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Reducing Delinquency and Default Prevention. Mark C. Walsh Default Prevention Team U.S. Department of Education Federal Student Aid. Topics. Incorrect Data Challenges ED’s Default Prevention Plan Characteristics of Defaulted Borrowers Three Quick Prevention Tips

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reducing delinquency and default prevention
Reducing Delinquency and Default Prevention

Mark C. Walsh

Default Prevention Team

U.S. Department of Education

Federal Student Aid

topics
Topics
  • Incorrect Data Challenges
  • ED’s Default Prevention Plan
  • Characteristics of Defaulted Borrowers
  • Three Quick Prevention Tips
  • Late Stage Delinquency Assistance
defaults in the stafford loan program
Defaults in the Stafford Loan Program
  • $400 billion in outstanding federal student loans
  • Nearly 30 million borrowers
  • 50% + in FFEL and DL consolidation
  • Average outstanding consolidation balance is $18,240
beyond the cdr dollars in default
Beyond the CDR – Dollars in Default
  • Demands our attention
  • Equally important as the CDR
  • Dollars in default continue to grow even

as the national cohort default rate has decreased over a period of years

beyond the cdr dollars in default1
Beyond the CDR – Dollars in Default

What is your school’s contribution?

You can estimate the approximate dollars in default at your school.

$1,000,000 (origination volume)

x 5% (estimated school CDR) ___________

$50,000 (approx dollars in default)

definition of cdr
Definition of CDR
  • For schools having 30 or more borrowers entering repayment in a fiscal year, the CDR is the percentage of borrowers entering repayment on certain FFEL and/or DL Program loans during that fiscal year and default within the CDR period.
  • For schools with 29 or fewer borrowers entering repayment in a fiscal year, the CDR data includes borrowers entering repayment over a three-year period.
cdr included loans
CDR – Included Loans
  • Federal Family Education Loan Program
    • Subsidized Stafford Loan
    • Unsubsidized Stafford Loan
    • Supplemental Loans for Students Loan
  • William D. Ford Federal Direct Loan Program
    • Subsidized Stafford Loan
    • Unsubsidized Stafford Loan
slide8

FY 2004

10/1/03 – 9/30/05

10/1/03 – 9/30/04

(N)

(D)

CDR Guide – Page 2.1-6

Cohort Default Rate Periods

cdr review

N X 100% = CDR

D

CDR Review

FFEL & DL

Loan data for CDR calculation stored in NSLDS

FormulaFor FY 2004

N Default during 2 year period 10/1/2003 – 9/30/2005

D Enter repayment during 1 year period 10/1/2003 – 9/30/2004

Guide—page 2.1-6

cdr denominator in the formula
CDR – Denominator in the Formula
  • Determine Date Entered Repayment (DER)
    • Date of graduation, withdrawal, or less than half-time status
    • plus 181 days (6 months + 1 day) = DER
  • Using the DER, determine the correct cohort year in which the student will be counted
cdr numerator in the formula
CDR – Numerator in the Formula
  • Loan must be included in denominator
  • Determine default date (361 day of delinquency or Claim Paid Date [CPD])
  • Determine if default date falls within cohort period
quick cdr review
Quick CDR Review

Calculated 2 times/year

Draft CDR

February

(FY 04 = 1/7/06, 2/13/06)

Calculated/released

Official CDR

September

(FY 04 = 7/29/06, 9/11/06)

Calculated/released

  • Not public
  • No sanctions
  • No benefits
  • Public
  • Sanctions
  • Benefits
cdr applying the formula
CDR – Applying the Formula
  • Non-Average Rate
    • 30 or more borrowers in repayment
  • Average Rate
    • less than 30 borrowers in repayment
    • 3 years of data
example using the non average rate formula
Example: Using the Non-Average Rate Formula

Calculation: For a school with30 or more borrowersentering repayment in a fiscal year

5

(N)

X

100

=

2.2%

225

(D)

example using the average rate formula
Example: Using the Average Rate Formula

Calculation: For a school withless than 30 borrowersentering repayment in a fiscal year

5

3 + 1 + 1

(N)

=

X

100

=

10.6%

(D)

