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
•
•
•
•
•
•
•
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]