• That servicers can assist them if they run into repayment
difficulties
Please help servicers convey these messages.
Student Success Model
What Prevents Student Success?
o Finances/need
o Poor study habits
o Relationship issues
o Under-prepared, basic skill needs
o Physical & mental health
challenges
o Language barriers
o Dependent-care
o Transportation
o Housing
o Transition difficulties
o Feel unwelcome, no “campus
connection”
o First generation, no role models or
family support
Identifying Students in Trouble
• Does your school have an “early warning” system?
– Take attendance?
– Issue mid-term grades which provide clues as to whether or not
student will persist?
– Alerts from faculty members, student support staff: who has
missed classes? failed tests? had adjustment challenges?
• Don’t allow academic or social problems to become default risk
Helping Students in Trouble
• Reach out immediately
• Help them remain in school
• If they’ve already left, help them to return
– May involve help to overcome obstacles
• If they will not return, help them to understand their repayment
obligations as some think they don’t owe anything because they
left
• Learn what you can about their experiences and use this
information to help other students stay in school
Default Prevention - Outreach Efforts
Consider When It Makes Sense to Intervene
• Borrower education about repayment
• Financial literacy
• Gain additional or updated contact information
• Engage borrowers through social media for increased exposure
Consider When It Makes Sense to Intervene
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•
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•
•
•
•
Use social media to promote good loan repayment
Ask borrowers to contact you if they have questions
Reiterate the importance of communicating with their servicer(s)
Validate contact information
Re-enrollment or transfer assistance
Employment counseling and search assistance
Job placement assistance
Consider When It Makes Sense to Intervene
• Contact borrowers in early-stage delinquency (30-90 days) directly
• Contact those in late-stage delinquency (210+ days)
o By phone, if possible
o Review servicer information and urge servicer contact
Borrower engagement is a key factor in successful default prevention!
School – Servicer Partnership
All servicers work to gather feedback and find ways to partner with schools on
default prevention.
Partner with the servicers!
Source:
23 Federal Student Aid 2012
School Best Practices:
Westmoreland County Community
College
Cheri Kramer
School Best Practices:
Great Lakes Institute of Technology
Erie Institute of Technology
Kelly Keener
Sharing…
• Can you share what you have implemented on your campus in an effort to
help reduce default?
• How do you focus your limited staff resources on default prevention
strategies?
• Do you have one key staff member assigned to default prevention?
• What have been some of the barriers? Do you have campus collaboration?
• Do you run delinquency reports, send individual letters, make phone calls,
send emails?
• What do you include in your entrance/exit interviews? NSLDS?
• If you were going to share one key nugget that seems to have worked on
your campus, what would it be?
• Can you share what you have implemented for financial literacy?
Review
Limited Resources/Best Results
 Identify Cohorts in effect
 Work with Servicers
o Pull delinquency reports by cohort year
 Identify highest risk (most delinquent)
 Develop plan for contact
o Phone most effective
o Email, Letters, Text messages if can’t reach by phone
o Integrate effort with other campus offices with whom
student has relationship
Limited Resources/Best Results
 Use school d-base for contact info
o When student in school, update contact info, references,
personal email/facebook accounts, obtain authorization to
text, etc.
 When contacting borrower, have portfolio of loan
history
o Recommendations depend on characteristics of loan
o Make warm transfer to Servicer while student on phone
Limited Resources/Best Results
Students who withdraw are at **HIGH RISK**
 Official Withdraw - Required to meet with FA
 SAP, Academic Dismissals - Track, monitor separately
 Unofficial Withdrawals
o Receive info from academic offices, registrar others
o Report to NSLDS/Clearinghouse immediately
o Reach out to students by mail, phone informing them of
obligation re. student loan
o Update contact info, address, references, emails, etc. so you
can contact in future
Resources
Cohort Default Rate Guide
The “Cohort Default Rate Guide” (Guide) is a publication that the U.S.
Department of Education designed to assist schools with their 2-Year and 3Year FFEL Program and Direct Loan Program CDR data. The guide has been
updated and should be used as a reference tool in understanding CDRs and
processes.
Source: Federal Student Aid 2012
Financial Awareness Counseling Tool- FACT
Each module has been designed to communicate key financial
management concepts to increase students’ financial literacy.
Understand
Your Loans
 Your Student
Loans
 Loan Basics
 Free Money First
 Types of Student
Loans
Manage Your
Spending
 Manage Your
Spending While In
School
 Live Within Your
Means
 Borrow Smart
Source: Federal Student Aid 2012
Plan to
Repay
 Estimate What
You Will Owe,
Spend & Earn
• Monthly
Expenses
• Monthly Income
 Understand
Repayment
Avoid
Default
 Avoiding Default
 Postpone or
Lower Your
Payments
 Forgive or Cancel
Your Debts
 Delinquency and
Default
Make
Finances a
Priority
 Plan For the
Future
 Your Income and
Taxes
 Your Credit and
Identity
 Credit Cards and
Other Borrowing
Default Prevention Page
Thank You!
 Cheri Kramer
Westmoreland Community College
[email protected]
 Kelly Keener,
Great Lakes Institute of Technology, Erie Institute of Technology
[email protected]
 Anne Del Plato, Regional Director of Partner Solutions
Nelnet Education Loan Servicing
[email protected]