A Practical Approach to a Comprehensive Default Program Presenter: Ryan James Bonner Spring Conference April 9 - 12, 2017

Scope of the Presentation We will be covering: Creating a default aversion team and Plan Basics of how the CDR is calculated Why schools should confirm the accuracy of LRDR data Tools / Reports / Resources Portfolio Navigator – an in-depth look at how GTCC uses PN to help manage outreach to delinquent borrowers Spring Conference April 9 - 12, 2017

Introduction to Default Management The best place to start when creating / implementing a Default Management Program is to form a Default Prevention Team on campus. You will want to include staff and faculty from different areas of campus so you can have the best and most diverse opinions on how to address default and repayment related concerns at your school. This committee should create a Default Aversion Plan The committee should meet every semester to improve the interventions and brainstorm new ideas. Spring Conference April 9 - 12, 2017

Default Aversion Committee Default management is a campus-wide concern. This committee, comprised of both faculty and staff, needs to look at possible policy changes and determine what measures can be taken to address the main obstacles to successful repayment, employment, and education. You need to know WHO your defaulters are. Have your institutional research department compile data on your defaulters and look for patterns such as the number of developmental classes needed, age, race, gender, SAP status, enrollment status, etc… Spring Conference April 9 - 12, 2017

Default Management Plan I suggest following the guidelines for the plans that a school would have to submit if their CDR reached 30%. You can use “Default Prevention & Management: A Plan for Student & School Success.” Identify factors causing your CDR to exceed the threshold. Establish measurable objectives for how to improve your CDR. Determine what actions you will take to improve student loan repayment, such as enhanced outreach and loan counseling. This plan must be submitted to the FSA / Dept of ED for review. Spring Conference April 9 - 12, 2017

Default Plan Possible Sections Here is what the section headers for GTCC’s plan look like: Spring Conference April 9 - 12, 2017

Default Prevention Plans…Continued Federal regulations (668.217) suggest this plan should include: Core Default Reduction Strategies Additional Default Reduction Strategies Statistics for Measuring Progress Spring Conference April 9 - 12, 2017

Core Default Reduction Strategies Establish your default prevention team, enlisting the support of representatives from diverse campus positions. Consider your history, resources, dollars in default, and targets for default reduction to determine which activities will result in the most benefit to you and your students. Define evaluation methods and establish a data collection system for measuring and verifying relevant default prevention statistics, including a statistical analysis of the borrowers who default on their loans. Identify and allocate the personnel, administrative, and financial resources appropriate to implement the DAP. Establish annual targets for reductions in your rate. Establish a process to ensure the accuracy or your rate. Spring Conference April 9 - 12, 2017

Additional Reduction Strategies Enhance the borrower’s understanding of his or her loan repayment responsibilities through counseling and debt management activities. Enhance the enrollment, retention, and academic persistence of borrowers through counseling and academic assistance. Maintain contact with the borrower after he or she leaves your institution by using activities such as skip tracing. Track the borrower’s delinquency status by obtaining reports from data managers and FFEL Program lenders. Enhance student loan repayments through counseling the borrower on loan repayment options and facilitating contact between the borrowers and the data manager and FFEL lenders. Assist a borrower who is experiencing difficulty in finding employment through career counseling, job placement assistance, and facilitating unemployment deferments. Identify and implement alternative financial aid award policies and develop alternative financial resources that will reduce the need for student borrowing. Spring Conference April 9 - 12, 2017

Statistics for Measuring Progress The number of students enrolled at your institution during each fiscal year. The average amount borrowed by a student each fiscal year. The number of borrowers scheduled to enter repayment each fiscal year. The number of enrolled borrowers who received default prevention counseling services each fiscal year. The average number of contacts that you or your agent had with a borrower who was in deferment or forbearance or in repayment status during each fiscal year. The number of borrowers at least 60 days delinquent each fiscal year. The number of borrowers who defaulted in each fiscal year. The frequency, type, and results of activities performed in accordance with the default prevention plan. Spring Conference April 9 - 12, 2017

How are Cohort Default Rates Calculated A school’s cohort default rate is the percentage of a school’s federal student loan borrowers who enter into repayment within the cohort fiscal year (denominator) AND default within the cohort default period (numerator). The cohort fiscal year refers to the fiscal year for which the cohort default rate is calculated. We are currently challenging the 2014 data, which is for the repayment dates of: Oct 1st 2013 to Sept 30th 2014. Rates are based on the number of borrowers who enter repayment, not the number of loans. Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

What Loans are Included in the Calculation? All Federal Direct loans (Sub and Unsub) Not included: Plus Loans Perkins Loans / FISL (Federal Insured Student Loans Consolidation loans* Spring Conference April 9 - 12, 2017

