1. KCTCS BOARD OF REGENTS KCTCS BOARD OF REGENTS STUDENT FINANCIAL AID LOAN COHORT DEFAULT RATE UPDATE THE MISSION OF KCTCS IS TO PROVIDE AN ACCESSIBLE, AFFORDABLE, QUALITY EDUCATION FOR ALL STUDENTS… December 5, 2014

2. 2 PRESENTATION OUTLINE  Federal Student Loan Background  Cohort Default Rate Defined/New Federal Guidelines  National Cohort Default Rate Comparison  KCTCS Financial Aid Student Profile  Strategies and Actions to Date

3. 3  1950s - wealthy families created a scholarship fund to defray cost of elite colleges. Banks held funds - awarded low-interest loans. (model for policy makers) National Defense Education Act 1958 - included fed. loans. National Education Act 1965 - college affordability.  Intent – To increase access to higher education. Bridge the financial gap for middle income students. Increased usage by affluent and low income students. FEDERAL STUDENT LOANS BACKGROUND

4. 4 THE SPREAD OF STUDENT LOANS WITH COMPLICATIONS  Rising cost of education created barriers in the 80’s and 90’s.  Loans - leading type of aid to fulfill financial need/gap.  Colleges - limited options to restrict access of loans.  Federal Government: Multiple repayment options. Lack of understanding of students’ financial obligations. Federal exit counseling challenging for students. Standard repayment plans assigned (highest monthly payments).

5. 5 KCTCS ALLOWABLE COST OF ATTENDANCE Estimated student educational expenses Allowable Cost Per TermDependentIndependent Tuition$1,764 Books and Supplies$500 Housing$2,095$3,488 Personal$400 Transportation$1,025 Build Smart Fee$48 Total$5,832$7,225

6. 6  Late 70’s – creation of proprietary schools created a different environment. United States Congress  Enacted a law in the 1980s To draw attention to institutions targeting low-income students. To hold colleges accountable for their students loan default rates. To potentially risk access to federal funds. COHORT DEFAULT RATES (CDR) INITIATED

7. 7 FEDERAL STUDENT LOAN COHORT DEFAULT RATES CDR Definition:  The percentage of a school’s borrowers who enter repayment on a loan during a fiscal year and defaulted within the next three years. Cohort default period - October 1 st of the fiscal year when the borrower entered repayment and ends on September 30 th of the next fiscal year. Department of Education annual CDR notifications to colleges. Draft CDR letter - February Official CDR letter - September

8. 8 NEW FEDERAL CDR GUIDELINES Higher Education Opportunity Act of 2008  Assessed institutional eligibility for financial aid based on the percentage of a school’s borrowers who defaulted within the first three years of repayment. 2009- first year cohort subjected to a 3-year calculation. 2012- first year official 3-year CDR reported. 2014- first year sanctions issued for 3-year CDR reporting.

9. 9 COHORT DEFAULT RATE COMPARISON  National 13.7%  Public Colleges & Univ.8.9%  Private Colleges & Univ. 7.2%  For Profit 19.1%  Community Colleges 20.6%  KCTCS 27% (Approx. 5,100 of 18,500) KCTCS-  Average loan amount $9,700  Maximum loan amount disbursed $10,500

10. 10 KCTCS FINANCIAL AID STUDENT PROFILE  PROFILE First generation Under-prepared Low-income First time borrowers Under-represented Age range 18-78  24,736 students awarded loans Fall 2014.  Approx. $98 million awarded- 2013 vs. $72 million awarded - 2014 as of Nov. 30.  26% decreased in loans award from 2013-2014. This profile puts KCTCS students at a greater risk for loan default. 90% of KCTCS students receive some form of financial aid

11. 11 KCTCS COLLEGES 3-YEAR CDR 2009 Cohort Rate 2010 Cohort Rate 2011 Cohort Rate Ashland Community and Technical College 28.1 30.3 28.3 Big Sandy Community and Technical College 23.2 31 29.6 Bluegrass Community & Technical College 21.2 25.5 25.2 Bowling Green Technical College 23.2 25.2 32.1 Elizabethtown Community and Technical College 20.9 26.9 28.3 Gateway Community and Technical College 27.7 29.5 32.5 HAZARD COMMUNITY AND TECHNICAL COLLEGE 23.7 34.4 31.6 Henderson Community College 19.4 20 22.5 Hopkinsville Community College 22 21.8 17.7 Jefferson Community and Technical College 21.2 23.2 24.7 Madisonville Community College 15 20.2 18.9 Maysville Community and Technical College 24.5 26.4 30.9 Owensboro Community & Technical College 20.3 25.1 25.6 SOMERSET COMMUNITY COLLEGE 28.4 33.4 33.3 Southeast Kentucky Community and Technical College 27 25.8 28.4 West Kentucky Community and Technical College 16.7 18.8 22.8

12. 12 KCTCS APPEALS TO FEDERAL DEPT. OF EDUCATION  Appeal categories for qualifying colleges: Uncorrected data New data adjustment Loan servicing

13. 13  Assist students with the completion of the FASFA.  Verify student data.  Certify eligibility, award aid, and ensure accurate disbursement.  Financial literacy, counseling, and advising.  Loan entrance and exit counseling online and in-person.  Offer cross-functional support for the financial aid life cycle of the student. THE ROLE OF KCTCS COLLEGES

14. 14 KCTCS LOAN DEFAULT PREVENTION STRATEGIES  Implemented default prevention management plans.  Established default prevention/management teams.  Early intervention strategies to educate & assist students.  Online/in-person financial literacy tools & advising resources available to promote responsible borrowing and repayment.

15. 15 ACTIONS TAKEN TO DATE  Sought expert advice and support from: American Association of Community Colleges. Kentucky Higher Education Assistance Authority.  Summer 2014 - consulting firm contracted - operational review of Financial Aid at four colleges and the System Office.  Fall 2014 - consulting firm assisting colleges with operational improvements and compliances and to provide a comprehensive re-design of Financial Aid operations.  Issued request for proposal (RFP) for student loan default management and prevention services. Three companies awarded contracts to assist colleges.

16. 16 ACTIONS TAKEN TO DATE  Created new online form for students to request loan amounts. Resulted in a 26% decrease in loan disbursements.

17. 17 Without financial aid, many KCTCS students would not be able to pursue higher education.QUESTIONS?