Default Prevention Task Force

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Why is Default Management Everybody’s Business and Why a Plan?

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In This Session

Section 1: Regulations Section 2: Default Management Task Force Section 3: Identifying Default Section 4: NSLDS Reports Section 5: Developing a Plan Section 6: Federal Loan Servicers Section 7: Resources

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SECTION 1

Regulations

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Regulations

34 CFR § 668.14(b)(15) Schools participating for the first time or that have undergone a change in ownership that resulted in a change of control are required to use a default prevention and management plan to participate in Title IV programs.

34 CFR § 668.217

Institutions that have a 3-Year Cohort Default Rate of 30 percent or greater for any one federal fiscal year is required to establish a Default Prevention Task Force to reduce defaults and prevent the loss of institutional eligibility.

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ED Recommendation

The Department recommends that every school implement a default prevention and management plan consistent with § 668.217 to: • Promote student and school success; • Achieve low CDR; and • Save students from the consequences of default.

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SECTION 2

The Default Management Task Force

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“Student Success” Approach

Focus is on helping borrowers to develop a healthy relationship with their education (student success solutions) and include: • Increasing program completion rates; • Decreasing program completion time; and • Helping non-completers find a job.

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School-Based Default Prevention

1) Form a Default Prevention Team, set measurable goals and develop or adopt a default prevention plan.

2) 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; and → Detail responsibilities of determining risk.

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Default Prevention Task Force

Task Force members should include: • Senior school official(s); • • Representatives from various offices (Enrollment Management, Academics, Student Affairs, IT and Institutional Advancement); Career Services; and • Student representative (Student Government, Pan Hellenic Council).

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Activities for the Task Force

• • • • 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.

Review all of your borrower education materials Discuss your current strategies and determine what works and what may need some improvement CONTINUED

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Activities for the Task Force (cont.)

• • • • Work closely with your servicers.

Find out what type of services are available from your servicers.

Fine-tune your Loan Servicing procedures for the period while the borrower is at your school, in grace

and repayment.

Have clear and precise procedures with a timeline of dates to take appropriate actions.

Default Management Strategy

Organize Task Force Establish Objectives Define Default Risk Outline Actions Submit Plan (optional for some schools)

Organize a Default Prevention Task Force Assess resources for team

Identify members

Set Purpose

Detail Responsibility

 

Set Objectives: Establish Objectives

 

Determine who is defaulting and why Analyze data Identify steps needed to achieve goal Define and Identify Risk Submit Plan FSA’s Default Prevention Team to assist schools with:

Establishing their default prevention goals

Developing, refining and reviewing your default prevention plan.

 

Outline Actions Specify actions needed to achieve your goal Ensure actions are measureable

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SECTION 3

Identifying Default:

Risks, Interventions, Strategies and Using The Data

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Who are your Students?

• ?% students received GED • ?% first generation college students • ?% receive financial aid • ?% of Pell recipients have Zero EFC • ?% students in a particular major • ?% students place into developmental Math or English • ?% are part-time students • ?% retention Spring to Fall – ?% retention Fall to Fall • ?% team sports players

Steps to Identify Default Risk

Conduct Risk Analysis: • You will need data! And someone to work the data!

→ Academic data: Program completion rates; retention rates; and data at the student level.

• Review combined NSLDS (default and delinquency) data and • school data about defaulters and non-defaulters. Servicer data Use data to create a picture of borrowers at-risk of default, e.g., who defaulted and why?

• ‘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.

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DM Task Force Responsibility

The responsibility of your DM Task Force: • 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; and • Assess the effectiveness of default reduction activities over time.

→ Are they working?

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Reducing Default

Risk Interventions

Two ways to think about reducing default risk: 1) Assisting borrowers by enhancing their knowledge of loan responsibilities and processes and strengthening their relationship with their loan servicer; and 2) Assisting borrowers by enhancing educational and employment outcomes.

Examples: → Increase Student Success; → Reduce Program Completion Time; → Strengthen Relationship with Potential Employers; and → Career Placement for both Graduates and Non-Graduates.

