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 PUBLICPRIVATE PROPRIETARYNATIONAL AVERAGE 13%8.2% 21.8% 14.7% O FFICIAL C OHORT D EFAULT R ATES 12.9%7.2%19.1% 13.7% FY 10 FY 11

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

CDRDenominator: Enter Repayment Numerator: Default Publish RatesCohorts used for Sanctions FY /1/11-9/30/1210/1/11-9/30/14September 2015 FY 10, FY 11, FY 30% FY /1/12-9/30/1310/1/12-9/30/15September 2016 FY 11, FY 12, FY 30% FY /1/13-9/30/1410/1/13-9/30/16September 2017 FY12, FY 13, FY FY /1/14-9/30/1510/1/14-9/30/17September 2018 FY13, FY14, Your Current Active 3-year CDR Timeframes

Of borrowers who defaulted, the majority withdrew without completing their academic programs. Did You Know? Source: Federal Student Aid 2012

Borrowers who do not receive their full six- month grace period have a greater risk of defaulting. Did You Know? Source: Federal Student Aid 2012

There is a strong correlation between increased financial literacy and decreased default risk Did You Know? 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

This will provide the right target population to focus on. (Photo credit: pixabay, public domain images) Understand Who Is Defaulting at Your School and Why

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. Nelnet Trends in Borrower Repayment

Student Success Model

What Prevents Student Success? o Finances/need o Relationship issues o Physical & mental health challenges o Dependent-care o Transportation o Housing o Transition difficulties o Poor study habits o Under-prepared, basic skill needs o Language barriers o Feel unwelcome, no “campus connection” o First generation, no role models or family support

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 Identifying 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 Helping Students in Trouble

Default Prevention - Outreach Efforts

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! Consider When It Makes Sense to Intervene

School – Servicer Partnership All servicers work to gather feedback and find ways to partner with schools on default prevention. Partner with the servicers! 23 Source: 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 s? 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 , 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 /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, s, etc. so you can contact in future

Resources

CDR 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 3- Year 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 Cohort Default Rate Guide

Understand Your Loans Manage Your Spending Plan to Repay Avoid Default Make Finances a Priority Each module has been designed to communicate key financial management concepts to increase students’ financial literacy. Your Student Loans Loan Basics Free Money First Types of Student Loans Your Student Loans Loan Basics Free Money First Types of Student Loans Manage Your Spending While In School Live Within Your Means Borrow Smart Manage Your Spending While In School Live Within Your Means Borrow Smart Estimate What You Will Owe, Spend & Earn Monthly Expenses Monthly Income Understand Repayment Estimate What You Will Owe, Spend & Earn Monthly Expenses Monthly Income Understand Repayment Avoiding Default Postpone or Lower Your Payments Forgive or Cancel Your Debts Delinquency and Default Avoiding Default Postpone or Lower Your Payments Forgive or Cancel Your Debts Delinquency and Default Plan For the Future Your Income and Taxes Your Credit and Identity Credit Cards and Other Borrowing Plan For the Future Your Income and Taxes Your Credit and Identity Credit Cards and Other Borrowing Source: Federal Student Aid 2012 Financial Awareness Counseling Tool- FACT

Default Prevention Page

Thank You!  Cheri Kramer Westmoreland Community College  Kelly Keener, Great Lakes Institute of Technology, Erie Institute of Technology  Anne Del Plato, Regional Director of Partner Solutions Nelnet Education Loan Servicing