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Session # 17
Federal Loan Servicing Update
Sue O'Flaherty and Cynthia Battle | Dec. 2014
U.S. Department of Education
2014 FSA Training Conference for Financial Aid Professionals
AGENDA
General Servicing Updates
o Contract Changes
o Servicing Portfolio
Key Projects and Improvements
o Standardization of Processes
o Program Updates
Looking Ahead
Questions and Answers
2
2
General Updates - Servicers
The Department currently has 11 student loan servicers under contract.
 Four Title IV Additional Servicers (TIVAS):


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FedLoan Servicing (affiliate of the Pennsylvania Higher Education Assistance Authority)
Great Lakes Educational Loan Services
Navient (formerly Sallie Mae)
Nelnet
 Seven Not-For-Profit (NFP) Servicers:
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Higher Education Loan Authority of Missouri (MOHELA)
Education Services of America (EdSouth)
Utah Higher Education Assistance Authority (Cornerstone)
Aspire (an affiliate of the Iowa Student Liquidity Corporation)
New Hampshire Higher Education Loan Corporation (Granite State)
Oklahoma Student Loan Authority (OSLA)
Vermont Student Assistance Corporation (VSAC)
New pricing and metrics were effective for the TIVAS on September 1, 2014.
Similar changes were implemented for the NFP servicers beginning October 1, 2014.
3
What is Being Overseen and Managed?
 11 loan servicing contracts
 Four Title IV Additional Servicers
 Seven Not-for-Profit Servicers
 8,670 employees at 38 facilities in 22 states
 Four servicing platforms
 29 million borrowers/130 million loans
 Over the last year servicers processed
 386 million phone calls
 754 million e-mails/correspondence
4
General Updates – Servicing Changes
Changes Beginning January 1, 2015:
 Booking Interface - The seven NFP servicers will begin receiving
newly originated (Direct Loans) from COD
o We have implemented a “booking interface” allowing the NFP members of
the servicing team to receive and service Direct Loans originated at COD
[Originated = disbursed amount >$0, linked P-Note, and disbursement date]
 Customer Satisfaction Survey - Discontinued the survey’s school
response element
o We took the opportunity to refocus and enhance the customer satisfaction
survey performance metric to better support the new incentives. We
retained the borrower response element and discontinued the survey’s
school response element
5
Strategies to Maximize Performance
Competition
Performance-Based
Compensation
Monitoring
and Oversight
6
Competition among Servicers
 Performance-Based Allocation of New Accounts
 Five Metrics
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% of Borrowers in Current Status (30%)
% of Borrowers over 90 Days Delinquent (15%)
% of Borrowers in Default (15%)
Borrower Satisfaction Survey (35%)
Federal Employee Satisfaction Survey (5%)
Performance-Based Compensation
• Monthly payments based on loan status and
volume of borrower accounts
• Highest payment for borrowers in repayment
and current
• Rates decrease on sliding scale as borrowers
grow more delinquent
• Recent change increased premium for current
in-repayment accounts
8
Monitoring and Oversight
• Planned enhancements include:
 Additional staff
 Move from quarterly to monthly monitoring
 Expand scope from broad view of due diligence
to explicit focus on areas such as IDR, service
member benefits, and loan consolidation
 Expand sampling of borrower-level account
transactions
9
Opportunities for Future Improvement
• Consolidated complaint submission, tracking, and
analysis
• Increased consistency in branding and
communications
• New loan servicing acquisition planned to begin not
later than early 2016
10
Servicing Transition to Navient
 Transition into two separated
companies – Navient and Sallie
Mae successfully completed
October 13, 2014
 Minimal actions for borrowers
 Payments made through
automatic debit continued without
any action from borrowers
 Telephone numbers and mailing
addresses remained same
 Loan account numbers, terms,
borrower benefits, and repayment
plans remained unchanged
11
www.Navient.com
Servicing Snapshot
Direct Loan Portfolio Summary (2014)
Borrowers
Outstanding Dollars
Average $$ Borrowers
27.9 million
$726.6 billion
$26,046.01
The total Outstanding FFEL Portfolio for 2014 is $395 billion for 19.4 million borrowers.
(average $20,360.82 per borrower)
The total Outstanding Perkins Portfolio for 2014 is $8.2 billion for 2.9 million borrowers.
(average $2,827.59 per borrower)
Includes outstanding principal and interest balances as of 09/30/14. Data Source: National Student Loan Data System (NSLDS)
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Servicing Snapshot
