Default Prevention
What’s New, What’s Still True &
What Your NY Colleagues are Doing
to Keep Their Rates Down
NYSFAAA Conference
October 2014
Cohort Default Rates Decrease
OFFICIAL COHORT DEFAULT RATES
PUBLIC
PRIVATE
PROPRIETARY
NATIONAL
AVERAGE
FY 10
13%
8.2%
21.8%
14.7%
FY 11
12.9%
7.2%
19.1%
13.7%
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
Your Current Active 3-year CDR Timeframes
CDR
Denominator:
Enter
Repayment
Numerator:
Default
Publish Rates Cohorts used for
Sanctions
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%
FY 2015
10/1/14-9/30/15
10/1/14-9/30/17
September
2018
FY13, FY14, FY15
@30%
Did You Know?
 Of borrowers who defaulted, the majority withdrew
without completing their academic programs.
 Borrowers who do not receive their full six-month grace
period have a greater risk of defaulting.
 There is a strong correlation between increased financial
literacy and decreased default risk.
Source: Federal Student Aid 2012
Characteristics of Defaulters
• Older (median age of 38 years old)
• Pell recipient/low-income
• Undergraduate loans only
• Median loan balance: $5,800
• Poor financial literacy
• Did not complete degree
SOURCES: NSLDS, June 30, 2013; The Student Loan Default Trap: Why Borrowers Default and What Can Be Done
About It, National Consumer Law Center, July 2012; What Matters in Student Loan Default: A Review of the Research
Literature, Jacob P. K. Gross, Osman Cekic, Don Hossler, and Nick Hillman; Journal of Student Financial Aid, 2009;
Calculating the Contribution of Demographic Differences to Default Rates, Mark Kantrowitz, May 2010.
7
Understand Who Is Defaulting at Your
School and Why
This will provide
the right target
population to
focus on.
(Photo credit: pixabay, public domain images)
Nelnet Trends in Borrower Repayment
Nelnet Trends in Borrower Repayment
• Borrowers who get into a good early repayment habit are
less likely to default.
• Intervention efforts are more successful within the first 90
days of delinquency. From then on, there is a higher
likelihood of eventual default.
• Setting up auto-pay is a good determinant of repayment
success, as well as signing up for an online account.
Nelnet Trends in Borrower Repayment
• Good contact information for a borrower is critical. Schools
who collect updated contact information after entrance or exit
are encouraged to share with servicers.
• Students in skip-trace status are much more likely to default.
• Much of the default or late delinquency groups are made up of
borrowers with small balances.
• Late Stage Delinquency – Borrowers in this category are very
difficult for servicers to reach since they have avoided contact
from us for so long.
Nelnet Trends in Borrower Repayment
Many borrowers have a knowledge gap when they go into repayment. They are
unaware of:
• Who their servicer is
• What a servicer does
• That they have options in addition to the standard ten-year
payment plan
• What deferments/forbearances are
• That servicers can assist them if they run into repayment
difficulties
Please help servicers convey these messages.
Student Success Model
What Prevents Student Success?
o Finances/need
o Poor study habits
o Relationship issues
o Under-prepared, basic skill needs
o Physical & mental health
challenges
o Language barriers
o Dependent-care
o Transportation
o Housing
o Transition difficulties
o Feel unwelcome, no “campus
connection”
o First generation, no role models or
family support
Identifying Students in Trouble
• Does your school have an “early warning” system?
– Take attendance?
– Issue mid-term grades which provide clues as to whether or not
student will persist?
– Alerts from faculty members, student support staff: who has
missed classes? failed tests? had adjustment challenges?
• Don’t allow academic or social problems to become default risk
Helping Students in Trouble
• Reach out immediately
• Help them remain in school
• If they’ve already left, help them to return
– May involve help to overcome obstacles
• If they will not return, help them to understand their repayment
obligations as some think they don’t owe anything because they
left
• Learn what you can about their experiences and use this
information to help other students stay in school
Default Prevention - Outreach Efforts
Consider When It Makes Sense to Intervene
• Borrower education about repayment
• Financial literacy
• Gain additional or updated contact information
• Engage borrowers through social media for increased exposure
Consider When It Makes Sense to Intervene
•
•
•
•
•
•
•
Use social media to promote good loan repayment
Ask borrowers to contact you if they have questions
Reiterate the importance of communicating with their servicer(s)
Validate contact information
Re-enrollment or transfer assistance
Employment counseling and search assistance
Job placement assistance
Consider When It Makes Sense to Intervene
• Contact borrowers in early-stage delinquency (30-90 days) directly
• Contact those in late-stage delinquency (210+ days)
o By phone, if possible
o Review servicer information and urge servicer contact
Borrower engagement is a key factor in successful default prevention!
School – Servicer Partnership
All servicers work to gather feedback and find ways to partner with schools on
default prevention.
Partner with the servicers!
Source:
21 Federal Student Aid 2012
School Best Practices:
Niagara County Community College
Jim Trimboli
Default
Student loan default is an institutional problem not a
financial aid problem.
• All departments on campus must take a proactive role in
preventing default. (including the President ,Vice
Presidents, and Area Managers).
• 3 leading factors of Default prevention are:
• Retention
• Financial Literacy
• Student Social Economic Background
Default Threat to Community Colleges
• Not only are community college student borrowing more
money, community colleges now have the largest twoyear default rates of any higher education sector
according to recent U.S Department of Education study.
• Three-year community college CDR was nearly 21
percent for FY 2010 cohort.
• (Source NASFAA Reporter Brittany Hackett)
How is NCCC Reducing it’s Default Rate?
