1. Successful Repayment and Default Prevention: It’s Not an Information Problem; it’s a Motivation Problem Presented: March 26, 2014 Rebecca Isaacs NMEAF

2. Public education Professors must take attendance— accountability Recruiters must share their experiences Student ambassadors’ communication It takes a campus, not just the financial aid office, to create financially smart students Saturday, April 18, 20152 “It Takes a Campus”

3. You have to begin on day one. “I didn't know anyone on campus except my brother. I didn't know how to pick the right classes or find the right buildings. I didn't even bring the right size sheets for my dorm room bed.“ Saturday, April 18, 20153 Obama’s Launch Plan [www.rueters.com[www.rueters.com, Michelle Obama, “Obamas Launch Plan to Get More Low-income Kids to College,” January 16, 2014]

4. Saturday, April 18, 20154 [Homeroom, US Department of Education Blog, “Making College Affordable for Every American”, August 22, 2013 ]

5. FSA Recommendations Fully Implement the Department’s Plan: Engage Campus-Wide Stakeholders Identify Your Unique Borrower Profiles Set and Track Goals Implement Borrower Awareness Programs Strengthen and Enhance Orientations Strengthen Entrance and Exit Counseling Track Riskiest Borrowers Partnerships Saturday, April 18, 20155 5

6. 6 6 U.S. Department of Education Fact Sheet, September 2013 “… Schools have increased borrower awareness of obligations through incorporating borrower topics at orientation sessions and providing enhanced entrance and exit counseling. Other best practices include borrower tracking, increased contact with delinquent borrowers…and partnering with other stakeholders to optimize default prevention, resolution, and reduction.” [Fact Sheet September 30, 2013.]

7. Saturday, April 18, 20157 7 NY Times Editorial Columnist, Gail Collins “…Don’t you think there should be someone in charge of calling [students] once a week and yelling: ‘$800 a month until you’re 51 years old’?” [New York Times, “The Lows of Higher Ed”, September 14, 2012]

8. Motivate the borrower to make the first payment: Take action: Motivate borrowers to get started on the right foot to successful loan repayment. 7 out of 10 borrowers that ultimately default never made their first payment. Saturday, April 18, 20158 Primary Objective

9. Saturday, April 18, 20159 Student Facts: Who struggles most? Students who drop out of college before earning a degree.

10. Motivation You still have to pay your loans! Get back to school… –How close are you to graduating? –Is there another option? Saturday, April 18, 201510

11. Saturday, April 18, 201511Saturday, April 18, 201511 Average debt of college seniors: $29,400* Monthly payment over 10 years: $338 Average debt of college seniors in NM: $17,994* Monthly payment over 10 years: $207 *The Project on Student Debt, The Class of 2012 www.projectonstudentdebt.org Student Facts:

12. Saturday, April 18, 201512Saturday, April 18, 201512 A successful financial education program must be strong enough to influence the behavior of the most difficult students. The students most likely to default are the most difficult students to influence. We have a motivation problem, not an information problem. Consider this…

13. Saturday, April 18, 201513 Debtor Psychology Two Obstacles: Avoidance: “I don’t want to deal with this…” Ignorance: “I don’t know what to do about this…” First obstacle is much harder to overcome than the second… AVOIDANCE IGNORANCE

14. Three Causes of Avoidance: Fear Confrontation Negative treatment Personal embarrassment Saturday, April 18, 201514Saturday, April 18, 201514 Debtor Psychology

15. Procrastination & Apathy “It’s only a student loan…” “It’s a government loan – it will take someone a long time to come after me.” “What are they going to do, repossess my brain?” Saturday, April 18, 201515Saturday, April 18, 201515 Debtor Psychology Second Cause of Avoidance:

16. Saturday, April 18, 201516Saturday, April 18, 201516 Debtor Psychology “I cannot afford the past due amount…” “I have so many other problems…” “There is nothing I can do right now…” Third Cause of Avoidance: Feelings of Being Overwhelmed or Helpless

