Loan Servicing & Loan Default
Presented by Dan Weigle
Manager, School Support Services
FedLoan Servicing
dweigle@pheaa.org
Agenda
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Role of the servicer
Communication milestones
Servicer support activities
Default statistics
School involvement
Federal Loan Servicers
Comply with legislative regulatory requirements and provide
unique services to borrowers and schools
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For Borrowers:
For Schools:
• 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
• Help schools to manage delinquency
activities and cohort default rates
“TIVAS”
Title IV Additional Servicers
“TIVAS”
An acronym used by FSA which stands for the Title IV Additional Servicers.
In communications with schools, borrowers, and the financial aid community,
FSA uses the term “federal loan servicers.”
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Federal Loan Servicers - TIVAS
COD LDE
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Origination
Disbursement
Loan Allocation
Servicer Assignment
Customer Service
COD
LDE : Loan Distribution Engine:
interface to assign loans to the
federal loan servicers.
“Booked” Loan: occurs when the
COD system accepts an origination
record; links p-note to the record
and accepts actual disbursement.
The federal loan servicer is assigned
upon “booking” of loan.
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Servicers
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Direct Loan
Servicing
Center (ACS)
FedLoan
Servicing
(PHEAA)
Great Lakes
Educational
Loan Services,
Inc.
Nelnet
Sallie Mae
Not-For-Profit Servicers
“Not-For-Profit awarded federal loan servicing contracts under the
HCERA/SAFRA Not-For-Profit (NFP) Servicer Program
solicitation.
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Not-For-Profit Servicers
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Federal loan servicing contracts awarded under the
HCERA/SAFRA Not-For-Profit (NFP) Servicer Program
solicitation
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Federal loan servicer team will continue to expand as
the loan portfolio grows
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Whether individual or team award, borrowers will know
and face one servicer
Not-For-Profit Servicers
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NFP Servicer
NSLDS Name
NSLDS
Code
Aspire Resources Inc.
DEPT OF ED/ASPIRE RESOURCES INC.-ISL
503
COSTEP
DEPT OF ED/COSTEP
510
CornerStone
DEPT OF ED/CORNERSTONE-UHEAA
502
EDGEucation Loans
DEPT OF ED/EDGEUCATION LOANS
509
EdManage
DEPT OF ED/EDMANAGE
505
ESA/Edfinancial
DEPT OF ED/ESA-EDFINANCIAL
501
Granite State – GSMR
DEPT OF ED/GRANITE STATE-GSMR-NH
504
KSA Servicing (Kentucky)
DEPT OF ED/KSA SERVICING
508
MOHELA
DEPT OF ED/MOHELA
500
OSLA Servicing
DEPT OF ED/OSLA SERVICING
506
VSAC Federal Loans
DEPT OF ED/VSAC SERVICING
511
Measuring Performance
Borrower
Satisfaction
School
Satisfaction
FSA and
Partner
Satisfaction
Servicer
Performance
Score
Default
Prevention
Measures
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Allocation Methodology
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Allocations are based on rankings
Survey results
Default statistics
Most points for first place
One point for last place
Percent of new loans = percent of points
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Due Diligence Requirements
Stage
Required Action
Up to 8 calls
5 letters
5 emails
1 Communication
Attempt
Mid
121-240
Up to 8 calls
2 reference calls
Up to 3 letters
4 emails
1 Communication
Attempt
Late
241-360
Up to 6 calls
2 letters
5 emails
1 Communication
Attempt
Early
1-120
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FedLoan Servicing
Action
Servicer Role - Loan Lifecycle
On-Boarding
Grace
In-School
Prepare for Successful
Transition to Repayment
 Early intervention
 Repayment options
 Repay plan modeling
 Reminder to set up acct
 “We’re here to help”
Establish Customer
Relationship
 Contact information
 Online acct set-up
 Tools available
 “We’re here to help”
Maintain Contact
 Obligation reminders
 Financial Literacy
 NSLDS Update/exchange
 Answer questions
 “We’re here to help”
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Communication Channels
 USPS
 Email
 Phone
 Web
 Social media
 Text
Tools Available
 Financial Literacy
 Self service options
 Numerous payment options
 Repayment plan modeling
 Call center agents
Delinquent
Repayment
Repayment
Focus on Healthy Repayment
 Predictive modeling/segmentation
 Reminders of repayment
solutions
 Proactive skip-tracing
 Increasing intensity of contact
 “We’re here to help”
Ensure Successful
Transition to Repayment
 Early intervention assistance
 Repayment options
 Promote auto-debit
 Repayment tools available
 Billing reminders
 Transaction updates
 Outreach to at risk borrowers
 Repayment counseling
 Self-service options
 “We’re here to help”
Services Offered
 School default management assistance
 School access to borrower acct info
 School call center
 School webinars/relevant servicing info
Communication Milestones
FedLoan Servicing In School to In Grace Communications
Welcome Letter &
Email / Privacy
Notice
Enrollment
Change
Confirmation
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Disbursement
Notification Email
Outstanding
Interest Email
Loan Summary
Email
Interest Bill*
* To receive an Interest
bill while in school, the
borrower must contact us.
