REDUCING COHORT
DEFAULT RATES:
SUCCESS STRATEGIES FOR
YOUR CAMPUS
NELNET - NASSAU COMMUNITY COLLEGE - MONROE COLLEGE
NYSFAAA Conference
October 2013
Session Agenda

Current Data and Trends

Default Prevention and Debt Management
Strategies

Partnering with Servicers

Cohort Default Rate Review and Challenge
15.0%
14.7%
Cohort Default Rate
14.5%
14.0%
13.5%
13.4%
13.0%
12.5%
FY 2009 Official
FY 2010 Official
Cohort Years
FY 2010 3-Year Official National Cohort Default Rates
Public
Less than 2 yrs
2-3 yrs
4yrs(+)
Private
Less than 2 yrs
2-3 yrs
4yrs(+)
Proprietary
Less than 2 yrs
2-3 yrs
4 yrs(+)
Foreign
Unclassified
Total
Number of
Schools
Borrower Default
Rate (%)
Number of Borrowers
Defaulted
Number of Borrowers
Entered Repayment
1,619
139
840
640
1,712
41
168
1,503
2,187
1,117
743
327
432
1
5,951
13.0%
16.5%
20.9%
9.3%
8.2%
21.8%
14.2%
8.0%
21.8%
20.9%
21.4%
22.1%
4.6%
0.0%
14.7%
250,661
1,315
125,764
123,582
72,347
1,097
2,305
68,945
277,088
34,811
71,853
170,424
449
0
600,545
1,922,773
7,963
599,467
1,315,343
879,269
5,020
16,217
858,032
1,270,965
165,921
334,459
770,585
9,562
1
4,082,570
Default Prevention and
Debt Management Strategies
#1: Borrower Communication
Empower vs. Enable!
Students need to know…
 What accepting a loan means
 Where it comes from
 What a Servicer is (friend not collector)
 When or how they’ll pay loan back
 Who is involved in the process
This increase the likelihood that loans will be repaid
successfully.
Borrower Communication
In-school Campaigns:
At first loan disbursement
 Inform
about Loan Servicer assignment
 What a Servicer is, why they are important, create
picture of servicer as friend (not as collector!)
 How to find out who their servicer is
 Suggest they enroll for electronic account access
with servicer on their web sites.
Borrower Communication
In-school Campaigns:
Before semester ends
 Use
NSLDS Portfolio Report with disbursement
date parameters to let your student know who their
Servicer is.
 Suggest they enroll for electronic account access
with servicer on their web sites.
Borrower Communication
Graduation Campaign
 Remind
them they’re going into repayment
 Let them know they’ll be hearing from servicer
 Give overview on what to do if there are
repayment challenges
Borrower Communication
Loan Borrowers:
Your federal loan will go into
repayment soon after graduation.
Remember to:
-Complete an Exit Counseling at
www.studentloans.gov
-Contact your loan servicer to set up
timely payments. To find out who
your servicer is, visit nslds.ed.gov
#2: Financial Literacy for Borrowers
Educate Borrowers on Financial Responsibility
 Host a Financial Literacy speaker
 Email the link to financial awareness counseling
 Provide link to federal calculators…


On your loan request form
Accepting loan on website

Email the link to the students!
Financial Literacy for Borrowers
It is important to understand your student
population.
How will you target your message to them?
Consider first time college attendees -- They often
lack financial guidance and experience.
Financial Literacy for Borrowers
Counseling products on Studentloans.gov highlight
financial literacy concepts
*Challenge: How do we get students to use it?*



Entrance Counseling- required to receive a federal loan
Exit Counseling- required when the student graduates,
leaves school or drops below half-time student
Financial Awareness Counseling
#3: Communication Across Campus
Student success is everyone’s responsibility
A successful student is more likely to be
successful in repayment.
Communication Across Campus

Prevention & management of loan default is school-wide
effort, not sole responsibility of the financial aid office.