17. How do we overcome avoidance? Borrower Communication that is: Persistent… Relentless… Sustained… Saturday, April 18, 201517Saturday, April 18, 201517 Debtor Psychology Marketing Rule of 7

18. Second Obstacle: Ignorance Lack of Information about options and resources Confusion about who to call Saturday, April 18, 201518 Debtor Psychology Saturday, April 18, 201518

19. How do we overcome ignorance? Give recommendations, not information We must tell borrowers what to do and how to do it. “Contact your servicer” “Ask About…” “Here are links, resources, contact points…” Saturday, April 18, 201519 Debtor Psychology Saturday, April 18, 201519

20. Cohort analysis: What demographics make up the largest default group? Change your processes accordingly. Track your changes. Develop counseling for your dropouts. You will be surprised at your successes! Saturday, April 18, 201520 Case Study

21. Start at the beginning… Entrance counseling Communicate every time they borrow Suggest actions that can trigger successful borrowing Emails and text messaging are simple and affordable means of communication Saturday, April 18, 201521 Student, This semester, you borrowed: $X Your total loan amount so far is: $X Your monthly payment will be: $X Here are some resources to help you with successful loan repayment. Love, School

22. Yes; I did say text messaging! Saturday, April 18, 201522

23. Saturday, April 18, 201523 “I authorize my schools… and their respective agents… to contact me… at … my cellular telephone… using automated dialing equipment or artificial or prerecorded voice or text messages.”

24. “Mandated exit interviews are not a “teachable moment” for this information; we need to inform students more smartly. Consideration should be given to information at the time repayment kicks in --- usually six months post-graduation.” [Inside Higher Ed, Karen Gross,Student Loans I: Yes, Something Is Wrong, March 21, 2014] Karen Gross is president of Southern Vermont College and a former policy adviser to the U.S. under secretary of education. Saturday, April 18, 201524 Don’t Stop! One-off communications ARE NOT enough!

25. Saturday, April 18, 2015 Call Center Emails Text Messages Web Resources Skip Tracing Targeted Mailings Persistent, relentless and sustained communication of recommendations, options and resources. 25 Communication Strategy: Saturday, April 18, 201525

26. Recommendations Sponsor or Link to Online Resources: U.S. Department of Education Resources Link to other Commercial Resources Saturday, April 18, 201526Saturday, April 18, 201526

27. Recommendations Timing of Borrower Communication Begin NO LATER THAN 60-Days Delinquent - Why? 60-Days Delinquent = 3 Payments Due Average 1 st Year Student Owes: $150 Average Senior Owes: $900 Avoidance in full swing… Saturday, April 18, 201527Saturday, April 18, 201527

28. Communications Schedule Saturday, April 18, 201528Saturday, April 18, 201528 SundayMondayTuesdayWednesdayThursdayFriday Week 1Email 2PM Text 4 PM PM Phone Week 2PM Phone Email 4 PM Week 3Email 3PM PM Phone Week 4PM Phone Email 2PM Text 1PM Sample communication schedule, 60-269 days

29. Communications Schedule Saturday, April 18, 201529Saturday, April 18, 201529 Sample communication schedule, 270-360 days SundayMondayTuesdayWednesdayThursdayFriday Week 1Email 2 PM Text 4 PM PM Phone Week 2Text 2 PM PM Phone Email 4 PM Week 3Email 3 PM Text 1 PM PM Phone Week 4PM Phone Text 3 PM Email 2 PM

30. Results – How Do You Know? Follow delinquency This month’s 60-day delinquency is next month’s 90-day delinquency. You want the month-to-month delinquency trends to aim downward. Saturday, April 18, 201530Saturday, April 18, 201530

31. Conclusion Communicate where students are… Use automation… Don’t stop… Questions? Saturday, April 18, 201531Saturday, April 18, 201531 Rebecca Isaacs NMEAF isaacsr@nmeaf.org 505-761-2077