Borrower Status
14%
Inschool
28%
8%
Grace
Deferment
Forbearance
7%
32%
6%
5%
Repayment (0-31 days past due)
31-270 days past due
271 and over days past due
Includes Direct Loans with outstanding principal and interest balances as of 09/30/14. Data Source: National Student Loan Data System (NSLDS)
13
Servicing Snapshot
Repayment Plans
Includes Direct Loan borrowers in Repayment, Deferment, and Forbearance with outstanding principal and interest balances as of 09/30/14.
Data Source: National Student Loan Data System (NSLDS)
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AGENDA
General Servicing Updates
o Contract Changes
o Servicing Portfolio
Key Projects and Improvements
o Standardization of Processes
o Program Updates
Looking Ahead
Questions and Answers
15
15
Targeted Improvements
Borrower Outreach and Communication
Delinquency Support
Consolidation
16
Outreach - Repayment Options
 Increased Customer Awareness of IDR Plans
 Created central electronic Income-Driven Application at
StudentLoans.gov
 Can be used by borrowers with ED-held loans (Direct Loans or
FFEL)
 Can be used by borrowers with commercially held FFEL loans
serviced by an entity that also services ED-held loans
 Retrieves the most recent tax information from two most recently
completed tax years
 Application & income information sent to servicer for processing
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“Can’t Pay” / Payments Too High
 Servicers counsel borrowers on all affordable
repayment plans, due date changes, and pre-qualify
borrowers for repayment options
 Servicers have improved counseling to better explain
the different repayment options before deferment and
forbearance options
 More financial literacy materials and support for
borrowers and schools
18
FSA Campaign – Borrowers At-Risk
E-mails sent to 3.34 million borrowers (3.15 million successful)
COHORT
• CALL TO ACTION
90 -180 days delinquent
• Apply for an income-driven repayment (IDR) plan
181- 270 days delinquent
• Apply for an IDR plan
Owe more than $50K and entered
repayment in the last year
• Visit the repayment estimator
In deferment or forbearance for
reasons of financial hardship or
unemployment
• Visit the repayment estimator
In grace period and owe more
than $25K
• Visit the repayment estimator
Greater than 270 days delinquent
• Contact their servicer to apply for an IDR plan
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FSA Campaign Results
30%
17%
10%
7%
20
Opened e-mail
Logged in to
studentloans.gov
Accessed the repayment
estimator or IDR
application
Applied for IDR
Communication - Targeted Improvements
In School
Default
In Grace
Communication
Stages
Delinquency
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In
Repayment
Communication - Targeted Improvements
Communications
In
School
•
•
•
•
Entrance and Exit Counseling
FSA new borrower letter introduces servicer
Servicer Welcome letter and packet
Additional communications include self-service
features, balance, interest, entering grace
Financial Literacy
•
•
•
•
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Saving for college
Creating a budget
Managing personal finances
Establishing good credit
• Avoiding over-borrowing
• Identity theft
• Wise use of credit cards
• Dealing with life events
Communication Stages
In Grace
Continued Financial Literacy
• Servicer/FSA financial literacy site links
• Repayment calculator tools
• Career search tips
• Avoiding the consequences of default
Loan Awareness
• Understanding borrowing
• Benefits of auto-debit
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Communication Stages
In Grace
Preparing for Repayment
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•
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Maintain the relationship with the borrower
Ensure correct repayment status
Update and enhance contact information
Promote self-service through the web
Financial literacy continues
Correspondence: Countdown to repayment
FSA Campaigns
•
•
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In Grace borrowers were the most responsive to FSA’s 2014 campaign. Two
e-mails per year will go out containing information about repayment options
Borrowers that Have Withdrawn/Left School – Focus on IBR options that
can provide a lower monthly payment with a goal of allowing this group to
begin or re-enter a repayment status
Communication Stages
In
Repayment
Income-Driven Repayment
Proactive e-mail campaigns
Re-disclosure statements and
regular correspondence
FSA IDR campaigns
•
Communication Methods
•
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Inbound/Outbound calls
Servicer and FSA websites
Text messaging
Bills
Delinquency letters/e-mails
Mail inserts
