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
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.
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.
The Default Management Task Force
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.
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.
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).
• • • • 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
• • • • 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
Have clear and precise procedures with a timeline of dates to take appropriate actions.
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
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
Risks, Interventions, Strategies and Using The Data
• ?% 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
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.
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?
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.
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 .
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.
• 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
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.
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.
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.
• 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?
• 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?
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.
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.
• 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.).
Websites designed to assist the borrower: • Understand the various repayment plans and options; and • Understanding Options (examples).
→ Deferments → Forbearances → Discharges → Forgiveness Programs → Loan Consolidation
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!
Financial Awareness Counseling on developed to:
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.
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.
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
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.
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
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
Operations Performance Management Service Group CDR calculations and data challenges Main Line: 202-377-4258 Hotline: 202-377-4259 Email: http://[email protected]
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
WHAT DOES THE FUTURE HOLD FOR OUR STUDENTS?
1) Working with the New Default Prevention Team 2) Identifying Default Risks 3) Default Prevention Plans
Larry Eadie [email protected]
ET Winzer [email protected]
We appreciate your feedback and comments!