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Reducing Default

Risk Strategic

Create interventions based upon your data: • Targeted vs. ‘best practices’ interventions; • Most efforts are targeted at identified risk; • Utilizing Intervention Opportunities; • Utilizing ‘leverage’ where it exists; and • Adding general best practices to targeted efforts .

Reducing Default Risk

Plan Considerations

Specific Intervention Examples: • Targeted Additional Loan Counseling; • Targeted Existing Students; • Success Efforts for At-Risk Borrowers; • Review Policies and Procedures; • Collect Detailed Contact Information; • Financial Literacy Training; • Tracking and Projections; • Early Stage Delinquency Assistance; • Late Stage Delinquency Assistance; and • Promoting Loan Rehab for Defaulters.

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Food for Thought:Post College Risk Factors

• Income • Highest Income Earned • Occupation • Indebtedness → Other More Important Loans to Pay • Marital Status, basic skill needs • Number of Dependents • Filing for Unemployment Insurance • Dissatisfaction with Educational Program 20

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SECTION 4

NSLDS Reports for Default and Delinquency Prevention

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NSLDS Reports for Schools

Reports for Data Accuracy: • • Date Entered Repayment Report; School Repayment Info Loan Detail; • • School Cohort Default Rate History; and Enrollment Reporting Summary.

Reports for Default Prevention: • School Loan Portfolio Report; • • Date Entered Repayment Report; Borrower Default Summary; • • Exit Counseling; and Delinquent Borrower Report.

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NSLDS Reports

School Loan Portfolio (SCHPR1) • The School Portfolio Report provides details on borrowers and loans in your current loan portfolio.

• • The report is based on loan repayment begin date.

If your school has merged, previous school codes are included in the report.

• Report is available in Extract only.

Delinquent Borrower Data (DELQ01) • Use the Delinquent Borrower Report (DELQ01) to assist with • default prevention.

Use Web Page under Aid tab “Delinquent Borrowers” for current up-to-date data.

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SECTION 5

Developing a Default Prevention Plan

Involuntary DP Plan?

34 CFR § 668.217

Cohort default rate regulation requires that schools which have a cohort default rate equal to or greater than 30% must develop a default prevention plan that requires identifying at-risk borrowers.

25 Default Prevention Plan • • Success is achieved when solid plans are developed and executed; A plan pulls together people and resources toward a common goal; • The plan provides for consistency; • ED Default Management sample plan in Dear Colleague Letter GEN 05-14 issued September 2005 (Revised Plan out soon); and • Revise and adjust you plan as needed to maximize your success.

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Administrative Concerns

• What did your FY 09 and FY 10 rates look like and what will your FY 11 CDR look like? → If you have not looked at your rates, are you likely to hit 30% in September 2014?

• Who are members of or a part of your DP team?

• What are the sources of your default risk?

• What ‘traditional’ strategies are included in your DP plan?

CONTINUED 26

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Administrative Concerns (cont.)

• Have you leveraged knowledge about default risk?

• What ‘student success-focused’ strategies are included in your DP plan? Have you leveraged knowledge about your default risk?

• Are your strategies measureable? How will you know if you are succeeding?

• Is your plan 34 CFR § 668.217 compliant?

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SECTION 6 Federal Loan Servicers

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Federal Loan Servicers

Federal Loan Servicers: • Educate and inform borrowers regarding the tools and options available to assist in the management of their student loans; • Offer multiple repayment options tailored to borrower preferences (i.e. online payments, ACH, check, etc.); • Provide self-service tools for borrowers and options to receive bills and/or correspondence electronically; • Offer dedicated services to schools to help manage cohort default rates; and • Comply with legislative regulatory requirements and provide unique services.

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Servicer Repayment Counseling

During the grace period a loan servicer: • Establishes a relationship with the borrower; • Ensures the correct repayment status; • Discusses the appropriate repayment plan; • Promotes self-service through the web; • Updates and enhances borrower contact information; and • Discusses consolidation options.

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Communication Channels for Borrowers

• All servicers have toll free numbers for borrowers to contact (phone, fax, and e-mail).

• All servicers use IVR (integrated voice response) systems.

→ Allow self service-for those that prefer → Make payments over the phone • All servicers includes option to speak to a representative.

• All servicers have a dedicated staff to assist borrowers.

• All servicers offer financial literacy (budgeting, credit tips, etc.).

