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Four-year School Default Prevention Building on Your Current Strategies OASFAA Spring Conference 2008

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Four-year School Default Prevention Building on Your Current Strategies OASFAA Spring Conference 2008. John Pierson Tasha McDaniel FSA Default Prevention Great Lakes Higher U.S. Department of Education Guaranty Education Federal Student Aid Corporation. Team Energy Advances Me.

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Four-year School Default PreventionBuilding on Your Current StrategiesOASFAA Spring Conference2008

John PiersonTasha McDaniel

FSA Default Prevention Great Lakes Higher

U.S. Department of Education Guaranty Education

Federal Student Aid Corporation

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

non traditional methods
Non-Traditional Methods
  • Project recap
    • How we got here
    • Data
    • Changing landscape
  • Traditional vs. non-traditional methods
  • Next steps / goals

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

ohio project part of an fsa national initiative
Ohio Project: Part of an FSA National Initiative
  • FY 05: Nevada and Puerto Rico
  • FY 06: Ohio, Michigan, Georgia, Florida, Arkansas
  • FY 07: Career School Industry, California, New York
  • FY 08 Accrediting Organizations

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

fy 2005 calculation

FY 2005 Calculation

Special circumstances impact

FY 2005 calculation

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

national borrowers in default
National Borrowers in Default
  • 115,568

2004 144,128 (+24.7%)

2005 161,951 (+12.3%)

2006 Continuing a trend?

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

national dollars in default
National Dollars in Default

2003 $647.7m

2004 $801m (+23.6%)

2005 $915m (+14.2%)

2006 Continuing a trend?

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

ohio cdr accounting for 05 anomalies

Ohio CDRAccounting for ’05 Anomalies…

FY 2003 FY 2004 FY 2005 FY 2006 Draft

4.8% 4.7% 4.4% 4.6%**

**Draft data estimated only

Official ## may change….

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

ohio dollars in default this trend is not your friend
Ohio Dollars in DefaultThis Trend is Not Your Friend…

FY 2003 FY 2004 FY 2005 FY 2006 Draft

31.7m 32.1m 33.9m 46m**

% Change +1.2%+5.6%+35.6%**(#9)

**Draft data estimated only

Official ## will likely decrease….

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

ohio defaulting borrowers nor this trend
Ohio Defaulting BorrowersNor This Trend…

FY 2003 FY 2004 FY 2005 FY 2006 Draft

5771 5982 6617 7700**

% Change +3.6% +10.6% +16.4%** (#8)

**Draft data estimated only

Official ## will likely decrease….

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

a changing climate inconvenient truths
A Changing Climate: Inconvenient Truths
  • Educational costs: rising (costs to borrowers)
  • Dollars entering default: rising (costs to FSA et al.)
  • Borrowers entering default: rising (costs to FSA et al.)
  • Total indebtedness: rising (costs to borrowers)
    • Combined Stafford and Private loans
    • Sub-prime time again?
  • Impact on institutions and students

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

two broad approaches to successful default prevention
Two Broad Approaches to Successful Default Prevention
  • Traditional
    • Financial aid solutions
      • Support borrower relationship to loan
  • Non-traditional
    • Student success solution
      • Support borrower relationship to education…most defaulters do not complete academic program
    • Increase student success
      • Increase retention / graduation rates
      • Decrease time for program completion

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

traditional methods
Traditional Methods
  • Assistance throughout delinquency period
  • Late Stage Delinquency Assistance
  • Default Prevention Plan
  • Default Prevention Activity Log

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

unlimited time unlimited resources
Unlimited TimeUnlimitedResources

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

why late stage delinquency assistance makes sense
Why Late Stage Delinquency Assistance Makes Sense
  • Lenders have due diligence requirements when a borrower becomes delinquent
why late stage delinquency assistance makes sense1
Why Late Stage Delinquency Assistance Makes Sense
  • Guarantors also perform default aversion activities
  • Most delinquencies are resolved before the borrower becomes 240 days late
  • Biggest bang for your buck
    • The smallest segment of borrowers are more than 300 days delinquent therefore the most manageable
  • Something new is needed

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

delinquent borrower characteristics
Delinquent Borrower Characteristics
  • Most borrowers in the late stage of delinquency have never talked to their lender, guarantor or servicer
  • Many are also avoiding other creditors
  • They can be difficult to find
    • Utilize other offices on campus to obtain current addresses and phone numbers
    • 50 - 60% of defaulters were in phone skip tracing