20 + 17 + 10

47

FY04 FY03 FY02

The sum of the three most recent cohort periods

sanctions associated with high cdr
Sanctions Associated with High CDR
  • 3 most recent official CDRs 25.0% or greater (e.g. FY 2004, 2003, 2002)
    • Loss of eligibility to participate in FFEL, Direct Loan, and Pell Grant Programs
  • Current year official CDR is greater than 40.0%
    • Loss of eligibility to participate in FFEL and Direct Loan programs
slide17

Incorrect Data Challenge

An incorrect data challenge is the process by which a school challenges any errors contained in its draft cohort default rate data.

slide18

Incorrect Data Challenge

  • Eligibility
    • All schools are eligible to challenge
  • Time frames
    • The challenge must be postmarked within 45 calendar days of receiving the most recent draft CDR. (For FY 04, challenge timeframe ends on 4/7/06.)
slide19

Incorrect Data Challenge

  • Borrower incorrectly reported
  • Borrower incorrectly included
  • Borrower incorrectly excluded
slide20

Complete Incorrect Data Challenge

  • Send to each data manager
    • Letter
    • Spreadsheet
    • Page(s) of LRDR
    • Supporting documentation
slide22

1. Borrower’s SSN

2. Borrower’s Name

3. Number and type of loans

4. Earlier of LTH or LDA

5. Date entered repayment

6. CPD, DD or N/A

7. FY(s) appl.

8. Effect on CDR calc.

9. Comments

222-22-2222

David Smith

1 SF and 1 SU

11/12/2000

5/12/2001

4/10/2003

FY 2002

FY 2001

-B

+D

Borrower was incorrectly included and should be removed from the B of the FY 2002 calculation and added to the D of the FY 2001 calculation.

Sample Spreadsheet

FY 2004 Incorrect Data Challenge

Electrical Training Institute OPE ID# 11111 Guarantor/servicer code: 111 Number of borrowers: 1 Number of loans: 2

loan record detail report lrdr
Loan Record Detail Report (LRDR)

1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004

NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 1

COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)

0 Attention: ALEXANDER PEACHUM Organization ID Number: 99999900

Name: GRAPHIC TECHNOLOGY

Address: 9765 ARTS LANE

City: CORAL CITY State: IOWA Sort Selection: SSN

Country: Postal Code: 12345-6543 Program Type: FFEL/DL Years: 1

---------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic

SSN Last name First/M.I. D.O.B School Begin Date End Date Level

----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------

0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage

Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2

----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----

0001-01-0001 CHARM JIM K 06/07/1949 99999900 01/18/2000 05/11/2000 1

8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 2,000 666 04/24/2000 G 12/13/2001 D FD

0001-01-0001 CHARM JIM K 06/07/1949 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 783 666 10/12/2000 G 12/13/2001 E E

0001-01-0002 NOON SUN M 06/07/1949 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 2,834 666 10/12/2000 G 12/13/2001 B FB

0001-01-0002 NOON SUN M 06/07/1949 99999900 08/20/2001 12/13/2001 2

8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 1,471 666 08/24/2001 G 12/13/2001 E E

0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/23/1999 05/11/2000 1

8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 2,625 666 02/08/2000 G 12/13/2001 D FD

0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 3,500 666 01/30/2001 G 12/13/2001 E E

0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1

8888888888 9999999999 SF DA 00/00/0000 02/17/2002 $ 1,313 666 02/05/2001 W 12/12/2002 D FD

0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1

8888888888 9999999999 SU DA 00/00/0000 02/17/2002 $ 1,021 666 02/05/2001 W 12/12/2002 E E

-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted

Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator,

IC = ICR (Negative Amortization Only), N = Not Used, E = Eligible but not counted

INFORMATION PROTECTED BY THE PRIVACY ACT OF 1974 AS AMENDED

School Information

OPEID Number

Line 1

Line 2

Line 1

Line 2

Abbreviations

loan record detail report lrdr1
Loan Record Detail Report (LRDR)

1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004

NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 1

COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)

0 Attention: ALEXANDER PEACHUM Organization ID Number: 99999900

Name: GRAPHIC TECHNOLOGY

Address: 9765 ARTS LANE

City: CORAL CITY State: IOWA Sort Selection: SSN

Country: Postal Code: 12345-6543 Program Type: FFEL/DL Years: 1

---------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic

SSN Last name First/M.I. D.O.B School Begin Date End Date Level

----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------

0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage

Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2

----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----

0001-01-0001 CHARM JIM K 06/07/1949 99999900 01/18/2000 05/11/2000 1

8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 2,000 666 04/24/2000 G 12/13/2001 D FD

