Yes…Another Presentation on Default
Prevention
UASFAA Fall Conference
April 18, 2013
Bio
 Rose Amador, Call Center Supervisor
 7 Years Experience in Loan Servicing, Default Prevention
and Default Collections
 Joined UHEAA in 2006 to establish in-house servicing
 Direct Experience – Collector to Supervisor
 Primary Experience: Default Prevention
 Part of UHEAA’s Default Prevention Team that helped
UHEAA reach the #1 cohort default rate in the nation
 Part of UHEAA’s Default Prevention Team that helped
UHEAA reach a 1.9% cohort default rate
U.S. Department of Education Fact Sheet, September 2011
“HBCUs have deployed innovative approaches towards default
management and reduction. Such strategies include implementation of
a default management plan that engages stakeholders, identifies
approaches to reducing default rates, and tracks measureable goals.
These schools have increased borrower awareness of obligations
through incorporating borrower topics at orientation sessions and
providing enhanced entrance and exit counseling. Other best practices
include borrower tracking, increased contact with delinquent
borrowers…and partnering with other stakeholders to optimize default
prevention, resolution, and reduction.”
[Fact Sheet September 12, 2011.]
NY Times Editorial Columnist, Gail Collins
“…Don’t you think there should be someone in charge of calling
[students] once a week and yelling: ‘$800 a month until you’re 51 years
old’?”
[New York Times, “The Lows of Higher Ed”, September 14, 2012 ]
Presentation Objective #1
Make the case that we have a motivation problem, not
an information problem.
Presentation Objective #2
Present our recommended strategy for preventing
delinquent students from becoming defaulted
students.
Keep in mind…
CDR calculations based on # not $
Compare: 1st-year student with $2,500 in debt vs. a graduating
senior with $25,000.
 Who is most likely to default?
 Who is most difficult to help?
Keep in mind…
Highest risk of default: Dropouts
 Most Critical Risk Indicator: Completion
 Most Important Success Indicator: Completion
Average debt of 1st year dropouts -- $4,500
 Monthly payment over 10 years: $52
Keep in mind…
Average debt of college seniors: $25,250*
 Monthly payment over 10 years: $291
*The Project on Student Debt, www.projectonstudentdebt.org
Keep in mind…
The desired action is contact with the servicer
Why?
Only the servicer can solve the problem.
Consider this…
A successful default prevention program must be
strong enough to influence the behavior of the most
difficult students.
The students most likely to default are the most
difficult students to influence.
We have a motivation problem, not an information
problem.
Debtor Psychology
Two Obstacles
Avoidance: “I don’t want to deal with this…”
Ignorance: “I don’t know what to do about this…”
First Obstacle is much harder to overcome than the second
Debtor Psychology
Three Causes of Avoidance:
Fear
 Confrontation
 Negative treatment
 Personal embarrassment
Debtor Psychology
Second Cause of Avoidance:
Procrastination
 “It’s only a student loan…”
 “It’s a government loan – it will take someone a long time to
come after me.”
 “What are they going to do, repossess my brain?”
Debtor Psychology
Third Cause of Avoidance:
Feelings of Being Overwhelmed or Helpless
 “I cannot afford the past due amount…”
 “I have so many other problems…”
 “There is nothing I can do right now…”
Debtor Psychology
How do we overcome avoidance?
Borrower Communication that is:
Persistent…
Relentless…
Sustained…
Debtor Psychology
Second Obstacle: Ignorance
 Lack of Information about options & resources.
 Confusion about who to call.
Debtor Psychology
How do we overcome ignorance?
Information vs. Recommendations
 Recommendations are more important than information
 Giving information is not enough.
 We must tell them what to do and how to do it.
“Contact your servicer”
“Ask About…”
“Here are links, resources, contact points…”
Debtor Psychology
Our Objective:
Motivate the borrower to contact the servicer
Our Recommendations
Communication Strategy:
 Call Center
 Emails
 Text Messages
 Web Resources
 Skip Tracing
 Targeted Mailings
Persistent, relentless and sustained communication of
options, resources, and suggestions.
Our Recommendations
Implement the Department’s Plan
 Engage Campus-Wide Stakeholders
 Identify Your Unique Borrower Profiles
 Set & Track Goals
 Implement Borrower Awareness Programs
 Strengthen & Enhance Orientations
 Strengthen Entrance & Exit Counseling
 Track Riskiest Borrowers
 Partnerships
Our Recommendations
Collaborate with Federal Servicers
 Servicer’s School Representatives
 Servicer Website
 Servicer Ombudsman Office
Our Recommendations
Sponsor or Link to Online Resources
 In-House Resources
 U.S. Department of Education Resources
 Commercial Resources
Our Recommendations
Use NSLDS Reports
 Portfolio Reports
 Delinquency Reports
 Other Databases
Our Recommendations
Timing of Borrower Communication
 Begin 90-Days Delinquent - Why?
 90-Days Delinquent = 4 Payments Due
Average 1st Year Student Owes: $200
Average Senior Owes: $1,000
Avoidance in full swing…
Communication Schedule
Communication Schedule
Results – How Do You Know?
Follow delinquency
 This month’s 90-day delinquency is next month’s
120-day delinquency.
 You want the month-to-month historical trend lines
to aim downward.
Results
Don’t stop…
Questions?