1. Fall Conference| Nov. 2012 David Hammond and Cynthia Battle U.S. Department of Education Angela K. Johnson Cuyahoga Community College Developing Effective Mandatory and Voluntary Default Management Plans Session 12

2. 2 In This Session Part 1: Developing a Default Prevention Team Part 2: Identifying Default Risk Part 3: Default Prevention Plans Part 4: Resources – FSA and Federal Servicers Part 5: A Case Study Cuyahoga Community College

3. 3 The Changing Landscape Loan default increasing for most schools Educational costs continue to rise More students borrowing more money The combination of Stafford and private loans equal greater debt Changes to CDR calculation accompanied by new sanctions and an enhanced benefit

4. 4 The 3-Year CDR Calculation Expands the default tracking window from 2 years to 3 years Creates a transition period (FY09/10/11) Raises penalty threshold from 25% to 30% New set of requirements for FY09, FY10... Possible compliance issue beginning in September 2014 ( FY 2011 CDR) Increases availability of “disbursement relief” from 10% to 15% (effective 10/01/11)

5. 5 Mandatory Plans - 34 CFR 668.217 New cohort default rate regulation requires that schools which achieve a cohort default rate equal to or greater than 30% must develop a default prevention plan. Requires identifying at-risk borrowers

6. 6 3-Year CDR Corrective Actions First year at 30% or more Default prevention plan and task force Submit plan to FSA for review Second consecutive year at 30% or more –Review/revise default prevention plan –Submit revised plan to FSA –FSA may require additional steps to promote student loan repayment Third consecutive year at 30% or more Loss of eligibility: Pell, ACG/SMART, FFEL/DL School has appeal rights

7. Default Management Organize Task Force Establish Objectives Define Default Risk Outline ActionsSubmit Plan Organize a Default Prevention Task Force Assess resources for team Identify members Set Purpose Detail Responsibility Organize a Default Prevention Task Force Assess resources for team Identify members Set Purpose Detail Responsibility Set Objectives: Establish Objectives Identify steps needed to achieve goal Define and Identify Risk Determine who is defaulting and why Analyze data Define and Identify Risk Determine who is defaulting and why Analyze data Outline Actions Specify actions needed to achieve your goal Ensure actions are measureable Submit Plan FSA’s Default Prevention Team to assist schools with: Establishing their default prevention goals Developing, refining and reviewing your default prevention plan. Submit Plan FSA’s Default Prevention Team to assist schools with: Establishing their default prevention goals Developing, refining and reviewing your default prevention plan. 7

8. 8 Organize a Default Prevention Task Force The Default Prevention Task Force will drive your default prevention process:  Assess the resources you have available  Team participants SHOULD be across campus  Identify the purpose of the task force  Detail responsibilities of determining risk

9. 9 Default Prevention Task Force  A group of specialists who will ultimately conduct data analysis to determine the reasons for default at your school and formulate a set of intervention strategies  Select a leader for the group (Best if not FAD); Separate Default Coordinator is recommended  Use your current resources to create effective, customized default prevention programs that compliment existing efforts

10. 10 Activities for the Team  Study your student population. Identify any common characteristics of your defaulters and non- defaults, and borrowers and non-borrowers  Build on Early Intervention strategies already in existence  Discuss your current strategies and determine what works and what may need some improvement

11. 11 Activities for the Team (cont.)  Work closely with your servicers and lenders  Find out what type of services are available from your servicers/lenders  Fine-tune your Loan Servicing procedures for the period while the borrower is at your school  Have clear and precise procedures with a timeline of dates to take appropriate actions

12. 12 Activities for the Team (cont.)  Fine-tune your servicing efforts during the grace period and repayment  Have clear and precise procedures with a timeline of dates to take appropriate actions  Review all of your borrower education materials  Make sure all of your materials are current and up-to-date. Look for new materials to incorporate into your training

13. 13 Activities for the Team (cont.)  Review your results and make the necessary enhancements  Always look for ways to improve whatever you are doing. Use evaluations or surveys to get input from the students and staff Create a default prevention plan!

