1. Default Prevention and NSLDS: Managing Cohort Default Rates
9/18/2018
2016 GASFAA Conference

2. Overview Why are Cohort Default Rates growing higher?
3 year Cohort Default Rate calculation
Do you need assistance to manage your rate?
Proven methods to lower Cohort Default Rates
Early Intervention
Default Prevention Activities
NSLDS Reports
Default Prevention Task Force/Plan
Hello everyone. Since you are here in this session, I can only assume that you read the description of the session and are concerned about your cohort default rates and are wanting to know what you can do at your institution to counteract the increasing default rates we are seeing in the industry.
We will touch on the change to the calculation, and along with the changes to the calculation, we will talk about the other changes that go along with the 3 year calculation (i.e. the benefits, the sanctions)
I am hoping that at the end of this session, you will carry away with you the tools you need to assist in the lowering of your cohort default rates. (i.e. an understanding of what Early Intervention is and what schools can do to prevent default, what reports are available on NSLDS to help in this endeavor, and what is needed to develop a Default Mgt Plan)
9/18/2018
2016 GASFAA Conference

3. I decided to start this session by providing an overview of the new Cohort Default Rate calculation and the changes that go along with it to set the stage for why schools should be performing activities to prevent defaults.
Cohort Default Rate
9/18/2018
2016 GASFAA Conference

4. Cohort Default Rate Released twice a year (Draft and Official)
Draft – February
Not Public, No Sanctions, No benefits
Opportunity to Challenge
Within 45 days of issuance of the draft rates
Official – September
Public, Sanctions and Benefits apply
Opportunity for Adjustments/Appeal
Various timeframes dependent on the type of appeal
The rates are published twice a year. First a Draft rate in February, then the Official in September.
The Draft rate is provided only to your institution and is not made public. There are no sanctions or benefits applied/associated with the Draft rate. However, there is an opportunity at this time to challenge the Draft rate by reviewing the detail of the calculation and identifying incorrect data that may be “fixed” through cooperation with the responsible data manager (i.e. loan servicers or Guarantors with respect to FFEL). This has to be done within 45 days of the issuance of the draft rates.
The Official rate is published in September and is made Public. Sanctions and Benefits are applied based on the official rates. If any errors remain uncorrected from the challenge process or there are new data errors identified when the official rates are released, the Dept allows schools the opportunity to submit requests for these adjustments to be made.
There are also other appeals that a school can utilize if they are subject to sanction. Each of these appeal processes have their own timeframes in which to appeal. Typically within 15 and 30 days of receipt of the Loan Record Detail Report (LRDR) which is a report provided by NSLDS.
I won’t get into the specifics of the appeals processes but wanted to provide a general overview for you to know that there is such a process. More information on the appeals process can be found on the Dept’s website and in the Cohort Default Rate Guide.
9/18/2018
2016 GASFAA Conference

5. 3-Year Cohort Default Rate
The 3-Year Numerator is the number of a school's borrowers who enter repayment on certain FFEL Program or Direct Loan Program loans during a particular federal fiscal year (FY), which is from October 1 to September 30, and default prior to the end of the next two fiscal years.
3-Year Cohort Default Rate
As you can see, the 3-year Numerator includes those borrower who enter repayment in a given federal fiscal year and default prior to the end of the next two fiscal years.
We will touch on the Benefits and Sanctions coming up in the next couple slides.
The 3-Year Denominator is the number of a school's borrowers who enter repayment on certain FFEL Program or Direct Loan Program loans during a particular federal fiscal year (FY), which is from October 1 to September 30
9/18/2018
2016 GASFAA Conference

6. Benefits of a Low CDR based on the 3-year rate
Three most recent official CDRs are less than 15.0 percent
May disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period.
May choose not to delay the first disbursement of a loan for 30 days for first-time, first-year undergraduate borrowers.
The Benefits are still the same as they have been except for the percentage threshold changing from 10 to 15% which comes with the change from the 2 to 3 year calculation. So if the three most recent Official CDRs are less than 15 percent, then schools may choose to disburse in a single installment and may choose not to delay the first disbursement for 30 days for first-time, first-year undergrad borrowers.
9/18/2018
2016 GASFAA Conference