Note: This is the FedLoan Servicing communication timeline.
While other timelines may vary, most servicers will have similar milestones.
Communication Milestones
FedLoan Servicing In Grace to In Repayment Communications
Entering Grace
Email
Entering
Repayment Email
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3-Month Grace
Email
Interest Notice
Installment Bill
Repayment
Obligation/
Schedule
Disclosure
Statement
Servicer Support Activities
Federal Loan Servicers:
• Provide outbound targeted calling campaigns along with
inbound call center representatives to help borrowers become
current
• Utilize electronic communication methods, such as e-mail, to
keep borrowers informed about account status
• Work with schools to obtain current available contact information
- Utilize a variety of tools to get the most current data to contact
borrowers (skip tracing on delinquent accounts)
• Work in partnership with the school community to assist
borrowers in the later states of delinquency
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Servicer Support Activities
Cure Rates
• Over 95% of delinquent contacts result in a cure
within 30 days of contact
• 1/3 of borrowers that hit 30 days delinquent cure
before 60 days delinquent
• 87% of borrowers that hit 270 Days delinquent
continue to fall delinquent
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Default Statistics
FedLoan Servicing 3 year 2011 Cohort Defaults
SCHOOL TYPE
PROGRAM
LENGTH
# BRWR
DEFAULT
# DEFAULT BRWR
WITHDREW
%
PRIVATE SCHOOL
PRIVATE SCHOOL
PROPRIETARY SCHOOL
PROPRIETARY SCHOOL
PUBLIC SCHOOL
PUBLIC SCHOOL
2 YEAR
4 YEAR
2 YEAR
4 YEAR
2 YEAR
4 YEAR
528
10,899
13,050
29,321
30,906
19,911
332
8,092
9,004
25,456
23,488
15,393
63%
74%
69%
87%
76%
77%
FedLoan Servicing 3 year 2010 Cohort Defaults
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SCHOOL TYPE
PROGRAM
LENGTH
# BRWR
DEFAULT
# DEFAULT BRWR
WITHDREW
%
PRIVATE SCHOOL
PRIVATE SCHOOL
PROPRIETARY SCHOOL
PROPRIETARY SCHOOL
PUBLIC SCHOOL
PUBLIC SCHOOL
2 YEAR
4 YEAR
2 YEAR
4 YEAR
2 YEAR
4 YEAR
518
10,318
6862
21,698
21,859
16,574
205
5,104
2,143
13,564
10,310
8,306
40%
49%
31%
63%
47%
50%
Strategies for Targeting
At-Risk Borrowers
 Financial Aid Awareness
Counseling
Target
Groups
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 Understand Income
Driven Repayment Plans
 Sign-up for Account
Access
NSLDS Reports
School Portfolio
Report (SCHPR2)
• The School Portfolio Report (SCHPR2) provides
school users with information about all Direct
Loan and/or FFEL program loans for a specified
school
Delinquent
Borrower Report
(DELQ01)
• The Delinquent Borrower Report (DELQ01)
provides school users a report of borrowers who
have been reported as delinquent in making loan
payments to one of the federal loan servicers
Use the NSLDS Delinquent Borrower Report to produce letters to
delinquent borrowers who have loans serviced by any federal servicer.
