Putting the Puzzle Together

1. Students College Putting the Puzzle Together Late Stage Delinquency Assistance for FFELP, W. D. Ford Direct and Perkins Loans Ruth T. Vincent, Director of GHEAC John Pierson, Client Account Manager, School Relations SFA Kenneth Banks, Client Account Manager, School Relations SFA 2004 GSFC Annual Conference March 3 & 4, 2004

2. Parents Overview • Georgia FY 2001 Cohort Default Rates • Defaulter Characteristics • Georgia Economic Issues Impacting Default • Late State Delinquency Assistance • How LSDA Works • Benefits • What’s Next

3. Colleges FY 2001 Cohort Default Rates By School Type

4. Students Cohort Default RatesNational, Georgia and GHEAC RatesFederal Fiscal Years 1992-2001

5. Financial Aid Georgia FY 2001 Cohort Default Rates • Georgia schools with cohort default rates higher than 10% typically serve low income students and are concentrated in middle and south Georgia where economic conditions limit opportunities.

6. Parents Typical Defaulter Characteristics • 71% have withdrawn from school and did not complete studies. • 84% have a seemingly short grace period due to dropping out and late notification of drop out to the lender. • 45% have bad telephone numbers at the time of default. • 58% have not been successfully contacted by telephone during the delinquency period .

7. Colleges Georgia Economic Issues Impacting Defaults • During the recent economic downturn, Georgia lost more jobs than any state in the nation. • Georgia’s credit score released by Experian in September 2003 is 43rd of the 50 states and the District of Columbia. • Georgia consistently ranks 2nd to 5th in bankruptcy filings. • 3000 homes in metro Atlanta are in foreclosure each month. • Metro Atlanta ranks among the highest in balances carried on credit cards.

8. Students Late Stage Delinquency Assistance • What is Late Stage Delinquency Assistance (LSDA)? üA strategy for targeting borrowers who are most likely to default…241- 360 days delinquent. üA strategy for communicating with borrowers. üA strategy for reducing Cohort Default Rates. • Experience from the LSDA pilots

9. Financial Aid Borrower Delinquency Pattern

10. Parents Schools Can Help • Assist the severely delinquent borrowers in establishing communications with the lender/servicer and/or guarantor. • This is a small subset of borrowers that have not responded to attempts to communicate and help them resolve their delinquency. • These borrowers will frequently respond to school outreach. • User Guides available for DL and FFEL schools.

11. Colleges How LSDA Works • Using information provided by the guarantor or lender/servicer, focus on borrowers at the highest level of delinquency for that cohort year. • School uses resources available to it and makes contact with the borrower, who at this stage is in denial and may welcome a helpful call from the school. • School acts as a facilitator to get the borrower, lender/servicer and/or guarantor to work together to resolve the delinquency.

12. Financial Aid Sample Late Stage Delinquency Assistance (LSDA) Report The Late Stage Delinquency Assistance Report provides the most recent report of borrowers from your institution that are between 241 and 360 days delinquent and that can affect your cohort default rate.

13. SCHOOL Total Defaults Percent Default Rescued Percent Rescued Technical Institute 2 0 0% 2 100% Institute of Technology 25 9 36% 16 64% College 10 4 40% 6 60% University 41 20 49% 21 51% Memorial College 21 11 52% 10 48% College 23 13 57% 10 43% State University 32 19 59% 13 41% State University 50 30 60% 20 40% College 36 23 64% 13 36% Students College 23 15 65% 8 35% State University 66 44 67% 22 33% College of Business 15 10 67% 5 33% University 23 16 70% 7 30% University 11 8 73% 3 27% University 9 7 78% 2 22% TOTAL 387 229 59% 158 41% Sample Results for Late Stage Delinquency Assistance (LSDA) Schools 2nd Quarter 2002 CDR

14. Parents Durability of Cures • 14 months after the delinquency was cured, 82.49% of the borrowers did not default. • 24 months after the delinquency was cured, 76.70% of the borrowers did not default.

15. Colleges Perkins LSDA • Perkins “Late Stage Borrowers” • 180-240 days delinquent • Current default cohort • Who is servicing the loan? • Institution • Outside contractor • Why is this important?

16. Students Perkins LSDA Stafford LSDA principles apply: • Do something different • Light touch • Monthly attention works best • Limited investment: cost, time and staff

17. Financial Aid Perkins LSDA When doing LSDA for both Perkins and Stafford: • QC your data before you start: • Review delinquency lists for overlap. • Update contact information. • Borrower Contact process: How will you do it? • Separate LSDA process for each program? • Combined LSDA process? • Know the rules: • Resolution for Stafford and Perkins may be different.

18. Parents Benefits • Provides greatest possible return for the smallest investment of staff time and money. • Reinforces school’s role as a helpful party. • Rescues over 30% of the potential defaulters. • Reduces the schools Cohort Default Rate. • Improves the integrity of the program.

19. Colleges Contact information Ken Banks 404-562-6261 Kenneth.Banks@ed.gov John Pierson 404-562-6269 John.Pierson@ed.gov Carole Jones 770-724-9130 Carole@gsfc.org

20. Students What’s Next? • GHEAC Pilot • Adapting the technique to what you are currently doing

21. Financial Aid LSDA Q & A’s

22. Putting the Puzzle Together! Colleges Parents Students Financial Aid