1. A Practical Approach to a Comprehensive Default Program
Presenter: Ryan James Bonner
Fall Conference November , 2018

2. Scope of the Presentation
We will be covering:
Creating a Default Aversion Plan / Team
CDR Calculations / Challenging the Draft Rate
What do FA Advisors Need to Know About Default?
Tools / Reports / Resources
Fall Conference November , 2018

3. Creating a Default Aversion Plan / Team
Fall Conference November 4-7, 2018

4. Create a Team, Create a Plan
The best place to start when creating / implementing a Default Management Program is to form a Default Prevention Team on campus. (One designated individual? Time and Resources?)
You will want to include staff and faculty from different areas of campus so you can best address default and repayment related concerns at your school.
Create / review your Default Aversion Plan
The committee should meet every semester to review current plans, improve the interventions, and brainstorm new ideas.
Fall Conference November , 2018

5. Default Aversion Committee
Default management is a campus-wide concern, does your campus reflect that? How big of a concern is student loan default at your college / university.
This committee should look at current policies and determine what measures can be taken to address the main obstacles to successful repayment, employment, and education. (Late Registration, Borrower Outreach, Multiple Disbursements)
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…(Use the LRDR)
Fall Conference November 4-7, 2018

6. Who are YOUR Defaulters
One of the most important things you can do is study the characteristics / similarities of your school’s defaulters. This will inform your policy decision making.
Take the information from the LRDR when the draft rates are released and find the students who are in the numerator (those students who entered into repayment and also defaulted within the 3 year repayment period).
Create a spreadsheet of their SSNs to give to your Institutional Research department so they can give you information that you will use with your Default Aversion Plan.
Fall Conference November 4-7, 2018

7. Who are YOUR Defaulters
Age / Race / Gender
SAP Status
Program of Study
Employment Status
Enrollment Status
Class Time / Registration Data
Developmental Coursework Required
Credits Completed
Use this information for targeted interventions…
Fall Conference November 4-7, 2018

8. Targeted Interventions
Find out which programs of study have the highest percentage of defaulters (or just the highest number of defaulters total). These programs should be targeted for financial literacy endeavors.
Send outreach to borrowers in various stages of delinquency.
Host Events / Workshops on campus.
Revamp loan acceptance process. Can your students accept less than the max? Do they?
Loan Balance / Lifetime limits for current students
Job Network / Career Services
Fall Conference November 4-7, 2018

9. Default Management Plan
Now that you have a committee, you need a plan. I suggest proactively 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.” (IFAP)
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 may have to be submitted to the FSA / Dept of ED for review, depending on your rate.
Fall Conference November 4-7, 2018

10. Potential Sections for Default Plan
Here are the sections of GTCC’s Plan (what I want the committee to know and focus on)
DAC Responsibilities
Defaulter Characteristics
Borrower Outreach
Financial Literacy
Interventions and Implementations
Employment Opportunities
Fall Conference November 4-7, 2018

11. Default Prevention Plans…What to Include?
Federal regulations ( ) suggest this plan should include:
Core Default Reduction Strategies
Additional Default Reduction Strategies
Statistics for Measuring Progress
Fall Conference November 4-7, 2018

12. 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. (3rd Party Help? Retention Staff?)
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 resources (personnel / administration / finances) appropriate to implement the DAP.
Establish annual targets for reductions in your rate.
Establish a process to ensure the accuracy or your rate (challenge process).
Fall Conference November 4-7, 2018

13. 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*.
Fall Conference November 4-7, 2018

14. 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.
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15. CDR Calculations / Challenging the Draft Rate
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16. 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.
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18. 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. We will discuss later how important this detail is for advising.
Fall Conference November 4-7, 2018

19. What Loans are Included in the CDR Calculation?
All Federal Direct loans (Sub and Unsub)
Not included:
Plus Loans
Perkins Loans / FISL (Federal Insured Student Loans
Consolidation loans*
Fall Conference November 4-7, 2018

20. 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. The CY2015 Official rates were posted in late September, 2016 draft rates will be posted in February. Are your rates going up or down?
Rates are based on the number of borrowers who enter repayment, not the number of loans.
Fall Conference November 4-7, 2018

21. 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.
Fall Conference November 4-7, 2018

22. 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
Fall Conference November 4-7, 2018

23. 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??
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CDR Thresholds
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25. 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
Fall Conference November 4-7, 2018

26. 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…
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Challenging the CDR
The draft CDR is typically released late-February. When the rates are released, the LRDR will be sent to your SAIG mailbox.
Official rates are posted no later than September 30th.
The file itself is not delivered in a user-friendly way. If you haven’t ever manipulated this file and would like assistance, contact me after the session.
The LRDR contains info on the loans that were used to calculate a school’s draft / official CDR.
You will not need to order the LRDR, it is automatically sent…
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Challenging the CDR
The Department of ED electronically transmits cohort default rate (eCDR) data (notification packages) using the Student Aid Internet Gateway (SAIG) destination point administrator designated by the school.
The process of correcting loan data errors from the draft CDR is called the Incorrect Data Challenge.
You have 45 days after you load your LRDR into the eCDR appeals system to challenge your data.
Fall Conference November 4-7, 2018