Responding to written
communications
• Social media
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•
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Payment Vehicles
•
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Online
Regular telephone
Smart phone
Mail
Auto-pay
FSA Repayment Campaigns
Marketing Objective: Increase
awareness of repayment options
Key Messages:
•
Find the best repayment plan for you
Estimate your monthly payments
You may qualify to make payments
based on your income
If you’re having trouble making
payments, we can help
You don’t need to pay for services
related to your student loans
•
•
•
•
Target Audience: Recent College
Graduates and Borrowers
Timing:
•
•
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Spring: 5/1/2014–6/30/2014
Fall: 10/15/14–12/15/14
Fall Repayment Campaign
October 15 – December 15, 2014
Sample posts from Halloween
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Fall Mini-Campaign
FSA launched a three week joint mini-campaign with the loan
servicers to address the predatory practices of third-party debt
relief companies. Campaign started Sept. 24th
Combat These Ads
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Critical Communication Stages
FSA Outreach Campaigns
Delinquency
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“Getting Back on Track” E-mails
60 and 240 day delinquency letters
Social Media campaigns
Customer Experience
Servicer Outreach Activities
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•
•
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Creative correspondence
E-mails
Website banners
Working with schools
Personal visits to borrowers
•
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Text messages
Calling campaigns
Skip-trace activity
Assigning borrowers to
individual staff members
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Critical Communication Stages
Facts and activities
Default
• Default occurs at 270 days delinquent
• All servicers continue attempts to reach
the borrower up to 360 days of delinquency
• Final Demand Letter sent
• Notice of Default sent
FSA Campaign
• Defaulted Borrowers with Low Balances <$4,000
Communication will focus on the small amount of money per
month ($50) it will take to rehabilitate their loans, re-enter a
repayment status, and start to repair their credit
31
Servicer Communication Enhancements
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•
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•
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Website redesigns
Adding new links
Text messaging
Payment plan comparisons
Web chat
Personalized e-mails
Billing reminders
Unique delinquency campaigns
Special features for the military
Enhanced communications while
in school and during grace
•
•
•
•
•
IDR hotline and webpages
Pre-filled forms for convenience
Borrower newsletters
New website videos
Special phone lines for
delinquent borrowers
• New voice messaging to make
deferment requests easier
• In-house borrower surveys
• Ability for borrowers to manage
their accounts online 24/7
Improvements based on surveys (FSA and Internal, Social Media Comments, Open
rates, Feedback from Schools, Focus Groups and Success rates (Calls to Action).
32
Improving Borrower Communications
•
Servicer Quality Control
•
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FSA Quality Control
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•
•
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Initial and update training
Scripts or talking points provided
Repository of information maintained
Supervisory review and coaching
Regular call monitoring
Call monitoring
Call Center statistics and analysis
Account monitoring and review
Weekly Servicer Liaison touchpoint meetings
On-site reviews
Plans for the Future
•
Servicer initiatives
•
•
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•
•
•
•
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Easy navigation from any mobile device (phone, tablet, laptop)
Web redesign
Communications and Q&As on the 150% DL Subsidized Limit
Increased “self-service” opportunities
Promoting social media to schools
Enhanced financial literacy materials for borrowers
Staff dedicated to service member counseling
Unique new ideas to reach delinquent borrowers
Online scheduling of a call with a counselor 24/7
Post-call borrower customer service surveys
Targeted Improvements
Borrower Outreach and Communication
Delinquency Support
Consolidation
35
Delinquency Support
 Servicers follow standard CDR guidelines and work
closely with FSA
 Provide support to schools investigating rates
 Process challenges and appeals via eCDR
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Delinquency Support
37