7. Sanctions Associated with a High CDR based on the 3-year rate
Three most recent official cohort default rates are 30.0 percent or greater
Lose Direct Loan and Federal Pell Grant eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.
A school’s current official cohort default rate is greater than 40.0 percent
Lose Direct Loan eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.
* Except in the event of a successful adjustment or appeal
Under the current model of the 3-year CDR, schools whose three most recent official cohort default rates are 30% or greater will lose Direct Loan and Pell eligibility for the fiscal year in which the school is notified of its sanction and the following two fiscal years.
If a school’s CDR is 40% or greater for the current cohort period, the institution will lose Direct Loan eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the next two fiscal years.
You see the note at the bottom of the slide which refers back to the appeal process I mentioned briefly earlier when talking about the calculation of the rate. If schools are successful at appealing their rates to reduce them below these thresholds, the sanctions will be averted.
9/18/2018
2016 GASFAA Conference

8. Sanctions Associated with a High CDR based on the 3-year rate
First Year: Establish Default Prevention Task Force
Second Year: Revise Default Prevention plan and submit to ED for review.
ED may revise the plan and include specific actions the school must take to improve the CDR.
Third Year: School will lose Direct Loan and Pell eligibility for the fiscal year in which the school is notified of its sanction and for the following TWO fiscal years.
For those schools whose official cohort default rates are 30.0 percent or greater, there are special sanctions applied:
First Year: Establish default prevention task force to identify the factors causing the CDR to exceed the threshold. The task force should establish measurable objectives and steps that will be taken to improve the CDR. The plan must be submitted to ED for review.
Second Year: Revise default prevention plan and submit to ED for review. ED may revise the plan and include specific actions the school must take to improve the CDR.
Third Year: School will lose Direct Loan and Pell eligibility for the fiscal year in which the school is notified of its sanction and for the following TWO fiscal years
9/18/2018
2016 GASFAA Conference

9. Reasons for CDR increases
Educational costs continue to rise
Students borrowing more money
Economy and Unemployment
One-in-five household’s hold student loan debt
Increasing loan delinquency rates
The combination of Stafford and private loans equal greater debt
As we have seen, the default rates are increasing. Not all schools are seeing the increases, but many are. Some factors contributing to the increases are that:
The cost of education continues to rise for students.
Student borrowing has been increasing in recent years, while tuition continues to grow and families face inflation, poor economy and lower family incomes.
We are seeing a higher unemployment rate for young workers and can probably expect that default rates may continue to rise.
Research studies show that one in five households has a student loan.
A recent study by the Institute for Higher Education Policy found that for every borrower who defaults, at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.
We are seeing more and more students borrowing private loans on top of their Stafford loans which means more debt.
With the combination of rising educational costs, lower family incomes, increased debt…..you can expect higher delinquency and default rates.
9/18/2018
2016 GASFAA Conference

10. What Should Schools Do Proven Methods to Lower Default Rates!
So….the burning question in the room then is….What should schools be doing about the increase in their delinquencies and default rates?
What Should Schools Do
9/18/2018
2016 GASFAA Conference

11. What Schools Should Do Perform Early Intervention
Conduct Default Prevention Activities
Develop a Default Prevention Task Force and Plan
Review NSLDS Reports on a regular basis
Communication early and throughout a students educational experience is an integral part of preventing defaults.
We will discuss the types of Early Intervention and Default Prevention Activities your institutions should be performing.
And we will get into a high-level overview of developing a Default Prevention Task Force/Plan which includes the Early Intervention and Default Prevention activities we will go over.
Then finally, we will discuss what reports are available to you on NSLDS and how to use them.
9/18/2018
2016 GASFAA Conference