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Engaging At-Risk Borrowers
In School
Target at-risk borrowers with early/extra exit loan counseling, financial
literacy training, and collect additional contact Information.
Which at-risk borrowers?
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Students on academic probation
Students who express intention to withdraw
Students currently enrolled in programs producing a disproportionate
number of defaulters
Engaging At-Risk Borrowers
In Grace
Steps to take:
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Validate contact information
Re-enrollment assistance
Transfer assistance
Prepare borrower for repayment
Provide employment counseling and search preparation
Job placement assistance
Assist in establishing a relationship with servicer
Engaging At-Risk Borrowers
In Repayment
Reach out to at-risk borrowers and facilitate the critical contact with the
loan servicer to prevent default.
• Early Stage Delinquency: Target borrowers 30-60 days delinquent
• Mid Stage Delinquency: Target borrowers 60-270 days delinquent
• Late Stage Delinquency : Target borrowers 270+ days delinquent
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Are You Making an Impact?
Categorize your efforts, track your success, and make adjustments. Establish an
action plan and follow the students targeted to determine their success.
Track Your Efforts
High-Risk Program of Study - Total Students (90)
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Sample
Size
Target
Attendance
Effort
Made in-school
payment
Enrolled in autopayments
Non-delinquent
50
23 (45%)
Explained Income Driven
Repayment Plans
5 (10%)
15 (30%)
45 (90%)
40
30 (75%)
Completed FACT w/ Exit
Counseling
2 (5%)
15 (38%)
30 (75%)
Late-Stage Delinquency Students - Total Students (100)
Sample
Size
Effort
Target
Responders/
Contacts
Responded to effort
Resolved
delinquency thru
payment
Resolved
delinquency thru
other means
50
Email
13 (25%)
15 (30%)
7 (47%)
8 (53%)
50
Phone Call
25 (50%)
30 (60%)
10 (33%)
20 (67%)
How to Help Defaulters
When federal student loans default, borrowers are provided with
opportunities to clear their credit history. Borrowers with defaulted
student loans can regain eligibility for federal student aid and return
to good standing with their loan servicer.
What needs to happen:
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To regain Title IV eligibility a student must make at least six voluntary ontime payments for six consecutive months.
To rehabilitate a defaulted loan a student must make at least nine full
voluntary payments within 20 days of their monthly due date over a 10
month period.
Consolidation is an option to bring the account current, but does not
remove the default record from a student's credit report.
Pay the loan in full.
How to Help Defaulters
Benefits of rehabilitating defaulted loans:
• Students will regain all benefits such as deferments, forbearance, loan
forgiveness, and repayment options.
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Regain eligibility for federal student aid.
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Default status will be removed from credit report.
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Wage garnishment and withholding of income tax return will cease.
Who to contact:
• Debt Management Collection Services (DMCS)
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The U.S. Department of Education's Federal Student Aid Ombudsman
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1-800-621-3115
1-877-557-2575
fsaombudsmanoffice@ed.gov
Resources
Cohort Default Rate
• The Cohort Default Rate Guide
http://www.ifap.ed.gov/DefaultManagement/guide/CDRGuideMasterVersion.html
Delinquency and Default Management
• Electronic Announcement – Delinquency Prevention Activities and
Webinars -- Monitor IFAP for updates
http://www.ifap.ed.gov/eannouncements/071411DefaultPreventionResourceInfoSite.html
Assessments
• FSA Assessments
http://www.ifap.ed.gov/qahome/qaassessments/defaultmanagement.html
Presentations
• Federal Loan Servicer Panel Discussion
http://ifap.ed.gov/presentations/2012FSAConference.html
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Questions
Dan Weigle
Manager, School Support Services
FedLoan Servicing
717.720.2955
dweigle@pheaa.org
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