Provide outbound targeted contact campaigns along with
inbound call center representatives to help borrowers
become current

Utilize electronic communication methods, such as e-mail,
chat, messaging, text to keep borrowers informed about
account status, and offer to help

Work with schools to obtain current available contact
information - utilize a variety of tools to get the most current
data to contact borrowers (skip tracing on delinquent
accounts)

Work in partnership with the school community to assist
borrowers in all stages of delinquency
Targeted Improvements
Borrower Outreach and Communication
Delinquency Support
Consolidation
38
“New” Loan Consolidation
Available on StudentLoans.gov
 Borrowers with federal student loans can:
Submit applications electronically
Confirm loans for consolidation
Choose a consolidation servicer
Select a repayment plan and submit an IncomeDriven Repayment e-application if desired
39
New Direct Consolidation Loan Process
www.StudentLoans.gov
 With the implementation of our new Direct Loan Consolidation process, we have four
consolidation servicers:
FedLoan / PHEAA
Great Lakes
Nelnet
Navient (formerly Sallie Mae)
 Through the completion of the Federal Direct Consolidation Loan Application and
Promissory Note, a borrower will confirm the loans that they want to consolidate and
agree to repay the new Direct Consolidation Loan
 The electronic application on StudentLoans.gov consist of five steps:
1. Choose Loans & Servicer
2. Repayment Plan Selection
3. Terms & Conditions
4. Borrower & Reference Information
5. Review & Sign
40
New Direct Consolidation Loan Process
www.StudentLoans.gov
Key features of the electronic application:
 NSLDS lookup performed and information about an applicant’s
federal education loans will populate the application
 Ability to delay processing of the application if applicant has at
least one loan still in grace
 Option to choose the federal servicer to complete the
consolidation
 Ability to select a repayment plan for the consolidation loan.
Applicants interested in one of the income-driven repayment
plans will be able to complete the electronic request process
41
Consistency vs Competition
Decision to Standardize
In order to provide the best service to our customers, our
servicing contracts are structured to allow for servicer creativity
and innovation. However, there are times when decisions are
made to standardize our servicing processes.
Why the need for consistency or standardization?
 Standardization makes sense when differences in servicer
processing cause different results to borrowers in the same
circumstance
Identify Issue
or Impact
42
Determine
Objectives
Decision to
Standardize
Standardization of Servicing Processes
Identify Issue or
Impact
Servicing Process
Capitalization
Deferment/Forb Forms Processing
Forbearance Limits
Documentation for IDR plans
Service Member Benefits
Prepayment / Paying Ahead
Loan Transfer Notification
43
Determine
Objectives
Complete






Decision to
Standardize
In Process

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
Improvements - Service Member Support
 Increased efforts to promote awareness of
service member benefits such as SCRA
Interest rate cap and Military Service
Deferment
 Revised portal/correspondence
 Phone center counseling
 Servicers collaborated to create a new
brochure for service members to help them
understand all their benefits
 Servicers enhanced web content and
proactively outreached to service members
44
Service Member Support – Online
45
Service Member Support – The “New” Way
 Expanded the use of the Department of Defense (DoD) Database
to proactively identify all active duty service members
 As of July 2014, the servicers no longer require a written
request from the borrower
 SCRA interest benefit is granted based on information contained
in the DoD database
• Borrowers can verbally request servicer to check DoD
database for eligibility or submit military documents, if
orders are more current than database
 Servicers will review monthly all borrowers against the DoD
database and apply the interest benefit based on that match
46
Improvements - Prepayment / Paying Ahead
Issues
• How are payments applied?
• Can I pay extra?
• Transparency in payment application
There is still work to do …. But so far:
 Based on borrower and school feedback the servicers have
expanded web content to make payment information (how
payments are applied) clearer
 Many of the servicers have made improvements in the
transparency of payment information on communications
(i.e. billing statements)
47
Improvements - Loan Transfer
Issues
• Why did my loan get “sold”
to a new servicer?
• Loan status discrepancies
• Payments made to prior
servicer not applied timely
 Redesign and
standardization of transfer
communications
 Coordination and
collaboration with previous
servicer
 Extended call center hours
for problem resolution
 Experienced and dedicated resources to resolve data issues
 Targeted communications and options for recently transferred
borrowers (to assist with delayed payment posting)
48
Program Updates
The Public Service Loan Forgiveness
Program (PSLF) allows eligible
borrowers to cancel the remaining
balance of their Direct Loans after
serving full-time at a public service
organization for at least 10 years
while making 120 qualifying monthly
payments after October 1, 2007.
49
Key Program Concerns
• Qualifying Payment Eligibility
• Program Visibility
• Consolidation and PSLF
• Addressing School Concerns
50
2
PSLF – Qualifying Payments
Must make
120
separate,
monthly
payments
Must be
made with
15 days of
due date
After
October 1,
2007
Qualifying
payments
Must be for
full amount
due under
plan
51
Do not
need to be
consecutive
PSLF – Qualifying Repayment Plan
•
Income-driven plans are most likely to leave a remaining
balance for forgiveness after 120 qualifying payments
10-Year Standard
IBR
ICR
Pay As You Earn
Others >= 10-Year Standard
52
Qualifying Payment Eligibility Repayment Plan Breakdown
Standard Graduated
5%
(Extended)
2%
Pay As You Earn
5%
ICR
5%
Ineligible
9%
Eligible
91%
53
Graduated
(Extended)
2%
Alternative
1%
Standard
17%
IBR
63%
8
Qualifying Payment Eligibility
Quarterly Repayment Plan Evaluations
 Communicate to borrowers on 10-year Standard
payment plans that they will not benefit from PSLF
 Communicate to borrowers not on an eligible
repayment plan that they are not making qualifying
payments
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Qualifying Payment Eligibility
No Benefit
55
Not Eligible
Qualifying Payment Eligibility PSLF Customer Support