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Servicer Tools for Borrowers

Websites designed to assist the borrower: • Understand the various repayment plans and options; and • Understanding Options (examples).

→ Deferments → Forbearances → Discharges → Forgiveness Programs → Loan Consolidation

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Servicer Partnership

All servicers work to gather feedback and opinions from schools and find ways to partner with schools on default prevention, via: • Face to face meeting on school campuses; • Financial aid conference attendance; • Presentations at conferences; • Proactive phone calls; and • E-mail communications.

Partner with the servicers!

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SECTION 7

Resources

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Financial Awareness Counseling

Financial Awareness Counseling on developed to:

StudentLoans.gov

was • Provide a centralized, online source of financial literacy information for students; • Assist borrowers in making informed postsecondary funding decisions; • Provide schools with educational resources about federal student aid; and • Support the government-wide efforts to improve financial capability in the U.S. through the Financial Literacy Education Commission.

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FAC: StudentLoans.gov

for 2013-2014

StudentLoans.gov has brought ALL FSA loan counseling tools together on one website: • Entrance Counseling; → Subsidized & Unsubsidized and GradPLUS • Exit Counseling; and → NSLDS will continue to provide detailed Exit Counseling reports and you’ll continue to obtain demographic and reference information from that website as you do today • Financial Awareness Counseling.

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FAC: StudentLoans.gov

for 2013-2014

New features for signed-in students: • New landing page with guidance to help the student select the right type of counseling; • Select schools to notify from a list of associated schools; • Add new schools to notify; • Select preferred repayment plan in Exit Counseling; and • Send notifications of previously completed counseling sessions. → → Entrance Counseling Financial Awareness Counseling

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FAC:

StudentLoans.gov

for 2013-2014

StudentLoans.gov

to the website.

has added a new Repayment Estimator • • The repayment estimator is on the “My Preferences” screen An authenticated users will see loan data from NSLDS, eligibility of each loan for a particular repayment plan, and estimate the payment → for a particular plan based on several factors including: Loan type; → Loan balance; → Income; → Family size; and → Where you live.

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FAC: StudentLoans.gov

for 2013-2014

FAC: StudentLoans.gov

for 2013-2014

New entrance and exit counseling response functionality on ‘Options’ screen in COD.

Entrance Counseling • • Participation Response frequency (Daily or On-Demand) Exit & Financial Awareness Counseling • Response frequency (Daily or On-Demand) 40

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Cohort Default Rate Guide

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Web Links

Cohort Default Rate • The Cohort Default Rate Guide → http://www.ifap.ed.gov/drmaterials/finalcdrg.html

Delinquency and Default Management • Electronic Announcement – Delinquency Prevention Activities → http://www.ifap.ed.gov/eannouncements/060310LoanServicingyInfoDelinqPrevent Act.html

General Servicing Information • Electronic Announcement (EA) – Loan Servicing Information → http://www.ifap.ed.gov/eannouncements/032610LoanServicingInfoFedOwn.html

• Assessments FSA Assessments → http://ifap.ed.gov/qamodule/DefaultManagement/DefaultManagement.html

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Additional Resource

Operations Performance Management Service Group CDR calculations and data challenges Main Line: 202-377-4258 Hotline: 202-377-4259 Email: http://[email protected]

Web: http://ifap.ed.gov/DefaultManagement/DefaultManagement.html

Financial Literacy Resources

44 Lenders and Guarantors • Counseling Resources Jump$tart Coalition For Personal Financial Literacy • http://www.jumpstart.org/ FDIC Financial Education Literacy • http://www.fdic.gov/consumers/consumer/moneysmart/index.html

Mapping Your Future • http://www.mapping-your-future.org

National Endowment for Financial Education • http://www.nefe.org/tabid/183/default.aspx

IF WE DON’T MANAGE HIGH DEFAULT RATES

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WHAT DOES THE FUTURE HOLD FOR OUR STUDENTS?

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3 Take-a-ways from this Session

1) Working with the New Default Prevention Team 2) Identifying Default Risks 3) Default Prevention Plans

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FSA Contact Information

Larry Eadie [email protected]

ET Winzer [email protected]

We appreciate your feedback and comments!

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