14. 14 Part 2 Identifying Default Risk

15. 15 Understand Who is Defaulting… and Why After establishing a default prevention team: Step 1 - Conduct analysis to identify the sources of default risk Step 2 - Create measureable interventions/steps Step 3 - Describe consequent actions to be taken to reduce default (the written plan) Step 4 - Review and revise as necessary

16. 16 Steps to Identify Default Risk The job of your Default Prevention team:  determine the source of your default risk;  determine what steps your school will take to reduce default risk;  represent all parts of the institution (including management), which will contribute to risk reduction activities;  allocate school resources to default reduction activities;  assess the effectiveness of default reduction activities over time: are they working?

17. 17 Steps to Identify Default Risk Conduct Risk Analysis First!  Understanding who is defaulting, and why  Increase effectiveness of DP efforts  Reduce wasted time/resources  Aiming at the right targets  You will need data  Similar to studies necessary to understand/improve retention/graduation  Review combines NSLDS, servicer (default and delinquency) data, and school data about defaulters and non-defaulters

18. 18 Steps to Identify Default Risk Conduct Risk Analysis First  Use data to create a picture of borrowers at-risk of default  ‘Who’ is not enough  ‘Why’ will require input of academic, student affairs, and other professionals  Knowing ‘why’ is necessary to create targeted, useful and measureable interventions

19. 19 Reducing Default Risk Interventions Risk Analysis Results for Average School Poor… Educational Outcomes Employment Outcomes Repayment Outcomes

20. 20 Examples: “Who” Never Contacted Developmental Studies Late Admits Early Withdrawal Gradated/Not Pass License Exam No Exit Counseling Excessive Debt Academic Preparedness Academic Probation No Job in Profession Certain Majors Attendance Issues Student Employment Late Majors Your ‘who’ will be unique

21. 21 Examples: “Why” Finances/Need Relationship Issues Physical & mental health challenges Dependent-care Transportation Housing Poor study habits Basic skill deficits Language barriers Feel unwelcome, no “campus connection” First generation: No role models or family support Transition difficulties Understanding ‘why’ is necessary

22. 22 Part 3 Developing a Default Prevention Plan

23. 23 Developing the Plan Things to Consider When Creating Your Plan  Analyzing Default Loan Data to Identify Default Characteristics  Early Stages of Enrollment  Entrance Counseling  Financial Literacy for Borrowers

24. 24 Developing the Plan (cont.) Things to Consider When Creating Your Plan  Early Identification and Counseling for Students at Risk  Communication across the Campus  Default Prevention and Retention Staff  Late Stages of Enrollment

25. 25 Developing the Plan (cont.) Things to Consider When Creating Your Plan  Exit Counseling  Withdrawals from School  Timely and Accurate Enrollment Reporting  After Student Leaves School

26. Developing the Plan (cont.) Things to Consider When Creating Your Plan  Early Stage Delinquency Intervention  Late Stage Delinquency Intervention  Enhanced Entrance and Exit Counseling 26

27. 27 Reducing Default Risk Interventions  Default Prevention Team translates ‘who’ and ‘why’ into core strategies to reduce default risk  Improve Repayment Outcomes  Improve Educational and Employment Outcomes

28. 28 Reducing Default Risk Interventions Improve Repayment Outcomes Examples of tactics: Enhanced Entrance and Exit Counseling Financial Literacy Education Collect More Useful Contact Information Early Stage (Repayment) Assistance Late Stage (Repayment) Assistance

29. 29 Reducing Default Risk DP Plans Plans we have reviewed recently

30. 30 Reducing Default Risk Interventions Improve educational/employment outcomes Examples of tactics: Increase student success ‘Crisis’ response, program completion Reduce Program Completion Time Strengthen Relationship with Potential Employers

31. 31 Reducing Default Risk Developing a DP Plan Core efforts should be targeted at ‘who’ and ‘why’ Your efforts may or may not utilize ‘best practices’. They may be unique to your particular problems Add general best practices only after you have established targeted activities

32. 32 Reducing Default Risk Targeted Efforts: When? In school, In grace, In repayment When: How to Intervene Driven by Data Key to effectiveness of your plan - Understanding how to utilize these opportunities

33. 33 Reducing Default Risk Targeted Efforts: When Use ‘leverage points’ to gain active borrower participation: Admissions Entrance and Exit Counseling Probation/SAP Registration What ‘leverage points’ do you have?