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

what resources are needed
What Resources Are Needed
  • An updated listing of delinquent borrowers
    • Late Stage Delinquency Reports
  • School-based contact information
  • Training for staff on how to work with delinquent borrowers

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

late stage activities
Late Stage Activities
  • Letters
  • Emails
  • Phone calls

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

when sending letters
When Sending Letters…
  • Provide contact information of school and/or guarantor/servicer
  • Create urgency
  • Describe the consequences of default in plain language
  • Include information on repayment options, deferments, and forbearance
  • Sign letters by hand

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

get the borrower s attention
Get the Borrower’s Attention
  • Goal is to get the borrower to open your letter
    • Hand-addressed envelopes
    • School’s letterhead
    • Non-business size envelopes
    • Colored envelopes or paper
  • Postcards can also be effective
    • Ask for call back; don’t mention loan

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

when sending emails
When Sending Emails…
  • Utilize school email addresses
  • Attach deferment or forbearance forms requested by the borrower
  • Forward any email responses or completed forms to the guarantor and/or direct loan servicer

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

phone calls can be most effective
Phone Calls Can Be Most Effective
  • Utilize a phone call script
  • Explain that you are calling to help
  • Make it plain
  • WIIFM
  • Present possible solutions

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

phone calls can be most effective1
Phone Calls Can Be Most Effective
  • Initiate a three-way phone call
  • Hand-off calls to the guarantor or direct loan servicer
  • Make calls when borrowers are most likely to be home
  • Utilize calling cards to make calls from home during the evenings
  • When leaving a message do not mention “loan” or “delinquency”

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

default prevention plan
Default Prevention Plan
  • Long-term strategy to address issue of loan default
  • Identifies objectives, steps, and measurements used
  • Pulls people and resources together towards a common goal

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

why create a default prevention plan
Why Create a Default Prevention Plan
  • Shows you’re doing the right thing for your students
  • Details practices, resources and measurements
  • Identifies initiatives to prevent over-borrowing
  • Helps to manage your cohort default rate
  • Allows you to justify additional resources

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

steps to create a plan
Steps To Create a Plan
  • Establish a Default Prevention Team
  • Study your student population
  • Review current initiatives, tools and resources
  • Review all borrower education materials
  • Track servicer and lender performance
  • Seek assistance from partners

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

what s in a plan1
What’s in a Plan
  • 5 Elements of a plan (DCL GEN-05-14)
    • Early stages of enrollment
    • Late stages of enrollment
    • After students leave school
    • Enhanced entrance and exit counseling
    • Tools and activities for schools

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

default prevention activity log
Default Prevention Activity Log
  • Track your default prevention activities

Source: Great Lakes Higher Education Guaranty Corporation

default prevention activity log1
Default Prevention Activity Log
  • Items to track include:
    • Creation and execution of a Default Prevention Plan
    • Financial literacy materials provided to students
    • Late stage delinquency assistance activities
    • Steps taken to monitor and manage your institution’s Cohort Default Rate

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

non traditional methods1
Non-Traditional Methods
  • Student success solutions
    • Financial literacy
  • Defaulter data analysis

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

financial literacy
Financial Literacy
  • Correlation between increased financial literacy and decreased defaults
  • DCL GEN 05-14 lists financial literacy as one of the nine key elements to include in a default prevention and management plan
    • 14% of students who left college without completing a degree cited financial reasons studies*
    • Of the borrowers who defaulted, 71% withdrew from school before completing their education

Team Energy

Advances Me

* National Center for Education Statistics

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

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financial literacy1
Financial Literacy
  • Five step process to financial literacy programming
    • Identifying objectives
    • Developing your program
    • Promoting your program
    • Implementing your program
    • Evaluating outcomes

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

defaulter data analysis
Defaulter Data Analysis
  • Focusing on student success
    • Defaulter data analysis
    • What steps do you take?
    • Who needs to be involved?
  • Good students make good borrowers

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

defaulter data analysis1
Defaulter Data Analysis
  • An analysis of your defaulters used to identify factors that cause default in your student population
  • Obtain a Loan Record Detail Report (LRDR)
  • Query your internal system to obtain demographic data
  • Seek assistance from your lenders, guarantor, servicer or FSA

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

school update
School Update
  • What steps are you taking?
    • Traditional methods
    • Non-traditional methods
  • What are your next steps / goals?

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

thank you
Thank You!

John PiersonTasha McDaniel

[email protected] [email protected]

Team Energy

Advances Me

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

TEAM ENERGY

ADVANCES ME

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