How is the Repayment Date Determined? Typically students enter into repayment after a six month grace period that begins when the borrower separates (graduates or withdraws) from school or drops below half- time. Official repayment is the first day following the end of the six month grace period. Spring Conference April 9 - 12, 2017

How is Default defined in terms of Cohort Default Rate Purposes? To determine who is in the numerator for these calculations, we must define default for CDR purposes. Federal Direct student loans are considered in default after 360 days of delinquency. (FFEL loans not purchased by the department is considered in default only if the guaranty agency has paid a default claim to the lender. The claim date determines which cohort the cohort will be included in. Default begins at 270, but not for calculation purposes. Spring Conference April 9 - 12, 2017

How do consolidation loans affect the numerator of the calculation? Federal Direct consolidation loans are not directly included in the CDR calculations, however a defaulted consolidation loan may cause borrowers to be included in the numerator if the consolidated loan defaults within the cohort period applicable to the underlying loans. Lets look at an example: Spring Conference April 9 - 12, 2017

How do consolidation loans affect the numerator of the calculation? Mary enters repayment on multiple loans in January 2014. Because of this, she will be included in the denominator for the 2014 cohort year. After entering into repayment, she elects to consolidate the loans. Mary fails to make payments and the consolidated loan defaults in June of 2015. Even though the underlying loans never defaulted, she will be included in the numerator because the consolidated loan defaulted during the cohort period. Spring Conference April 9 - 12, 2017

How does loan rehabilitation affect the numerator of the calculation? Once a borrower in default has made the required payments (9 consecutive) then the loan is rehabilitated and the borrower is no longer in default. For CDR purposes, if the borrower rehabilitates the loan before the end of the cohort default period, the borrower should not be included in the numerator. They will be considered in the numerator however, if they don’t rehab this loan before the end of the cohort default period. Spring Conference April 9 - 12, 2017

Why are Cohort Default Rates Important? CDR sanctions and benefits provide an incentive to schools to work more closely with borrowers in repayment to reduce default. Higher default rates = higher costs for taxpayers… Sanctions can prevent a school with a high percentage of defaulters from continuing to participate in the Direct Loan and Pell Grant programs. If there is inaccurate data on the LRDR, schools can challenge this data through IDC, etc. Spring Conference April 9 - 12, 2017

The Consequences of Default for the Borrower Credit damage for at least 7 years Wage garnishment Ineligible to receive TIV funds Garnishment of federal and state tax returns (any Federal Payment) Potential loss of occupational licensure No mortgage loans Collection costs Denied loans (car, apartment, etc) Legal action in Federal District Court Spring Conference April 9 - 12, 2017

Consequences of Default for the School High CDRs reflect negativity on school quality Result in provisional certification Result in loss of TIV eligibility Threaten access to private loan funds How would your school handle the loss of the Pell Grant?? Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 CDR Thresholds Spring Conference April 9 - 12, 2017

What Would a School Have to do to Regain TIV Eligibility? Pay any amount owed to the Department (or are meeting that obligation under an agreement acceptable to the Dept) Wait until the fiscal period ( the current year and two following years) has ended… Submit a new application for participation Get approval from the Department that you met all of the requirements in effect AND Enter into a new program participation agreement Spring Conference April 9 - 12, 2017

What is the LRDR and Why is Reviewing it Important? The LRDR contains information on the loans (FFEL / DL) that are used to calculate your schools draft / official CDR. It includes: The number of borrowers who enter repayment in a fiscal year. The loan status of those borrowers. If you don’t challenge the draft LRDR, you cannot contest the official rate in September… Spring Conference April 9 - 12, 2017

Current Default Rate Concerns In September of 2016 the Dept of Ed announced that the 3- year CDRs dropped nationally from 11.8% to 11.3%. The 3-year CDR for FY2010 was 14.7%. Many credit the expansion of Income Drive Repayment plans, although the expense of these plans on the taxpayer were grossly underestimated. Community College students account for about 28% of all defaulters (FY2011) Spring Conference April 9 - 12, 2017

Helping Borrowers Manage Repayment Since 2010 there has been a historic investment in college affordability by increasing the Pell Grant by more than $1,000 and tying the grant to inflation for the first time. American Opportunity Tax Credit – worth 10k over 4-years. Cutting student loan interest rates Simplifying the process for applying for Federal financial aid (at least when the DRT works). College Scorecard to increase transparency. Spring Conference April 9 - 12, 2017

Resources / Tools / Reports In this section we are going to cover some of the available resources for colleges who are managing student loan repayment. NSLDS offers several reports schools can order to monitor the repayment status of their borrowers, such as: Delinquent Borrower Report Date Entered Repayment Report 24 / 36 Month Repayment Info Loan Detail Report Borrower Default Summary Report School Portfolio Report Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