34. 34 Reducing Default Risk Active vs. Passive Interventions Passive: No action required… Loan Counseling Financial Literacy Video Active: Borrower must do something which addresses identified risk: Test re: R&R - results show ‘mastery’ Periodic update of contact information Establish online account w/servicer

35. 35 Analysis of Default Risk Tracking and Projections Additional Loan Counseling Existing Student Success Efforts for At-Risk Borrowers Collect/Refresh Detailed Contact Information Establish Online Servicer Accounts Examples: DP Best Practices

36. 36 Early Stage Delinquency Assistance Late Stage Delinquency Assistance Promoting Loan Rehab for Defaulters Financial Literacy Training Leveraging Loan Servicer Products and Services Review Policies/Procedures Working with Employers Examples: DP Best Practices

37. 37 Analyzing for default risk is THE best practice! Do the leg-work first! Let your data lead the way. That’s the surest way to end up with an effective default prevention plan. Failing to take the time to understand who is defaulting, and why, may be fatal.

38. 38 Part 4 Resources – FSA and Federal Servicers We are here to HELP!

39. Goals of our Default Prevention Team Our Default Prevention Team was established to assist schools with:  Establishing their default prevention goals  Assessing the resources schools have available in order to establish their Default Prevention team  Understanding default risk through the use of servicer and NSLDS available reports and tools  Developing/refining your default prevention plan 39

40. Need Assistance? If schools need assistance in developing or reviewing their default prevention plan, please send a request to the following e-mail address: defaultpreventionassistance@ed.gov Contact Us! 40

41.  Provide outbound targeted calling campaigns along with inbound call center representatives to help borrowers become current  Utilize electronic communication methods, such as e-mail, to keep borrowers informed about account status  Work with schools to obtain current available contact information - Utilize a variety of tools to get the most current data to contact borrowers (skip tracing on delinquent accounts)  Work in partnership with the school community to assist borrowers in the later states of delinquency Federal Loan Servicers 41

42. Partnering with Schools : All servicers work to gather feedback and find ways to partner with schools on default Prevention Face to face meeting on school campuses Financial aid conference attendance Presentations at conferences Proactive phone calls E-mail communication Partner with the servicers! 42

43. Reminder: Protect the Grace Period - Schools must learn when a borrower leaves campus to promptly report to NSLDS Of the borrowers who defaulted, most did not receive their full 6-month grace period due to late or inaccurate enrollment notification by the school. 43

44. Reporting Resources: Centralized Loan Information NSLDS:  Includes Guaranty Agency (GA) or Lender held FFEL, PUT (ED-held FFEL), Direct Loans, and servicer assignments  Leverage NSLDS Reports for Default/Delinquency Prevention:  School Portfolio Report  Delinquent Borrower Report 44

45. Reporting Resources: Individual Servicer Reports  Provide greater level of detail  Offer customization options  Include only loans serviced by that organization 45

46. 46 Part 5 Cuyahoga Community College A Case Study… …illustrating the importance of understanding who is defaulting, and why, and how to apply this knowledge to reduce default risk.

47. Cuyahoga Community College Cleveland, Ohio Angela K. Johnson Executive Director Enrollment Operations 47

48. Cuyahoga Community College Facts Largest community college in the state of Ohio Serves more than 55,000 credit and non-credit students annually 32,000 plus credit students (district-wide) Multi-campus institution in Cleveland and surrounding suburbs Four campuses, one Corporate College location, one District Office and growing 48

49. Who are our students? 60% students place into developmental English 82% students place into developmental Math 25% students received GED or passed ATB 70% first generation college students 55% receive financial aid 80% of Pell recipients have Zero EFC 62% are women 60% are part-time students 67% retention Spring to Fall/ 50% retention Fall to Fall 49

50. Rising education costs Decreasing state funding Struggling economy (state-wide and national) Lack of financial literacy education Reduced state funding –Elimination of state grants for low cost institutions (all community colleges) –State share of instruction (SSI) formula change Increased unemployment rate Ohio’s Climate Concerns 50

51. Overview of Defaulter Analysis 51

52. Identifying common characteristics of student loan defaulters to determine who’s defaulting and why Defaulter Analysis – A Look at Yesterday’s Defaults 52

