1. An Overview

2. Building Student Success
An Overview
Dana Kelly, National Trainer
Nelnet Loan Servicing

3. Agenda Its all about Loan Repayment The importance of loan repayment
Results from FSA survey of borrowers in grace
Resources for repayment
A Focus on the Data

4. Context: Student Loan Repayment
37 million federal student loan borrowers
The median amount owed by new borrowers is $10,000 and the average is $20,000
Debt levels for graduate borrowers are significantly higher: a median of $31,000 and an average of $51,000
The majority of new borrowers will choose the standard ten-year repayment plan

5. Cohort Default Rates are Increasing
SOURCE: NCES, Condition of Education 2013, Table 400, Number of postsecondary students who entered the student loan repayment phase, number of students who defaulted, and 2-year student loan cohort default rates, by level and control of institution: Fiscal years 2007 through 2010; IFAP, September 30, 2013, National Default Rate Briefings for FY Year Rates and FY Year Rates.

6. 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, as of 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 2010.

7. who are just about to begin
What do we know about
new borrowers
who are just about to begin
repaying their loans?

8. Characteristics of Borrowers in Grace
SOURCE: NSLDS, as of June 30, 2013.

9. Characteristics of Borrowers in Grace
Median loan balance for undergraduate students in grace
$6,000 $0
$50K
$25K
Median loan balance for graduate students in grace
$14,500 $0
$50K
$25K
SOURCE: NSLDS, as of June 30, 2013.

10. Typical Borrower in Grace
26 years old
Graduated with a Bachelor’s degree
Family income: $25,000
Pell recipient
Five loans in grace
Undergraduate loans only
Has not consulted any resources about loan repayment
NOTE: Loan balance is the median for both undergraduates and graduates combined
SOURCE: NSLDS, as of June 30, 2013; CFI, Customer satisfaction survey of borrowers in grace, June 2013.

11. Most Choose Standard Repayment
Nearly half of borrowers in grace plan to choose standard repayment.
A large number do not know enough or are undecided.
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.

12. Reason for Choosing Plan
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.

13. Consideration of IBR
The majority (54%) did not consider income-based repayment (IBR) because they did not have enough information
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.

14. Understanding of Borrower in Grace
New borrowers who completed their degree program rated their understanding of student loan options higher than borrowers who did not complete their degree
There is a 14-point difference in confidence in their ability to manage their loans
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.

15. Borrower in Grace – by Balance
Borrowers with a high balance (+$50K) were more likely to consolidate their loans and begin repayment than those who owed less
They were also more likely to choose income-based repayment
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013; Questions 21: “At the end of your grace period, what action will you take related to your student loan(s)? and 29: “What repayment plan have you chosen, or do you plan to choose at the end of your grace period?”

16. Borrower in Grace - Repayment
44% report not being contacted at all about their loans going into repayment 34% report not being aware of their repayment options 26% are undecided about what action they will take on their loans at the end of their grace period 35% of those planning to go into repayment at the end of their grace period, either don’t know or are undecided about their repayment plan
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013.

17. Borrower in Grace - Resources
Gone to find out information from…
% of Respondents
Online loan servicer account management
40%
Studentloans.gov website
25%
Talking with friends or family
21%
NSLDS website
18%
Exit counseling at my school
Not used any of these sources of information
17%
Studentaid.gov website
15%
Phone number for loan servicer
14%
Talking with staff at my school
12%
Other online government resources 4%
Online non-government resources
Other
Mobile phone apps 1%
Social media resources
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013, Question 12: Where have you gone to find out information about your repayment options, your grace period, or how to manage your student loan(s)? – check all that apply.

18. Resources
for Repayment

19. StudentLoans.gov

20. FACT Tool

21. Loan Repayment Estimator
Available at Studentloans.gov.

22. Loan Repayment Estimator
Repayment plans and loan payment calculators are available at:

23. Your Data is Your Key To Building Successful Students

24. DID YOU KNOW??? Borrowers who did not receive their full
6-month grace period due to late or inaccurate enrollment notification by the school are at a higher risk of default.

25. DID YOU KNOW?
Borrowers who withdrew without completing their academic programs are also at a much higher risk of default.

26. DID YOU KNOW???
There is a strong correlation between increased financial literacy and decreased default!

27. Nelnet Trends in Borrower Repayment
Borrowers who get into good early repayment habit less likely to default.  For these borrowers, delinquency more likely due to life event change, if delinquency occurs at all.
Intervention efforts more successful within the first 90 days of delinquency.  From then on, there is a higher likelihood of eventual default.
Setting up auto-pay good determinant of repayment success, as well as signing up for services like Manage My Account.

28. Nelnet Trends in Borrower Repayment
Good contact information on borrowers critical.  Students in skip-trace status much more likely to default.  Schools who collect updated contact information after entrance or exit encouraged to share with servicers.
Much of default or late delinquency group is made up of borrowers with small balances.
Late Stage Delinquency – Borrowers in this category very difficult for servicers to reach since they have avoided contact from us for so long.  

29. Nelnet: Trends in Borrower Repayment
Many borrowers have a knowledge gap when they go into repayment. They are unaware of:
What a servicer does
Who Nelnet is
That they have options in addition to standard
ten-year payment,
What deferments/forbearances are
That servicers can assist them if they run into repayment difficulties 
Please help servicers convey these messages.

30. Importance of School-based data
Benefits of School-based Defaulter Analysis
Enables you to develop specific strategies to help students avoid default.
Allows you to correct ineffective practices throughout your institution.
Enables you to identify high risk students.
Helps you identify the relationship between loan default and student success.

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

32. Identifying Students in Trouble
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

33. Helping 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

34. Engaging At-Risk Borrowers
School engagement can help reduce risk at
any stage of the borrowing cycle.
Questions:
Who are my at-risk borrowers?
Learning to identify risk factors
When should I intervene, and how?
The right time and the right strategy

35. Engaging At-Risk Borrowers
Identifying at-risk borrowers
Determine, using available data, which students have defaulted in the past
At what point are you most likely to be able to contact and influence these particular borrowers?
In school?
In grace?
In repayment?

36. Engaging At-Risk Borrowers Example: While In School
Target at-risk borrowers with early/extra exit loan counseling, financial literacy training, and collect additional contact information.
Which at-risk borrowers?
Students on academic probation
Students who express intention to withdraw
Students currently enrolled in programs producing a disproportionate number of defaulters

37. Engaging At-Risk Borrowers Example: While In Grace
Steps to take:
Validate contact information
Re-enrollment assistance
Transfer assistance
Prepare borrower for repayment
Provide employment counseling and search preparation
Job placement assistance

38. Engaging At-Risk Borrowers Example: While In Repayment
Reach out to at-risk borrowers and facilitate
the critical contact with the loan servicer to
prevent default.
Early in repayment: Target borrowers who did not complete
Late in repayment: Target borrowers who are 240+ days delinquent

39. Exercise: Getting To Where You Are…
Evaluating your default prevention readiness
Do I have the right team in place to develop and execute my default prevention strategies?
What was my FY 10 CDR? Draft 11? Am I likely to hit 30% in September 2014?
What is the source of my default risk?
What default prevention strategies are in my plan that address the source of my default risk? How will they work? Are they measureable?
What ‘traditional’ strategies are included in my plan?
What ‘student success-focused’ strategies are included in my plan?

40. Leadership Buy-in
Global default risk isn’t going away…it will only get worse over the next several years
While outside servicers can help, reducing specific borrower risk is an ‘inside job’
School leadership must be prepared to devote internal resources to solve this problem

41. Thank You! Dana Kelly National Trainer Nelnet Loan Servicing