12. Early Intervention
Provide students with specific time-released information designed to:
Support transition into higher education
Navigate college life
Encourage persistence and completion
Promote financial literacy
Educate students on entering the workforce
Promote successful management of student debt
I think we all know that the more well-informed you are about something, the less likely you are to make a poor choice. Communication is the key. Get the word out to students about the various topics that relate to them while attending your institution.
Provide students with specific time-released information that is designed to make students well-informed. Topics geared to increase a student’s success in school, attainment of their degree or program completion, and retention rates at your institution. Topics regarding financial literacy and entering the workforce. All these things lead to successful repayment of student loans.
9/18/2018
2016 GASFAA Conference

13. Early Intervention Increased financial literacy decreases defaults
Make it a part of your curriculum
Utilize free resources
Federal, non-profits, lenders, guarantors
Utilize Facebook and Twitter
Provide information regarding:
Credit Card Debt, Budgeting, Banking
Successful Student Loan Repayment
Increased financial literacy decreases defaults. The more you know about finance management, the less likely you are to become delinquent and default on your loans.
Make it a part of your curriculum. I have heard that some schools require a course for credit. Some withhold degrees until completed. Some do this as a requirement for orientation.
Utilize School Facebook and Twitter accounts to provide financial literacy information to students. Use your school’s social networking site to push the information on the prior slide out to students.
Be sure to include information regarding Credit Card Debt, Budgeting, Banking and Successful Student Loan Repayment.
Conduct this activity throughout the student’s educational experience.
9/18/2018
2016 GASFAA Conference

14. Early Intervention Offer job-placement services
Contact recently non-enrolled students to determine their future educational plans and encourage re-enrollment
Advise of repayment beginning in six months
Counsel on repayment plans, deferments and forbearances
Ensure they have lender/servicer contact info
Job-Placement Services - Does your school have a job-placement program? An employed borrower, even one earning less than if they had completed school, is better able to make loan payments than an unemployed borrower!
Contact recently non-enrolled students to determine their future educational plans and encourage re-enrollment. Studies show that students who do not complete their program of study are most likely to default. Timely intervention can improve student retention and reduce the number of defaulted loans. Schools should attempt to work with students even after they have left school by encouraging them to complete their programs of study and helping them resolve the issue(s) that prompted their withdrawal.
When you have made contact with these former students, advise them of their grace period and repayment beginning in six months. Discuss if an alternative repayment plan, other than the Standard plan, is best suited for their particular situation.
Getting set up initially on the right repayment plan and making regular monthly payments establishes good habits and promotes successful repayment. Do not simply offer the borrowers deferments and forbearances as a “way out”. Sometimes these are the only options, or perhaps the best option for the borrower’s situation, but you want to encourage repayment, not post-ponement!
Ensure the borrower has appropriate servicer contact information.
9/18/2018
2016 GASFAA Conference

15. Early Intervention Conduct Entrance/Exit Counseling
Collect borrower contact information
Identify your “at risk” population
Working with this population can equate to more students completing their educational programs, which equates to higher retention rates and lower defaults.
Update enrollment to NSLDS or Clearinghouse frequently
There is a direct correlation between late or inaccurate enrollment reporting and loan defaults.
Be sure to conduct Entrance/Exit counseling. For those who leave early and do not complete their degree program, find out why they left and use this information! It will help you to identify your “at risk” population and that information can be extremely useful in developing a plan to prevent future defaults. Collect updated contact numbers and addresses so you can reach them at a later date. Collect ALL addresses they may have. Many students have more than one these days! And if they are like me, typically one of them they check often and the others are reserved for “junk”. So try to collect them all!
Get them to provide contact information for siblings, parents, grandparents, etc. including and cell phone numbers. Ask them for the ONE phone number through which he/she can ALWAYS be reached.
Promptly update the enrollment change so the servicer will have the full six month grace period to inform the student borrower about their rights/responsibilities and can get the borrower set up on the most affordable repayment plan for their situation.
Important Note: Most defaulters do not receive their full grace period
During the grace period a loan servicer:
Establishes a relationship with the borrower
Ensures the correct repayment status
Discusses the appropriate repayment plan
Promotes self-service through the web
Updates and enhances borrower contact information
Discusses consolidation options
This is key to establishing good habits in communicating with the servicers and staying on track for successful repayment of student loans.
9/18/2018
2016 GASFAA Conference