53. Benefits of 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 to identify the relationship between loan default and student success 53

54. Loan Default Correlation to Student Success Hypothesis – Students who are more successful are more likely to complete their program and graduate. Thus, successful students have greater ability (economically) to repay student loan debt Student success Successful repayment 54

55. College preparedness Success rates (passed courses) Retention rates (term to term) Matriculation rates (year to year) Graduation rates (average) Employment market for non-graduates Knowledge about student loan borrowing Student Success Assumptions 55

56. Project overview –In 2006, reviewed and analyzed shared data sets and demographic information about student loan defaulters for three cohort years (2002, 2003, and 2004) –Obtained data points either locally (institution) and from the Ohio Board of Regents Default Aversion Project 56

57. Non-Traditional Default Aversion Approach Student Success Intervention Strategies Institutional Accountability 57

58. Campus committee –Develop student success categories Retention, Intervention, and Student Success – Stakeholders Enrollment Management Student Affairs Student Success Financial Aid Academic Advising Articulation & Transfer Student Success Strategies 58

59. Philosophical Focus Understand institutional factors that impede student success (social, environmental, etc.) Address student access and success barriers Implement strategies that maintain success in support services for effective matriculation and completion Expand default aversion initiatives beyond the Student Financial Aid Office 59

60. Common Data Points First time student (Y/N) Transferred in (Y/N) Average GPA Hours completed Graduated (Y/N) Number of terms completed Program of study Major course of study High school attended Developmental education course (Y/N) HS diploma/GED/ATB (Y/N) First generation (Y/N) Academic Progress (Y/N) EFC (by range) 60

61. Defaulters (over 3 CDR periods – FY 02, FY03, FY04) –30% students placed in developmental education –30% students received GED or passed ATB –60% students had earned zero hours Average credits earned = 33.8 –82% students had below 2.0 GPA Average cumulative GPA = 1.96 –38% students had not maintained SAP Disqualified or Warning Cuyahoga Community College Data Findings 61

62. Defaulters (over 3 CDR periods – FY 02, FY03, FY04) –60% are in 20-29 age group 36% - age 20-24; 24% - age 24-29 –69% - African-American / 29% - White –53% students are male –67% students are first generation college students –50% students had an EFC = O –5% graduated from Cuyahoga Cuyahoga Community College Data Findings 62

63. Default Aversion = Student Success 63

64. Mentoring Program –Developmental Math and English courses Students testing into Dev Ed Math 0950 and English 0990 mentoring program with On Course delivery and focus Learned from Achieving the Dream data Gatekeeper courses where students struggle most; Repeat courses more than once Satisfactory Academic Progress (SAP) –Terminate financial aid for all graduates Appeal for additional aid, proof of new degree sought regardless of credits completed Student Success 64

65. Return to Title IV Withdrawals –Exit information and deferment Promote re-enrollment, personalized letter of next term info, and provide support services info Transfer Students –Add additional entrance counseling and consultation session for new transfer borrowers –Mandatory academic advising and degree completion planning for transfer students –Offer career counseling with degree planning –Transfer student orientation Retention 65

66. Financial responsibility –Incorporated financial literacy in financial advising –Added financial literacy into First-Year Experience courses Implemented model for early/late stage delinquency –Loan advising for students who have exited and reconnect them with college, enrollment, and loan repayment options Combined academic and financial aid planning –Developed individual student success plans based on academic program to help students plan student loan borrowing Intervention 66

67. Cuyahoga Project Status Successes – Mentoring data Increased retention up to 24% with students in cohort Increased course pass rate 10%-12% with focused intervention Challenges – Continuity Keep the conversation visible within executive leadership Find the right marriage (with other projects/initiatives) Opportunities – Accelerate time to degree completion – Impact the system (academic/service) for all students, not just financial aid students 67

68. Student Success Graduates = Employable Alumni Retained Students = Graduates Successful Students = Retained 68

69. 69 Contact Information Angela K. Johnson Cuyahoga Community College Phone: 216-987-4213 E-mail:Angela.Johnson@tri-c.eduAngela.Johnson@tri-c.edu

70. Questions Thank You! Please let us know feedback or further questions Cindy BattleCynthia.Battle@ed.gov David HammondDavid. Hammond@ed.gov 70