29. Challenging the CDR You are looking for:
Borrower’s data was incorrectly reported
Incorrectly included
Incorrectly excluded
Incorrect data challenges preserve your school’s right to submit an Uncorrected Data Adjustment, which is only necessary when the agreed upon challenge corrections were not reflected in the official rate.
Fall Conference November 4-7, 2018

30. Challenging the CDR
Submit challenges after the release of the draft CDR
Submit adjustments and appeals after the release of the official CDR
Refer to the CDR Masterfile for detailed information on challenging your cohort default rate.
You can submit challenges and check their status on the eCDR appeals page.
Fall Conference November 4-7, 2018

31. What Do Financial Aid Advisors Need To Know About Default
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32. What Do Your FA Advisors Need To Know?
Forbearance – A temporary suspension of payment. (36 months) If you have the time available, it’s time ‘ask and you shall receive.’ Requests made to loan servicer.
Deferment – A temporary suspension of payment. Either in-school deferment or financial hardship deferment. Unlike forbearances, must have deferments approved by servicer. Requests made to loan servicer.
Income Driven Repayment – Having your payments based on your current financial situation, not the amount you borrowed.
All of these options are available until the borrower hits 360 delinquency**
Fall Conference November 4-7, 2018

33. What Do Your FA Advisors Need To Know?
A student loan becomes delinquent the first day after a payment is missed. The account remains delinquent until you repay the past due amount or make other arrangements which we will discuss further.
After 90 days the delinquency is reported to the three major credit bureaus.
If no scheduled payments or arrangements are made for 270 days, the loan enters into *technical* default.
If no arrangements have been made after 360 days, the loan officially defaults, and the student must resolve the default through either PIF, consolidation, or rehabilitation.
Fall Conference November 4-7, 2018

34. What Do Your FA Advisors Need To Know?
If the student received a forbearance, they hadn’t hit 360 days delinquent.
Do all of your advisors have NSLDS access? Are they familiar with the default loan status codes? Can they look at an account and determine whether or not the student has hit 360?
When in doubt, call DRG / their loan servicer. If the DRG holds the account, it hit 360, and the student must resolve the default status. If the loan servicer still has the account, they are able to use forbearances, deferments, and IDR plans.
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270 vs 360
First Notified About Default
We / They are notified
Can STILL use Forbearances, Deferments, and Income- Driven Repayment Plans
***Still TIV Eligible***
Lose Options / Must Resolve
Only options are PIF, Consolidation, Rehabilitation
Not TIV Eligible, can’t get deferment or forbearances
Consequences begin
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38. Helping the Student Resolve Default
Pay in Full – Default status is cleared from credit history, late payments remain. TIV Eligible.
Loan Consolidation – Typically 2-4 months (20-30 minute online application). Default status and late payments will stay on the student’s credit history for 7 years. TIV eligible once application is approved and loan is consolidated.
Loan Rehabilitation – The whole application takes around 90 minutes, depending on who holds the account and what the student must provide / how accessible the documents are. After 6 months of consecutive payments, student regains TIV eligibility. After 9 months student has rehabilitated the defaulted loan, default status should be removed from credit history.
Fall Conference November 4-7, 2018

39. Tools / Reports / Resources
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40. 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
Fall Conference November 4-7, 2018

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42. 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.
Fall Conference November 4-7, 2018

43. 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.
Fall Conference November 4-7, 2018

44. 24 / 36 Month Repayment Info Loan Detail
These reports (DRC015 / DRC 016) 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.
Fall Conference November 4-7, 2018

45. 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.
Fall Conference November 4-7, 2018

46. 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.
Fall Conference November 4-7, 2018

47. 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 and ECMC.
Fall Conference November 4-7, 2018

48. Great Lakes’ Portfolio Navigator
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Portfolio Navigator
With Portfolio Navigator we can order reports, broken down by stage of delinquency and they can be delivered by , 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.
Fall Conference November 4-7, 2018

50. 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. (See Biz for details!)
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Action Center - Home
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55. Customize Your Outreach
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ECMC - Solutions
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58. 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 this 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.
Fall Conference November 4-7, 2018

59. A Comprehensive 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.
Fall Conference November 4-7, 2018

60. What Resources Are Available?
Depending on where you work, your school may dedicate an substantial amount of money, staff, and other resources to tackle this crisis head on.
For the rest of us…
If possible, submit an RFP for the services you want. If cost is a non-starter, you really want to inquire about any free services offered by the loan servicers, vendors, and any other potential resource.
Fall Conference November 4-7, 2018

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62. NCASFAA would like to thank our Professional Affiliates!
Fall Conference November 4 - 7, 2018