New Regulations – Rehabilitation, AWG and PLUS Adverse Credit

Collection Agency Perspective Lynn Heineman Senior Vice President Account Control Technology, Inc.

Pre & Post 7/1 Regulation Changes # of activations (accounts into billing) have stayed status quo on ED, increased in guarantor side Turn Rate of Activations into Rehabs has decreased since 7/1 regulation changes Customer and Activations Activations that Became RehabsSum of Rate Activation Month Client A % 7/ % 8/ % 9/ % Client B % 7/ % 8/ % 9/ % Client C % 7/ % 8/ % 9/ % Grand Total %

Credit Score to Balance Range # OF ACCOUNTS RANGE$0-$5K$5K-$10K$10K-$15K$15K-$20K$20K-$30K$30K-$40K$40K-$50K$50K-$75K $75K- $100K$100K ,5871, ,1702,9201, ,5296,9143,2401,7451, ,33110,5085,0852,5772,5691, ,01010,4995,8212,6162,6681, ,6616,8654,4532,2042, ,9383,2732,2781,2681, ,8722,0631,

Balance to Income Activations Balance / Income$0-$5K$5K-$10K$10K-$15K$15K-$20K$20K-$30K$30K-$40K $40K- $50K $50K- $75K $75K- $100K$100K+ 90K+1.5%5.5%13.2%17.6%13.6%16.1%26.2%17.9%29.4%33.9% 60K-90K1.1%3.3%7.7%12.1%13.0%16.1%15.7%19.7%20.8%18.1% 50K-60K0.9%3.6%8.3%11.9%14.0%14.2%18.5%18.4%18.6%13.2% 40K-50K1.5%4.6%9.4%12.1%15.3%18.4%14.3%19.2%24.4%17.1% 30K-40K1.4%4.8%9.0%11.9%15.5%14.8%17.3%19.3%16.7%20.7% <30K1.4%3.8%8.5%10.4%11.6%14.0%10.3%10.4%13.5%13.9% Total1.3%4.3%9.3%12.7%13.8%15.6%17.0%17.5%20.6%19.5%

Additional Changes since 7/1 Changed our process to adapt to new 7/1 regulations Enhanced technology to streamline the process, improved efficiencies SignNow technology used where permitted by client Clients who have kept the process borrower friendly have better success in rehab Fall Out Rate since 7/1 has increased We contribute this to the change in programs as middle class having to pay larger balances under the 15% rule than pre 7/1 Lose more at first talk off due to income & expense validation Proof of Expenses is another area where fall out occurs NSF increases seen in the lowest bracket - $5 payments Overall the percentage of payments to NSFs about the same Percentage of AWG Rehabs have increased since post 7/1 Many taking advantage of the suspension 70-80% return on updated paperwork for those in this group

Impact of Income-Driven Repayment

Rehabilitation Payment Trends Payment Range

Rehabilitation Completion Rate Trends

Observations All but the highest income borrowers can now qualify and afford their rehabilitation payments The number of borrowers completing the rehabilitation program should increase as a result of these regulatory changes Lower payments will likely mean a higher percentage of rehab agreements will complete the qualifying period Even with AWG suspension rules, the rehab program remains attractive to garnishees Due to the number of borrowers needing to utilize an income-driven repayment program, aiding a borrower’s transition to his/her new lender’s payment plan is increasingly important

Plus adverse credit Betsy Mayotte American Student Assistance November 4, 2014

Background November, 2011 ED modified PLUS credit check Before change - 72% approved, 28% denied After change – 38% denied Some HBCU’s jumped 75%

PLUS Loan Definitions Charged off – debt written off as loss, still subject to collection action In collection – a debt sent to a collection agency or is subject to more intense collection efforts due to inaction or unsatisfactory action by the borrower

Plus loan – adverse credit An applicant for a PLUS loan is considered to have adverse credit if they: Has one or more debts totaling more than $2,085 that Are 90 days or more past due (as of date of credit report) or Have been placed in collection or charged off within the last two years Has been subject to one or more of the following in the last 5 years: Default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or Write off of a Title IV debt

Plus loan - adverse credit Maximum debt threshold will be adjusted if the change in the Consumer Price Index is $100 or more Rounded up to the nearest $5 Changes announced in federal register

Plus loan - counseling Counseling available to all PLUS borrowers and endorsers No later than academic year Mandatory for borrowers who obtain loan due to appeal or endorser

Plus loan - counseling Voluntary counseling will contain Repayment estimator Repayment plan information Budgeting information Strategies to avoid delinquency and default

Plus loan - counseling Mandatory counseling will contain Repayment estimator Repayment plan information Budgeting information Strategies to avoid delinquency and default Additional financial literacy information Current debt level and estimated repayment amounts

Plus loan – other changes Credit checks will remain valid for 180 days Default rates will be published “as appropriate”

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