Managing Loan Default: Making a Difference in 60 Minutes

1. Managing Loan Default:Making a Difference in 60 Minutes

2. Facing the Facts

3. Fact 1: The Three-Year CDR is Here • Sanctions for FY 2011 3-year CDR over 30% • 1st year – create default prevention plan • 2nd year – revise plan • 3rd year – lose TIV

4. Fact 2: Rates are Trending Upward FY 2009 OfficialCohort Default Rate FY 2010 OfficialCohort Default Rate Source: Department of Education

5. Fact 2: Rates are Trending Upward Source: Department of Education

6. Fact 3: Loan Default is Receiving National Attention Student-Loan Default RatesContinue Steady Climb Student-Loan Defaults Risein U.S. as Borrowers Struggle Surging Student-Loan DebtIs Crushing the System Student-Loan Defaults Surge toHighest Level in Nearly Two Decades

7. Fact 4: More Default Prevention is Needed

8. Fact 5: You Have Work Overload Policies and Procedures Manual Professional Judgment FISAP Regulatory Reporting Professional Judgment Counsel Students Verification Packaging Return of Title IV Loan Processing Packaging Return of Title IV Regulatory Reporting Loan Processing FISAP Loan Processing Regulatory Reporting Counsel Students Policies and Procedures Manual Packaging Verification Counsel Students Verification Return of Title IV FISAP Return of Title IV Professional Judgment Policies and Procedures Manual Regulatory Reporting Policies and Procedures Manual Loan Processing Counsel Students Professional Judgment Packaging Verification

9. By allocating 60 minutes each month, you can help your borrowers decrease their chances of defaulting Make a Difference in 60 Minutes

10. We Will Discuss • Within 60 minutes you can: • Reach out to borrowers during their grace period • Promote income-driven repayment plans to mid-stage delinquent borrowers • Inform late-stage delinquent borrowers of their options to avoid default

11. Grace Period Outreach

12. What Happens During the Grace Period • Federal loan servicers • Establish relationship with borrower • Send correspondence about repayment plans • Promote online capabilities through the web • Update borrower contact information

13. Borrowers and Their Grace Period • Non-completers don’t realize in grace • Defaulted borrowers didn’t receive full grace due to inaccurate reporting • Borrowers develop financial habits not including student loan payments

14. Outreach Campaigns During Grace • Significant in helping prepare for repayment

15. Outreach Campaigns During Grace • Letters, emails, and postcards encourage, inform, and remind • Validate contact information remind inform encourage

16. Outreach Campaigns During Grace • Borrowers need to know: • Online account access • Create a budget • Review repayment plans • Choose during grace • Defaults to standard repayment • Change plan • Change due date

17. Outreach Campaigns During Grace • What borrowers need to know: • Postpone payment with deferment or forbearance • Longer repayment periods cost more in interest • Contact servicer

18. Outreach Campaigns During Grace • Most importantly: THEY HAVE OPTIONS • Most borrowers who default: • Standard repayment plan • Never obtain deferment or forbearance

19. Outreach Campaigns During Grace • Sending letters: • Stand out • Colored envelopes • School’s logo or mascot • Highlight in bold or color • Encourage to contact servicer

20. Outreach Campaigns During Grace • Sending emails: • Utilize school’s email address • Use creative subject line • Keep it precise • Avoid identifiable information

21. Outreach Campaigns During Grace • Sending postcards: • Reminder • Simple yet informative • Creativity • Ask for a call back • Don’t mention “loan” • Avoid identifiable information

22. Grace Period Outreach What types of information do you include in your grace period correspondence?

23. Connecting with Mid-Stage Delinquent Borrowers

24. Mid-Stage Delinquent Borrowers • More than 150, less than 270 • Early intervention not successful • Monthly payments not affordable • Not aware of options • Delinquency damaging credit

25. Options for Mid-Stage Delinquent Borrowers • Instructions to change to income-driven plan • IBR • Pay As You Earn • ICR • Go online: https://studentloans.gov/myDirectLoan/index.action • Sign in using FAFSA PIN • Forgot your PIN - http://www.pin.ed.gov/PINWebApp/pinindex.jsp

26. Helping Late-Stage Delinquent Borrowers Avoid Default

27. Late-Stage Delinquent Borrowers • Greater than 271 days • Never responded to servicer • Avoiding other creditors • More willing to communicate with school

28. Late-State Delinquency Initiative • Technical default occurs at day 270 • Can be saved until day 360 (Direct Loans) • Essential in helping avoid default

29. What They Need to Know • TIME’S RUNNING OUT • Consequences: • Federal tax refund withheld • Wages garnished • Collection costs assessed • Damaged credit history • Options to avoid default

30. Make Your Letters Stand Out • Sign by hand • Hand write envelopes • Use stamps • Get creative • Colors • Special messages HEY!…Open Me!

31. Responding to Your Borrowers • When borrowers call: • Stress options • Encourage to call their servicer • Conduct a three-way call with servicer

32. Conclusion and Resources

33. Don’t Let Time be a Stumbling Block • Allocating 60 minutes a month can: • Help prepare for repayment • Share income-driven repayment plan information • Save late-stage borrowers from default

34. Resources • Cohort Default Rate Guide • http://ifap.ed.gov/ DefaultManagement/ CDRGuideMaster.html

35. Resources • NLSDS Reports

36. Thanks for Attending!