Transcript Document

An Overview
Building Student Success
An Overview
Dana Kelly, National Trainer
Nelnet Loan Servicing
Agenda
1. Its all about Loan Repayment
2. The importance of loan repayment
3. Results from FSA survey of borrowers in grace
4. Resources for repayment
5. A Focus on the Data
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Context: Student Loan Repayment
• 37 million federal student loan borrowers
• The median amount owed by new borrowers is $10,000 and
the average is $20,000
• Debt levels for graduate borrowers are significantly higher: a
median of $31,000 and an average of $51,000
• The majority of new borrowers will choose the standard tenyear repayment plan
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Cohort Default Rates are Increasing
Two and Three Year Cohort Default Rates
2007
6.7
2008
7.1
2009
13.4
8.8
2010
Two-year CDR
14.7
9.2
2011
Three-year CDR
10.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
SOURCE: NCES, Condition of Education 2013, Table 400, Number of postsecondary students who entered the student loan
repayment phase, number of students who defaulted, and 2-year student loan cohort default rates, by level and control of
institution: Fiscal years 2007 through 2010; IFAP, September 30, 2013, National Default Rate Briefings for FY 2011 2-Year Rates
and FY 2010 3-Year Rates.
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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, as of 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.
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What do we know about
new borrowers
who are just about to begin
repaying their loans?
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Characteristics of Borrowers in Grace
Borrowers with at least one loan in grace
Total: 2.6m
Undergraduate loans only
1.9m (73%)
Pell recipient
1.8m (69%)
First-generation
1.2m (44%)
0
500,000
1,000,000
1,500,000
2,000,000
Number of borrowers in grace
SOURCE: NSLDS, as of June 30, 2013.
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2,500,000
3,000,000
Characteristics of Borrowers in Grace
Median loan balance for undergraduate students in grace
$6,000
$0
$25K
$50K
Median loan balance for graduate students in grace
$14,500
$0
SOURCE: NSLDS, as of June 30, 2013.
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$25K
$50K
Typical Borrower in Grace
• 26 years old
• Graduated with a Bachelor’s degree
• Family income: $25,000
• Pell recipient
• Five loans in grace
• Undergraduate loans only
• Has not consulted any resources about loan repayment
NOTE: Loan balance is the median for both undergraduates and graduates combined
SOURCE: NSLDS, as of June 30, 2013; CFI, Customer satisfaction survey of borrowers in grace, June 2013.
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Most Choose Standard Repayment
• Nearly half of borrowers in grace plan to choose standard repayment.
• A large number do not know enough or are undecided.
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
46%
18%
5%
9%
1%
0%
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
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4%
17%
Reason for Choosing Plan
60%
53%
50%
40%
46%
37%
30%
20%
10%
6%
7%
8%
4%
0%
Plan I was put into Monthly payment Allows me to pay Payments in plan Recommended by Recommended by
automatically
I can afford
off my loans as
qualify me for
servicer
family or friends
fast as possible
public loan
forgiveness
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
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Other
Consideration of IBR
• The majority
(54%) did not
consider
income-based
repayment
(IBR) because
they did not
have enough
information
13%
No, not enough
information
16%
No, not interested
54%
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
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Yes, considered
income-based
repayment, but chose
another plan
No, I do not qualify
16%
Understanding of Borrower in Grace
•
New borrowers
who completed
their degree
program rated
their
understanding
of student loan
options higher
than borrowers
who did not
complete their
degree
•
There is a 14point difference
in confidence in
their ability to
manage their
loans
Graduated within the last 6 months with a degree
70
Quality attribute rating
65
60
55
50
45
40
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
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Borrower in Grace – by Balance
70%
60%
50%
40%
30%
Owe less than $25,000
Owe $25,000 - $50,000
20%
Owe $50,000 or more
10%
• Borrowers with a
high balance
(+$50K) were
more likely to
consolidate their
loans and begin
repayment than
those who owed
less
0%
Plan to
Plan to
begin
consolidate
repayment student
loans and
begin
repayment
Chose
standard
repayment
Chose
incomebased
repayment
• They were also
more likely to
choose incomebased repayment
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013; Questions 21: “At the end of your grace period, what
action will you take related to your student loan(s)? and 29: “What repayment plan have you chosen, or do you plan to choose at the
end of your grace period?”
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Borrower in Grace - Repayment
44% report not being contacted at all about their
loans going into repayment
34% report not being aware of their repayment
options
26% are undecided about what action they will take
on their loans at the end of their grace period
35% of those planning to go into repayment at the
end of their grace period, either don’t know or are
undecided about their repayment plan
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013.