0001-01-0001 CHARM JIM K 06/07/1949 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 783 666 10/12/2000 G 12/13/2001 B FB

0001-01-0002 NOON SUN M 06/07/1949 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 2,834 666 10/12/2000 G 12/13/2001 E E

0001-01-0002 NOON SUN M 06/07/1949 99999900 08/20/2001 12/13/2001 2

8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 1,471 666 08/24/2001 G 12/13/2001 E E

0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/23/1999 05/11/2000 1

8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 2,625 666 02/08/2000 G 12/13/2001 D FD

0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/21/2000 05/10/2001 2

8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 3,500 666 01/30/2001 G 12/13/2001 E E

0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1

8888888888 9999999999 SF DA 00/00/0000 02/17/2002 $ 1,313 666 02/05/2001 W 12/12/2002 D FD

0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1

8888888888 9999999999 SU DA 00/00/0000 02/17/2002 $ 1,021 666 02/05/2001 W 12/12/2002 E E

-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted

Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator,

IC = ICR (Negative Amortization Only), N = Not Used, E = Eligible but not counted

INFORMATION PROTECTED BY THE PRIVACY ACT OF 1974 AS AMENDED

C

D

E

H

A

B

F

G

CDR Guide – Chapter 2.3

loan record detail report lrdr2
Loan Record Detail Report (LRDR)

U

V

N

S

T

O

P

I

J

1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004

NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 35

OPEID: 99999900 COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)

----------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic

SSN Last name First/M.I. D.O.B School Begin Date End Date Level

----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------

0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage

Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2

----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----

0003-00-0005 YOUTH JAZZ D 11/28/1975 9999900 08/21/1995 05/10/1996 2

0101 0101 D2 DA 00/00/0000 12/17/2001 $ 2,172 0101 12/21/1995 G 05/31/1996 E E

0003-00-0006 WISHING STAR B 11/17/1980 99999900 08/23/1999 05/11/2000 1

8888888888 9999999999 SF DF DF 08/31/2003 02/21/2002 $ 1,330 666 02/02/2000 W 05/10/2001 B FB

0003-00-0006 WISHING STAR B 11/17/1980 99999900 08/21/2000 05/10/2001 1

8888888888 9999999999 SF RP 00/00/0000 02/21/2002 $ 1,514 666 09/21/2000 W 05/10/2001 E E

FFEL DIRECT DUAL

------------- ------------- -------------

TOTAL DOLLARS IN DEFAULT : 20,360 14,895 35,255 (Based on Outstanding Principle Balance)

TOTAL DOLLARS IN REPAYMENT : 345,943 52,014 397,957 (Based on Outstanding Principle Balance)

TOTAL INSURANCE CLAIM PAYMENTS: 0

************* = Not Available

-Actual Numerator Count : 20 Report Count : 20(B Usage 1 Codes only)

Actual Denominator Count: 147 Actual Default Rate: 13.6 Report Count : 147(D & B Usage 1 Codes)

INDIVIDUAL PROGRAM TALLY: FFEL: 15/135 DIRECT: 5/19

Appealed Rate flag: N (D=Direct, I=Indirect, N=No Appeal, U=Unknown) IC: 0 (Negative Amortization Only)

0 End of Loan Record Detail Report Report Generation Date: 09/30/04

-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted

Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator,

N = Not Used, E = Eligible but not counted

M

K

L

Q

R

CDR Guide – Chapter 2.3

slide26

Certified by School

Status

Status First Started

Term Begin

Term End

Anticipated Graduation Date

School Code

School Name

01/15/2001

W

11/12/2000

09/04/2000

12/19/2000

111111-00

Electrical Training Institute

Supporting Documentation

David Smith SSN: 222-22-2222

slide27

Incorrect Data Challenge

Review and analyze the data shown on the LRDR against the school’s records

Identify inaccurate data and provide supporting documentation and relevant LRDR

Receive draft LRDR

Prepare a spreadsheet and cover letter for each data manager where inaccuracies occur