The Delinquent Borrower Report The DELQ01 provides schools a report of borrowers who have been reported as delinquent on at least one of their federal student loans. It includes demographic data, loan data, and can be ordered in report or extract form. Users can specify cohort year. Can be sorted by days delinquent. Extract file (DELQCMOP) layouts are available on the IFAP website. Spring Conference April 9 - 12, 2017

The Date Entered Repayment Report The Date Entered Repayment Report provides users with a list of borrowers with loan history who are scheduled to go into repayment during a certain date range. Output type can be Report, Standard, and Comma Delimited. You can compare this report with the LRDR (DRC035) to make sure the correct number of borrowers are included in the denominator of your school’s CDR calculation. Records layouts for the extract files are found on the IFAP website. Spring Conference April 9 - 12, 2017

24 / 36 Month Repayment Info Loan Detail These reports provide information on the status of the borrowers that attended school during a specific period. This is for informational purposes only, but it mirrors the information provided on the LRDR that schools receive during the draft rate period, typically in late February. Layouts for the extract reports can be found on the IFAP website. Spring Conference April 9 - 12, 2017

Borrower Default Summary Report This report provides school users with a list of loans that have defaulted and a loan date that falls within the requested date range. Includes current loan status… Schools can use this report when working on challenging their draft default rate, comparing the data with the numerator of the LRDR. Layout for the extract reports can be found on the IFAP website. Spring Conference April 9 - 12, 2017

School Portfolio Report The SCHPR1 provides school users with comprehensive information regarding all FFEL / DL program loans. This report can be sorted by loan status, repayment date, and loan program type. Will be delivered in extract type. Can be sorted by specific school branch ID Extract file layouts can be found on the IFAP website. Spring Conference April 9 - 12, 2017

Who are YOUR Defaulters One of the most important things you can do within a default management program is study the characteristics / similarities of your school’s defaulters. GTCC takes the information from the LRDR when the draft rates are released and finds the students who are in the numerator (those students who entered into repayment and also defaulted within the 3 year repayment period. Take their SSN’s and send this file to your Institutional Research department so they can give you information that you will use with your Default Aversion Plan / Committee. Spring Conference April 9 - 12, 2017

Who are YOUR Defaulters Age / Race / Gender SAP status Employment status Enrollment status Class time / registration data Developmental coursework required Credits completed Use this information for targeted interventions… Spring Conference April 9 - 12, 2017

Using 3rd Party Assistance for Default Management Schools often have to make the choice on whether or not they have the time / staff available to dedicate to implementing a comprehensive default management program. There are MANY companies willing to assist with this work, and the expenses can vary greatly, from free assistance to hundreds of thousands of dollars. GTCC is currently working with Great Lakes’ new resource, Portfolio Navigator… Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 Portfolio Navigator Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 Portfolio Navigator With Portfolio Navigator we can order reports, broken down by stage of delinquency and they can be delivered by email, letter, or phone. Unlike many products from loan servicers, this product contains loan information for all of your school’s borrowers, not just from GL’s service portfolio. By organizing our outreach this way, we have been much more successful in reaching borrowers, especially those who are very close to defaulting on their student loans. We now also can forecast future CDRs so we know which cohort we need to spend the most time working on. Spring Conference April 9 - 12, 2017

Uploading Reports to Portfolio Navigator The biggest “waste” of time I had before we went with Portfolio Navigator was formatting all of the reports using the “helpful” NSLDS records layouts. At best it is time consuming, at worst it is flat out confusing! We have fixed format reports automatically from our ORG tab on NSLDS so that each month all I have to do is save them from the FAIM screen in Datatel and upload them each month to Portfolio Navigator. Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 Action Center - Home Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

Create and Save Your Outreach Templates Spring Conference April 9 - 12, 2017

Customize Your Outreach Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 Support Central Spring Conference April 9 - 12, 2017

Forecasting Your Future CDR – Snapshot from Great Lakes Spring Conference April 9 - 12, 2017

Benefits of Forecasting Your Cohort Default Rate Forecasting your future default rates is paramount to successfully supervising a comprehensive default management program. You will likely have limited time each month to actually call your most delinquent borrowers. By reviewing CDR Snapshot data you can prioritize your outreach by the cohorts with the highest projected CDR, the highest Risk Factor rate, or the most borrowers in late stage delinquency. Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017 Final Thoughts… A true default management program: Has a default prevention team / plan Does an internal analysis of the characteristics of the school’s defaulters Reaches out to students who are delinquent on their student loans. Uses the reports available to schools in order to review the accuracy of borrower data and repayment information Forecast future cohort default rates so they can prioritize outreach and prepare for any sanctions, benefits, or concerns about eligibility. Spring Conference April 9 - 12, 2017

Spring Conference April 9 - 12, 2017

NCASFAA would like to thank our Professional Affiliates! Spring Conference April 9 - 12, 2017