16. Default Prevention Contact delinquent borrowers and encourage payment
Utilize Servicer and NSLDS reports to identify borrowers
Contact at various stages of delinquency
Counsel on various Repayment Plans available
Pay as You Earn
Revised Pay As You Earn
Income-Based Repayment
Income-Contingent
Extended
Graduated
Standard
Even after all the Early Intervention efforts we perform, we know there are going to be those that still fall delinquent on their student loan repayment.
Schools should work with the loan Servicers and reports from NSLDS to identify those student borrowers who are delinquent. These reports should be used to make contact with the borrowers at various stages of delinquency. You can focus efforts on Early or Late stages of delinquency and tailor the messages to the specific group you are reaching out to. For example, if Late Stage borrowers, you should advise them of the consequences of default. That their credit will be damaged due to non-payment of their student loans. Which could mean difficulty finding a job or getting a mortgage on a house.
Schools should attempt contact by phone and or even snail mail to reach these borrowers. Counseling should include the various repayment plans available. Attempt to hone in on what their financial situation is and which repayment plan may be best suited for them. Do they have a job lined up? Do they not? What is their earning potential over the next 5 years? Do they expect no change in their income over the next several years? These types of questions can point you to the appropriate plan for them.
As I said earlier, getting set up on the right repayment plan and making regular monthly payments establishes good habits and promotes successful repayment.
9/18/2018
2016 GASFAA Conference

17. Default Prevention Determine reason for delinquency
Counsel on Deferment and Forbearance options
In-school Deferment
Unemployment Deferment
Economic Hardship Deferment
Discretionary Forbearance
Mandatory Forbearance
Verify borrower demographics
Skip-Trace
Promote contact with lenders/servicers
When speaking with these borrowers, you need to determine the reason they are behind on making their monthly payments. Is it a financial hardship, is it because they are unemployed, perhaps they are having medical issues that come with their own large bills requiring payment.
These are all situations that may be temporary and while the borrower may not be able to make payments at this time, they may be able to in six months or a year. If that’s the case, perhaps they would be best suited for a Deferment or a Forbearance. Remember, Deferments are entitlements and the borrower must qualify for the deferment. However, a Forbearance is given at the discretion of the loan servicer. As a general rule, if a borrower has had 3 years of forbearance time already, the loan servicer most likely will not grant another one.
Again, always confirm borrower contact information: additional phone numbers, address and , each time you speak with them to ensure you have the most accurate information with which to make contact to assist them with successful repayment.
Employ Skip-trace services to locate those delinquent borrowers for whom you do not have good contact information. Use free web search services like Google and WhitePages. Use social media networking sites to locate good phone numbers/ s.
Promote contact with their servicer(s) and encourage them to discuss their repayment options to establish a long term repayment commitment with their servicer.
9/18/2018
2016 GASFAA Conference

18. Default Prevention Developing a Task Force and Plan
Now that you’ve had an overview of the activities that schools should be doing to assist their students with successful repayment of their student loans which ultimately reduces your institutions cohort default rates, we will move into an overview of the Default Prevention Task Force and developing a Default Prevention Plan that incorporates all these types of activities and when schools should be putting these in place.
Default Prevention
9/18/2018
2016 GASFAA Conference

19. Default Prevention Task Force/Plan
3-Year Cohort Default Rate of 30 percent or greater for any one federal fiscal year
Default Prevention Task Force
Objective: to reduce defaults and prevent the loss of institutional eligibility.
Preparing a Default Prevention Plan
Task Force should create a default prevention program
Submit a written Default Prevention Plan to the Department of Education
An institution that has a 3-Year Cohort Default Rate of 30 percent or greater for any one federal fiscal year is required to establish a Default Prevention Task Force to reduce defaults and prevent the loss of institutional eligibility.
I think it important to note here though that a school can develop a Task Force and Default Prevention Plan at any point and should consider doing so before you reach a point where it is required by regulations to do so. It is simply good business practice and will be beneficial to your school and its student borrower population.
Preparing a Default Prevention Plan
Regulations require that a school’s Default Prevention Task Force create a program of default prevention and submit a written Default Prevention Plan to the Department of Education.
9/18/2018
2016 GASFAA Conference