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Borrower in Grace - Resources
Gone to find out information from…
Online loan servicer account management
Studentloans.gov website
Talking with friends or family
NSLDS website
Exit counseling at my school
Not used any of these sources of information
Studentaid.gov website
Phone number for loan servicer
Talking with staff at my school
Other online government resources
Online non-government resources
Other
Mobile phone apps
Social media resources
% of
Respondents
40%
25%
21%
18%
18%
17%
15%
14%
12%
4%
4%
4%
1%
1%
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013, Question 12: Where have you gone to find out
information about your repayment options, your grace period, or how to manage your student loan(s)? – check all that apply.
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Resources
for Repayment
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StudentLoans.gov
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FACT Tool
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Loan Repayment Estimator
Available at Studentloans.gov.
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Loan Repayment Estimator
Repayment plans and loan payment calculators are available at:
http://studentaid.ed.gov/repay-loans/understand/plans#estimator
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Your Data is Your Key To
Building Successful Students
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DID YOU KNOW???
Borrowers who did not receive their full
6-month grace period due to late or inaccurate
enrollment notification by the school are at a higher
risk of default.
DID YOU KNOW?
Borrowers who withdrew without completing their
academic programs are also at a much higher risk of
default.
DID YOU KNOW???
There is a strong correlation between increased
financial literacy and decreased default!
Nelnet Trends in Borrower Repayment
• Borrowers who get into good early repayment habit less likely
to default. For these borrowers, delinquency more likely due
to life event change, if delinquency occurs at all.
• Intervention efforts more successful within the first 90 days of
delinquency. From then on, there is a higher likelihood of
eventual default.
• Setting up auto-pay good determinant of repayment success,
as well as signing up for services like Manage My Account.
Nelnet Trends in Borrower Repayment
• Good contact information on borrowers critical. Students in
skip-trace status much more likely to default. Schools who
collect updated contact information after entrance or exit
encouraged to share with servicers.
• Much of default or late delinquency group is made up of
borrowers with small balances.
• Late Stage Delinquency – Borrowers in this category 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:
– What a servicer does
– Who Nelnet is
– That they have options in addition to standard
ten-year payment,
– What deferments/forbearances are
– That servicers can assist them if they run into repayment
difficulties
Please help servicers convey these messages.
Importance of School-based data
Benefits of School-based Defaulter Analysis
• Enables you to develop specific strategies to help students
avoid default.
• Allows you to correct ineffective practices throughout
your institution.
• Enables you to identify high risk students.
• Helps you identify the relationship between loan default
and student success.
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 Feel unwelcome, no “campus
connection”
o Transportation
o Housing
o Transition difficulties
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
Engaging At-Risk Borrowers
School engagement can help reduce risk at
any stage of the borrowing cycle.
Questions:
• Who are my at-risk borrowers?
– Learning to identify risk factors
• When should I intervene, and how?
– The right time and the right strategy
Engaging At-Risk Borrowers
Identifying at-risk borrowers
• Determine, using available data, which students have defaulted in the past
• At what point are you most likely to be able to contact and influence these
particular borrowers?
In school?
In grace?
In repayment?
Engaging At-Risk Borrowers
Example: While In School
Target at-risk borrowers with early/extra exit loan counseling, financial
literacy training, and collect additional contact information.
Which at-risk borrowers?
• Students on academic probation
• Students who express intention to withdraw
• Students currently enrolled in programs producing a disproportionate
number of defaulters
Engaging At-Risk Borrowers
Example: While In Grace
Steps to take:
• Validate contact information
• Re-enrollment assistance
• Transfer assistance
• Prepare borrower for repayment
• Provide employment counseling and search preparation
• Job placement assistance
Engaging At-Risk Borrowers
Example: While In Repayment
Reach out to at-risk borrowers and facilitate
the critical contact with the loan servicer to
prevent default.
• Early in repayment: Target borrowers who did not complete
• Late in repayment: Target borrowers who are 240+ days delinquent
Exercise: Getting To Where You Are…
Evaluating your default prevention readiness
1.
2.
3.
4.
5.
6.
Do I have the right team in place to develop and execute my default
prevention strategies?
What was my FY 10 CDR? Draft 11? Am I likely to hit 30% in September
2014?
What is the source of my default risk?
What default prevention strategies are in my plan
that address the source of my default risk? How will they work? Are
they measureable?
What ‘traditional’ strategies are included in my plan?
What ‘student success-focused’ strategies are
included in my plan?
Leadership Buy-in
• Global default risk isn’t going away…it will only get worse over the next
several years
• While outside servicers can help, reducing specific borrower risk is an
‘inside job’
• School leadership must be prepared to devote internal resources to solve
this problem
Thank You!
Dana Kelly
National Trainer
Nelnet Loan Servicing
[email protected]
336-848-6441