Specialized
processing and
PSLF counselors

Unique 800# for
PSLF inquiries

Intelligent call
routing for the
primary 800#
56
Qualifying Payment Eligibility PSLF Escalated Issues
PSLF is 2.2% of FedLoan Servicing’s portfolio, but accounts
for 19% of escalated issues





57
PSLF Issues
Number of Qualifying Payments
Ineligible Repayment Plan
Qualifying Employment Concerns
Consolidation & Loss of Qualifying Payments
Borrower Confusion
Key Program Concerns
• Qualifying Payment Eligibility
• Program Visibility
• Consolidation and PSLF
• Addressing School Concerns
58
2
Program Visibility - PSLF Web Products
MyFedLoan.org/PSLF
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Account Access
Program Visibility ECF Processing cont.
60
17
Program Visibility Qualifying Employment Types*
Private, NonProfit
1%
Public, NonProfit
37%
Government
62%
Borrower with Qualifying Payment
Matched Months*
120+
0
97-120
0
73-96
78
49-72
25-48
0-24
*Employers with approved ECFs
61
1,504
9,619
122,631
Key Program Concerns
• Qualifying Payment Eligibility
• Program Visibility
• Consolidation and PSLF
• Addressing School Concerns
62
2
Consolidation & PSLF
*As of 10/20/2014
** Comparison based on 564, 397 total
Consolidation Applications as of 10/20/2014
132,321 Consolidation Applications* with ‘PSLF
Interest’
 Borrowers note PSLF interest on 23.4% **
of all Direct Loan Consolidation Applications
 Noted interest gives FedLoan unique PSLF
counseling opportunities that did not exist until
2014
Direct Loan counseling
Repayment Plan counseling
Employment Certification Form counseling
63
Direct Loan
Counseling
Pre-disbursement
Direct Loan counseling
when a borrower
includes Direct Loans
and may lose
qualifying payments as
a result of
consolidation
64
Repayment Plan
Counseling
Pre-disbursement
Repayment Plan
counseling if/when a
borrower has selected an
ineligible repayment
65
ECF Counseling
Post-disbursement
Employment Certification
Form counseling
66
Key Program Concerns
• Qualifying Payment Eligibility
• Program Visibility
• Consolidation and PSLF
• Addressing School Concerns
67
2
Addressing School Concerns

Forgiveness Application / Process
 2017 Earliest Forgiveness
 Proactive Outreach
 Consolidation & Loss of Qualifying Payments
 Lack of Qualified Employment Directory
 Program Visibility & Awareness