20. Default Prevention Task Force/Plan
A school’s Default Prevention Plan must:
Identify factors causing the default rate to exceed the threshold
Requires identifying at-risk borrowers
Establish measureable objectives and steps the institution will take to improve its cohort default rate
Specify actions the institution will take to improve student loan repayment
Sample Default Prevention Plan at
A school’s Default Prevention Plan must:
• Identify the factors causing the default rate to exceed the threshold (This involves identifying your at-risk population of borrowers.)
• Establish measureable objectives and the steps the institution will take to improve its cohort default rate
• Specify the actions the institution will take to improve student loan repayment
There is a sample Default Prevention Plan available on the Dept of Ed’s website.
9/18/2018
2016 GASFAA Conference

21. Identifying At Risk Students
Never Contacted
Late Admits
Early Withdrawal
No Exit Counseling
Academic Preparedness
Academic Probation
Certain Majors
Attendance Issues
No Job in Profession
Finances/Need
Relationship Issues
Physical/health challenges
Transportation
Housing
First generation
Transition difficulties
This slide depicts some of the characteristics of the most commonly identified “At Risk” students. Your institution may identify characteristics that are unique to you. These are just common examples.
Those that have never been contacted by their loan servicer. More often than not, this is due to not having a valid phone number or other good contact information. It is extremely critical to gather as much contact information on an outgoing student as you can. This information can be used when conducting Early Intervention and Default Prevention Activities internally or shared with a Third-Party Contractor you may have performing these efforts on your behalf.
Students that admitted late into their course of study or withdraw early and do not complete their academic program. These students may have one or more loans to repay and without completing the program, may not have the means to repay the loan. They also may not have received Exit Counseling which adds to their risk of defaulting.
Perhaps students are not academically prepared for higher education and struggle with their studies and taking exams. These typically end up being the ones who withdraw or end up on academic probation or have attendance issues.
Does your school have a way to identify these at-risk students? Do you have an early warning system in place? These are some of the things to consider.
Identifying these populations of at-risk students is extremely important and instrumental in developing your Default Prevention Plan so that your efforts are maximized by reaching out to the right groups of students.
9/18/2018
2016 GASFAA Conference

22. So another question you may have by now is…
So another question you may have by now is….what types of reports are available for us to use in these efforts to help determine who I need to contact? How do I get a list? Also, how do I know what students are in my cohort? How many students have defaulted in my cohort already?
Well…there are several reporting options available to schools from both the Direct Loan Servicers as well as on NSLDS.
NSLDS Reports
9/18/2018
2016 GASFAA Conference

23. NSLDS Reports
As a quick overview in case you are not familiar yourselves with the screens, this is the landing page for NSLDS. As you can see, there is a tab at the top for Reports. Click on that tab and it will take you to the full report listing.
9/18/2018
2016 GASFAA Conference

24. NSLDS Reports
This is the list. There are several on this list and I will just touch on a few that are necessary to conduct the research and activities we have discussed throughout this session.
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2016 GASFAA Conference

25. NSLDS Reports Click on the blue number Complete the report parameters
Select Extract or Report (where applicable)
File layouts are on IFAP/NSLDS Reference Materials-NSLDS Record Layouts
Delivered to SAIG mailbox
To request a report, you simply click on the blue number to the left of the report name. Complete the report parameters and select how you want to receive the data. Whether it be an Extract or Report form. The extract format would be used to pull it into Excel using the record layouts that are available on IFAP. Some also come in a report format which is pre-formatted for you.
All these reports are sent via the Student Aid Internet Gateway (SAIG) and you can pull them in via the use of the EdConnect software.
9/18/2018
2016 GASFAA Conference