Important for student service & academic areas to have
awareness of loan debt, how it affects the borrower and
the school

Important to communicate that CDRs are a reflection of
the effectiveness of academic program!
Shopping Sheet
 Early Warning System

#4: Timely, Accurate Enrollment Reporting
THE IMPORTANCE OF ENROLLMENT REPORTING



Critical for administration of Title IV Loan Programs
Ensures students’ rights are protected
Essential to:
 Proper servicing of loan
 Preventing defaults
 School cohort management
Timely, Accurate Enrollment Reporting

Be sure you make it your business to know that your school
is regularly reporting to NSLDS/Clearinghouse
 Encourage them to report at least monthly

Be sure institution is aware of ramifications if not reporting in
timely manner.
 Keep back up documentation to show you have done this
#5: NSLDS & School-based Data
School Reports: NSLDS

The School Portfolio Report (SCHPR1) provides details
on borrowers ad loans in your current portfolio.




Based on loan repayment begin date
If your school has merged, previous school codes
included.
Available in extract only.
The Delinquent Borrower Report (DELQ01) is used to
assist with default prevention. Current data can be
obtained on the DELQ01 webpage under the tab mark
“Aid.”
Main Menu: Requesting a Report
#6: Working with Servicers
Servicers increasingly focus on proactive contact with
borrowers. Goal: To establish early, positive relationship
 Servicers provide financial education and direct services
for borrowers; they provide loan training, direct contacts
and counseling support for schools
 Servicer reports tend to be more current and have more
extensive borrower account information
 Efforts
underway to provide standardized report format
Servicers’ Delinquency Prevention

Provide outbound targeted calling campaigns, inbound
call centers to help borrowers become current

Use variety of electronic communication (email, chat,
text messaging) to update borrowers on account status

Work with schools to develop borrower messaging. Use
variety of tools to get most current contact info on
borrowers (skip tracing on delinquent accounts)

Work in partnership with schools to assist borrowers in
the later stages of delinquency.
Profile of a Defaulted Borrower
Federal Data (from ‘08 database):
 70% withdrew before completing their programs of study
 91% did not receive their full 6-month grace period due
to late or inaccurate enrollment notification by schools
 There is high correlation between increased financial
literacy and repayment success
** New York Study: 50% of those who defaulted had a total
loan balance of $0–$5,000 **
Nelnet: Trends in Borrower Repayment

Borrowers who get into good early repayment habits 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.
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. School intervention helps.
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.
The 3-Year Cohort Default Rate

Expands the default tracking window from 2 years to 3
years

Raises penalty threshold from 25%-30%


Increases availability of “disbursement relief” from 10%
to 15% (effective 10/01/11)
34 CFR 668.217 affected the 2009 cohort year.
Your Current Active 3-year CDR Timeframes
CDR
Denominator:
Enter Repayment
Numerator:
Default
Publish Rates
Cohorts used for
Sanctions
FY 2011*
10/1/10-9/30/11
10/1/10-9/30/13
September 2014
FY 09, FY10, FY11
@ 30%
FY 2012
10/1/11-9/30/12
10/1/11-9/30/14
September 2015
FY 10, FY 11, FY 12
@ 30%
FY 2013
10/1/12-9/30/13
10/1/12-9/30/15
September 2016
FY 11, FY 12, FY 13
@ 30%
FY 2014
10/1/13-9/30/14
10/1/13-9/30/16
September 2017
FY12, FY 13, FY 14
@30%
The 3-Year Cohort Default Rate
 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, DL