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PSLF Toolkit
Addressing School Concerns
Increased Visibility
PSLF Toolkit for Students & Alumni
• Flyers & Handouts
• Ads for School Publications & Web Content
Since July 2012, we have had 724 unique
institutions attend one of the PSLF training
webinars at least once with a total of 1,031
attendees.
We offer additional individual and on-demand
support and support conferences with unique
sessions where possible.
69
Program Updates
TEACH Program Implementation at FedLoan Servicing
• July 2013 Implementation
All new TEACH Grants began disbursing directly to FedLoan
• August 2013 Implementation
All existing TEACH Grants transferred to FedLoan Servicing
70
Portfolio Overview
TEACH Grant Volumes as of September 2014
Volume Type
Total
Unique TEACH Grant Recipients
73,869
TEACH Grants
144,060
TEACH Grant Recipients by Year
40000
35000
33,085
30000
31,363
34,349
25000
24,161
20000
15000
15,547
10000
5000
5,073
0
2009
71
2010
2011
2012
2013
2014
Portfolio Overview
TEACH Grant Service Obligations
73,228
0 Years Satisfied
6,936
1 Year Satisfied
4,028
2 Years Satisfied
2,281
3 Years Satisfied
1,340
4 Years Satisfied
0
72
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Key Concerns & Issues 2014
Recipient Concerns - Program Confusion
Misunderstanding Agreement-to-Serve
 Importance of Certification Response
• Recipient Responsibilities (Demographics)
• Withdrawn Recipient Requirements
• No New Grant Responsibilities

73
Program Challenges
Reasons for Conversion
1. Recipient Requested – Voluntary (17%)
2. Withdrawn Recipient – No response to initial certification requests
3. Withdrawn Recipient – Ineligible response to first annual certification
requests (unique to withdrawn recipient)
4. No response (Both Graduated and Withdrawn)
5. Mathematically unable to fulfil obligation
74
Recipient Request No Time To Cert
64
Cannot Meet Due To No Time Left To Cert
79
Recipient Request Not In Qualified Teach Field
451
Recipient Request Other
601
Recipient Request Does Not Intend To Teach
679
Did Not Certify Intent Or Annual Certification
11,621
Program Challenges - Schools
Separation Date Processing
• Obligation begins with separation
• Differences with Direct Loans
• Withdrawn recipients
• Graduated recipients
• Inactivating enrollment or separation periods
75
Key TEACH Efforts & Improvements
76
1
FedLoan Servicing utilized Pennsylvania State Grant specialists to service
program
2
Specialists have intimate Grant-to-loan program knowledge and expertise
3
Creation of TEACH Certification forms (Certification, Suspension, Conversions)
to simplify program complexity and challenges
4
Online TEACH Web Products & Services for grant recipients
5
Expanded Quality Assurance on Grant-to-Loan Conversion Review
6
Recipient Behavior Analytics
- No New Grant Scenario
- Withdrawn/Reenrolled Scenarios
Initial Certification
Initial Certification – Withdrawn Recipients
Letter Description
Initial Intention Letter and Form
Initial Certification Follow-up
E-mail
When Sent
75 Days from Separation Date OR date that it is determined No
New Grant
Sent 30 days following the initial certification letter if no
response is received
Initial Certification Reminder Letter Sent at day 120, or 45 days from the Initial Intention Letter, and
15 days from the follow-up e-mail
Conditional Grants to Loan
Conversion Letter
77
If the recipient hasn’t certified by 30 number of days after the
prior letter, the grants would convert to loans and this letter
would be sent
Sharing Data with Schools
• Raise awareness of change
in program
• Share communication to
recipients
• Prepare schools for
questions from recipients
• NSLDS Reporting –
Separation Date
• Counseling Guide
78
AGENDA
General Servicing Updates
o Servicing Portfolio
Key Projects and Improvements
o Standardization of Processes
o Program Updates
Looking Ahead
o Summary
Questions and Answers
79
79
Federal Student Loan Servicers
Federal Loan Servicers
Borrower Contact #
Aspire Resources Inc.
1-855-475-3335
CornerStone
1-800-663-1662
ESA/Edfinancial
1-855-337-6884
FedLoan Servicing (PHEAA)
1-800-699-2908
Granite State – GSMR
1-888-556-0022
Great Lakes Educational Loan Services, Inc.
1-800-236-4300
MOHELA
1-888-866-4352
Nelnet
1-888-486-4722
OSLA Servicing
1-866-264-9762
Navient
1-800-722-1300
VSAC Federal Loans
1-888-932-5626
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QUESTIONS?
Sue O’Flaherty
Program Management
202-377-3393
Sue.O'[email protected]
Thank You!
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Cynthia Battle
Direct Loan Servicing
202-377-3261
[email protected]