26. NSLDS Reports School Portfolio Report Date Entered Repayment Report
Provides information about all Direct and/or FFEL loans
Date Entered Repayment Report
List of student borrowers scheduled to enter repayment during a specified date range
Delinquent Borrower Report
Contains federal loan servicers data only
Includes borrower contact information as reported to NSLDS
Schools should compare these status reports available through NSLDS with the school’s data. This provides the school an opportunity to identify and correct errors before the draft or official cohort default rates are released.
The School Portfolio Report is the report that will provide you with the detail of all the loans in your current portfolio based on the loan repayment date. Therefore, you can pull the report for a particular cohort period for analysis. This report provides both consolidation loans and their underlying loans that are serviced by any loan servicer, including the Department of Education's federal loan servicers, FFEL lenders, FFEL lender servicers, and Guaranty Agencies. Additionally, the report contains other useful loan information such as loan amount, current outstanding principal balance, current outstanding interest balance, delinquency date, discharge and rehabilitation/repurchased and repayment plan information.
The School Portfolio Report is the main one to use and can eliminate the need for the next two I will touch on because that same data is included in this one. But there may be reasons why you would like to pull the other reports just to have a more manageable list for say those students that are entering repayment in a given period.
The Date Entered Repayment Report will provide you with a list of all your students that are scheduled to enter repayment during a given cohort period. You specify the range you are wanting to research. This report was originally created to alert schools of borrowers ready for Exit Counseling. It is based on those students “Scheduled” to enter repayment. It is not based on Actual repayment begin dates. Schools should use this report to compare against your internal records to determine if the appropriate students are showing up in the correct cohort periods. This report is critical in calculating the Cohort Default Rate as it is indicative of the students that are in the cohort period.
The Delinquent Borrower Report provides school users a report of borrowers with loans reported as delinquent in payments to one of the federal loan servicers. This does not include loans whose guarantee is held by a Guaranty Agency. This report is intended to assist schools with delinquency/default prevention. Student demographic data including address, phone numbers, and address are included in the report. It also contains loan data including date, type, total outstanding balance, and current monthly payment amount.
9/18/2018
2016 GASFAA Conference

27. NSLDS Reports Borrower Default Summary Report
List of loans that have already defaulted
Loan Record Detail Report
Contains loans used to calculate the school’s CDR
Use this report for researching accounts for challenges to the Draft CDR and Adjustments/Appeals to the Official CDR
The Borrower Default Summary Report provides a list of loans that currently have a defaulted loan with a loan status date that falls within the requested date range. Users can select all loan programs or only one. The report includes student identifiers, loan identifiers, Guaranty Agency/ED Servicer information, lender and lender servicer information. This report identifies those in the Numerator of your Cohort Default Rate calculation. This report could be used by Schools to research whether these students actually were placed into repayment correctly by the servicers based on enrollment.
And finally, the Loan Record Detail Report is the detail that supports the calculation of the school’s Cohort Default Rate. You can request this detail for both the Draft and Official calculations. Remember, unless corrected, the Draft rate data will be used to calculate the Official. Once a school has completed its challenges to the Draft, you can compare the Official LRDR to the Draft to confirm if they were removed/updated in the Official.
9/18/2018
2016 GASFAA Conference

28. Conclusion
Engage in Early Intervention and Default Prevention Activities
Focus on retention and completion
Make direct personal contact with students
Provide the information necessary to successfully transition through the education process
Monitor the students follow-up payment closely
Encourage payment to bring accounts current
Use NSLDS Reports to research data to ensure the CDR is calculated correctly
Remember, to lower Cohort Default Rates, engage in the activities to help your students attain academic achievement and program completion. Be proactive in identifying “At Risk” students with whom you can conduct Early Intervention and Default Prevention activities.
Use the reports available to you on NSLDS to research the data that makes up your cohort default rates. Review the data regularly.
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2016 GASFAA Conference

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