School has appeal rights
Limited Resources/Best Results
 Identify Cohorts in effect
 Work with Servicers
o
Pull delinquency reports by cohort year
 Identify highest risk (most delinquent)
 Develop plan for contact
o
o
o
Phone most effective
Email, Letters, Text messages if can’t reach by phone
Integrate effort with other campus offices with whom
student has relationship
Limited Resources/Best Results
 Use school d-base for contact info
o
When student in school, update contact info, references,
personal email/facebook accounts, obtain authorization to
text, etc.
 When contacting borrower, have portfolio of loan
history
o
o
Recommendations depend on characteristics of loan
Make warm transfer to Servicer while student on phone
Limited Resources/Best Results
Students who withdraw are at **HIGH RISK**
 Official Withdraw - Required to meet with FA
 SAP, Academic Dismissals - Track, monitor separately
 Unofficial Withdrawals
o
o
o
o
Receive info from academic offices, registrar others
Report to NSLDS/Clearinghouse immediately
Reach out to students by mail, phone informing them of
obligation re. student loan
Update contact info, address, references, emails, etc. so you
can contact in future
Other Useful Activities
 Grace
o
o
Proactive outreach re. Delinquency
Break into cohort years to prioritize
 Mid-stage Delinquency
o
o
Send out letters, emails, other electronic media
Refer to servicer for help/action
Cohort Default Rate Release Dates
February
(DRAFT)
September
(OFFICIALLY)
Not public
No sanctions
No benefits
Public
Sanctions apply
Benefits apply
Challenges, Adjustments, Appeals
Cohort Default Rate Review
Challenges, Adjustments, and Appeals
Challenges
• Incorrect Date Challenges (IDC)
• Participation Rate Index Challenge (PRI)
Adjustments
• Uncorrected Data Adjustment (UDA)
• New Data Adjustment (NDA)
Appeals
•
•
•
•
Loan Servicing Appeals (LS)
Erroneous Data Appeal (ER)
Economically Disadvantaged Appeal (EDA)
Participation Rate Index Appeal (PRI)
When/How to Challenge
 Start when you receive draft (Feb 2014)
o
o
o
o
Will receive 2011 3-yr draft
Challenge process will begin
45-days to submit challenge
Need to be enrolled in E-CDR
Watch for NYSFAAA webinar in February!!
What You Can Do Now
 Draw down NSLDS Portfolio report for 2011. Focus
on defaulted borrowers
o
Go through list - Is borrower in correct cohort year?
o
Verify - Did borrower default prior to 2013?
o
Create list of borrowers who are incorrect

Will help you develop the base of challenge (back up doc will
need to be attached)
What You Will Do in February
 Submit your challenges within 45 days of draft
release
o
o
o
Back-up documentation will need to be attached
President’s letter needed (try to obtain in advance
Servicer will review challenge, and agree or not agree
 You can request clarification. Servicer data mgr will
need to respond to you.
What Happens Next?
 You’ll receive notification
 September– official rate release
o
o
At that point, some might of your successful challenges
may still be in your CDR
Can do UDA within 30 days of official release, report to
Data Mgr that accepted appeals not taken out of rate
Cohort Default Rate Review - LRDR
Cohort Default Rate Review
Data Manager
Data Manager:
 Depending on the loan, a data manager may be the Federal Loan
Servicer, a guaranty agency or in some instances, the Department.
 Entry responsible for maintaining and managing the data used in
calculating cohort default rates.
Nelnet Default Prevention Resources
www.nelnetloanservicing.com






Step-by-step guide to creating default plan for your
school
School best practices
Links to federal data and resources
Powerpoint presentations, videos
Default plan template
Includes financial literacy link and library of school
collateral
FSA Cohort Default Rate Guide
The “Cohort Default Rate Guide”
(Guide) is a U.S. Department of
Education publication designed to
assist schools with their Direct Loan
Program cohort default rate data.
The Guide, on ifap.ed.gov, should be
used as a reference tool in
understanding cohort default rates
and processes.
FSA Cohort Default Rate Review
Contact Information
Operations Performance Division
Phone: 202-377-4259
Email: Fsa.schools.default.management@ed.gov
Website:
Ifap.ed.gov/default
management/defaultmanagement.html
E-Appeals:
https://ecdrappeals.edu.gov/ecdra/index.html
THANK YOU!
Patti Noren, Director of Financial Aid
Nassau Community College
patricia.noren@ncc.edu
Clemente La Pietra,
Monroe College
clapietra@monroecollege.edu
Anne Del Plato, Regional Director of Partner Solutions
Nelnet Education Loan Servicing
anne.delplato@nelnet.net