• Student loan clerk hired to work the NSLDS Delinquent
Borrow report(phone and emails)
• Partnership with Consumer Credit Counseling of New
York (Only state accredited debt counseling agency)
• Working with Nelnet (proactive approach)
• Student engagement with financial literacy component
(website, touch points for students, open houses, and
orientations)
• (NCCC’s default rate dropped almost 5% in the last two
years just using these prevention methods)
NCCC in 2012
• In 2012 NCCC’s 3 year default rate was 20.4%
• In 2013 NCCC’s 3 year Default rate dropped to 19.5%
• In 2014 NCCC’s 3 year Default rate fell again to 15.6 %
Important to note that NCCC is located between Buffalo and
Niagara Falls, two of the poorest cities in America.
SUNY SMART TRACK &NCCC
• NCCC is the first pilot community college In the SUNY’s
SMART TRACK Default Prevention Program.
• SMART Track involves using NSLDS reporting data to
extract student loan borrower information to establish a
proactive communication platform to prevent student loan
default and promote financial literacy.
School Best Practices:
Monroe College
Clemente LaPietra
MONROE COLLEGE – DEFAULT PREVENTION
 Default prevention is a college-wide effort that enjoys support of
senior management. The Office of Loan Management – OLM
entrusted with the task of working directly with students in this
regard. OLM collaborates with other departments on ongoing basis to
maximize outcomes.
 Borrowers separated into roughly four categories to determine the
level and nature of counseling to be provided to them:
1.
2.
3.
4.
Potential students: transfer or re-admitting students
Enrolled students
Students in their grace period
Students with loans in repayment
MONROE COLLEGE – DEFAULT PREVENTION
1. POTENTIAL STUDENTS/RE-ADMITS
• Potential students with high loan balances referred to OLM for
evaluation and counseling.
• Re-admitted student borrowers also directed to meet with OLM staff
to ensure prior loans are in good standing. Immediate assistance
provided to address delinquencies.
• This presents an opportunity to reiterate rights and responsibilities of
borrowers and to caution against over-borrowing.
MONROE COLLEGE – DEFAULT PREVENTION
3. STUDENTS IN THEIR GRACE PERIOD
• Letters
• E-mails
4. REPAYMENT
a. Early Stage delinquency
b. Late Stage delinquency
Both stages are given the same attention except in the wording of the
messages communicated to them. They constitute bulk of OLM’s work.
MONROE COLLEGE – DEFAULT PREVENTION
2. ENROLLED STUDENTS
• Entrance counseling.
• Financial Literacy – DR_091 and classroom presentations.
• DREAM initiative – iGrad on the college’s web site.
• Exit counseling – one to one counseling encouraged when students
withdraw or graduate. Online registration with servicers stressed, as
is need to make the first payment or contact OLM if unable to make
monthly payments.
MONROE COLLEGE – DEFAULT PREVENTION
Methods used
• Letters – monthly or as needed.
• E-mails – monthly or as needed.
• Calls – daily (3-way with servicer when student answers).
• Non-punitive restriction on delinquent students’ accounts to alert
other departments to send them to OLM.
MONROE COLLEGE – DEFAULT PREVENTION
RESOURCES USED
• Students’ financial aid records.
• In-house networking
– Office of Career Advancement database.
– Student Services Department.
• Default prevention software.
• Servicers – Reports and information on borrower activities.
MONROE COLLEGE – DEFAULT PREVENTION
RESOURCES – contd.
• NSLDS
a. School Portfolio Report - #20 SCHPR1.
b.

Exit completion Report (new - excel format):

To view immediately select Output Medium: XLS.
Report Tab, Select Web Report List ; Report #3 EXTC01.
Review
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 Phone most effective
o Email, Letters, Text messages if can’t reach by phone
o 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 Recommendations depend on characteristics of loan
o 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 Receive info from academic offices, registrar others
o Report to NSLDS/Clearinghouse immediately
o Reach out to students by mail, phone informing them of
obligation re. student loan
o Update contact info, address, references, emails, etc. so you
can contact in future
Resources
Cohort Default Rate Guide
The “Cohort Default Rate Guide” (Guide) is a publication that the U.S.
Department of Education designed to assist schools with their 2-Year and 3Year FFEL Program and Direct Loan Program CDR data. The guide has been
updated and should be used as a reference tool in understanding CDRs and
processes.
Source: Federal Student Aid 2012
Financial Awareness Counseling Tool- FACT
Each module has been designed to communicate key financial
management concepts to increase students’ financial literacy.
Understand
Your Loans
 Your Student
Loans
 Loan Basics
 Free Money First
 Types of Student
Loans
Manage Your
Spending
 Manage Your
Spending While In
School
 Live Within Your
Means
 Borrow Smart
Source: Federal Student Aid 2012
Plan to
Repay
 Estimate What
You Will Owe,
Spend & Earn
• Monthly
Expenses
• Monthly Income
 Understand
Repayment
Avoid
Default
 Avoiding Default
 Postpone or
Lower Your
Payments
 Forgive or Cancel
Your Debts
 Delinquency and
Default
Make
Finances a
Priority
 Plan For the
Future
 Your Income and
Taxes
 Your Credit and
Identity
 Credit Cards and
Other Borrowing
Default Prevention Page
Thank You!
 Jim Trimboli, Director of Financial Aid
Niagara County Community College
jtrimboli@niagaracc.suny.edu
 Clemente LaPietra,
Monroe College
clapietra@monroecollege.edu
 Anne Del Plato, Regional Director of Partner Solutions
Nelnet Education Loan Servicing
anne.delplato@nelnet.net