  • Send the incorrect data challenge(s)to each data manager where inaccuracies occur
  • Send within 45 calendar days of receiving the draft CDR data

Data manager responds within 30 calendar days

defaulter characteristics
Defaulter Characteristics
  • 84% did not receive the full 6 month grace period due to late enrollment notification
  • 71% withdrew without completing studies
  • 56% had bad telephone numbers
  • 83% were not successfully contacted by telephone during the 360 day collection effort

Represents Direct Loan Portfolio Only

defaulter characteristics1
Defaulter Characteristics

84% did not receive the full 6 month grace period

This statistic is directly related to untimely and/or inaccurate enrollment reporting

withdrawals
Withdrawals

71%withdrew without

completing their studies

  • These students are at extremely high risk for default
  • Early identification is a key
  • Retention effort
defaulter characteristics2
Defaulter Characteristics
  • 56% had bad telephone numbers
  • 83%were not successfully contacted by telephone during the 360 day collection effort
slide32

Default Prevention and Management Plan

  • The new sample plan includes activities that:
  • Promote student, school, and loan program success
  • Are easy to implement and do not require much in the way of resources
  • DCL GEN-05-14
default prevention and management plan
Default Prevention and Management Plan

Section I. Overview

  • Increase retention
  • Reduce borrower defaults
  • Promote school success
default prevention and management plan1
Default Prevention and Management Plan

Section II. Early Stages of Enrollment

  • Entrance Counseling
  • Financial Literacy for Borrowers
  • Early Identification of At-Risk Borrowers
  • Communication Across Campus
  • Default Prevention/Retention Staff
default prevention and management plan2
Default Prevention and Management Plan

Section III.

Late Stages of Enrollment

  • Exit counseling
  • Withdrawals
  • Timely and accurate enrollment reporting
default prevention and management plan3
Default Prevention and Management Plan

Section IV. After students leave school

  • Early Stage Delinquency Assistance (ESDA)
  • Late Stage Delinquency Assistance (LSDA)
  • Maintain Contact with Former Students
  • Analyze Defaulted Loan Data to Identify Defaulter Characteristics
default prevention and management plan4
Default Prevention and Management Plan

Section V.

Enhanced Entrance/Exit Counseling

  • Requests for borrower information
  • Information about repaying the loan
  • Reminders about personal financial management and Title IV loans
default prevention and management plan5
Default Prevention and Management Plan

Section VI.

Tools and activities for schools

  • Assessments for default prevention and management
  • General connections/publications Loan counseling
  • Enrollment reporting and data accuracy
  • Default prevention
three quick prevention tools
Three Quick Prevention Tools
  • Loan Record Detail Report
  • NSLDS Reports
  • Late Stage Delinquency Assistance
nslds reports
NSLDS Reports
  • Date Entered Repayment Report
  • School Repayment Info Loan Detail
  • School Cohort Default Rate History
  • Enrollment Reporting Summary
late stage delinquency assistance lsda
Late Stage Delinquency Assistance (LSDA)
  • Identify borrowers who did not respond to Lender, GA or DL Servicer loan counseling
  • Contact and support student to take constructive action: they will listen to you.
borrower delinquency pattern
Borrower Delinquency Pattern

35%

Stafford Borrower Delinquency Pattern

30%

12 month average

25%

Percentage of Total

Delinquency

20%

15%

10%

5%

0%

31-60

61-90

91-120

121-150

151-180

181-210

211-240

241-270

271-300

301-330

331-360

Days Past Due

why does lsda work
Why does LSDA Work?
  • Schools feel it is the right thing to do
  • It is achievable
  • Students typically respond well to schools
  • It doesn't take a lot of resources
  • The results are dramatic!
slide44

Contact Information

Default Prevention and Management

Main: 202-377-4258

Hotline: 202-377-4259

Email:

fsa.schools.default.management@ed.gov

Web:

ifap.ed.gov/DefaultManagement/DefaultManagement.html

slide45

Federal Student Aid’s Default Prevention Team

Mark Walsh Eileen Marcy

816-268-0412 215-656-3249

mark.walsh@ed.goveileen.marcy@ed.gov

Craig Rorie John Pierson

215-656-5916 404-562-6269

craig.rorie@ed.govjohn.pierson@ed.gov

Let us know how

we can help you!

slide46

Questions?

Thank you!