Servicing Update

1. Session 14 Servicing Update Lisa Oldre and Destre Holloway | Nov-Dec. 2016 U.S. Department of Education 2016 FSA Training Conference for Financial Aid Professionals

2. Agenda General Servicing Updates • Contract Updates • Servicing Portfolio Key Projects • Standardization of Processes – Consistency • Program Changes Looking Ahead Questions/Answers • Session Agenda

3. General Updates - Servicers The Department currently has 9 student loan servicers under contract. • Four Title IV Additional Servicers (TIVAS): • FedLoan Servicing (affiliate of the Pennsylvania Higher Education Assistance Authority) • Great Lakes Educational Loan Services • Navient • Nelnet • Five Not-For-Profit (NFP) Servicers: • CornerStone (Utah Higher Education Assistance Authority) • Granite State (New Hampshire Higher Education Loan Corporation) • HESC/EdFinancial • MOHELA (Missouri Higher Education Loan Authority) • OSLA (Oklahoma Student Loan Authority)

4. What is Being Overseen and Managed? • 9 Primary Loan Servicing Contracts • Four Title IV Additional Servicers & Five Not-for-Profit Servicers • Specialty Program Servicing Contracts • Total & Permanent Disability, Public Service Loan Forgiveness, Teacher Education Assistance for College and Higher Education (TEACH) Grant Program, & Perkins • 9,200+ Employees at 35 Facilities in 19 States • Four Servicing Platforms • 37.5 Million Borrowers/130 Million Loans/$1.0338 Trillion • Over the last year servicers… • Received over 38 Million in-bound Phone Calls • Answered 820 Million Borrower Inquiries

5. General Updates – Servicing Changes Changes Beginning July 1, 2016: • Allocation Metric – • Delinquency Risk Varies Significantly Based on Borrower - Characteristics Not Evenly Distributed Across Servicers • Developed New Approach to Better Reflect Noted Differences While Maintaining Positive Borrower Performance • Selected Methodology That Categorizes the Overall Portfolio According to Delinquency Risk • See 07/15/2016 Performance Metrics Electronic Announcement on IFAP

6. Strategies to Maximize Performance

7. Performance-Based Compensation • Monthly Payments Based on Loan Status and Borrower Account Volume • Highest Payment Earned for Borrowers in Repayment and Current • Rates Decrease on Sliding Scale as Borrowers Grow More Delinquent

8. Performance-Based Compensation Metrics • % of Borrowers in Current Status (30%) • % of Borrowers over 90 Days Delinquent (15%) • % of Borrowers in Default (15%) • Borrower Satisfaction Survey Results (35%) • Federal Employee Satisfaction Survey Results (5%)

9. Consistency • “Follow-Up” Processing • Incomplete Income-Driven Repayment (IDR) Applications • Outlined Outreach Time Frames • Defined Communications (Letters and Emails) • Discharges • Process Flows for Application Processing (All Statuses) • Outlined Time Frames • Defined Communications (All Statuses)

10. Monitoring and Oversight Activities

11. Call Monitoring • Daily Review of Stats • Response Time and Servicer Availability • Interactive Voice Response System & Web Checks • Average Speed to Answer • Hold Times • Call Abandon Rates • New Calibration Metrics and Feedback Process • Method of Resolution • Error Rates

12. Process Monitoring • Mission and Vision • Primary Monitoring Topics • Full Account Reviews/Core Items • Consistency and Accuracy • Change Requests • Proactive Servicing Evaluations • Collaboration

13. Oversight Monitoring The Numbers The Reports • Delinquency Statistics • Call Center Statistics • Income-Driven Repayment Statistics • Work in Process • Ombudsman/Escalated Issues/Control Mail • Default AversionStrategies • Financial Reporting • Top Inquiry Reasons forSchools/Borrowers

14. Servicing Snapshot Direct Loan Portfolio Summary (2016)

15. Servicing Snapshot Includes Direct Loans with outstanding principal and interest balances as of 10/1/2016 Data Source: National Student Loan Data System (NSLDS)

16. Servicing Snapshot Includes Direct Loans with outstanding principal and interest balances as of 10/1/2016 Data Source: National Student Loan Data System (NSLDS)

17. Agenda General Servicing Updates • Contract Updates • Servicing Portfolio Key Projects • Standardization of Processes – Consistency • Program Changes Looking Ahead Questions/Answers

18. Targeted Improvements

19. Communication - Targeted Improvements

20. Communication - Targeted Improvements • Main Objectives • Get The Word Out • Use Consistent and Plain Language • Appropriate Method • Timing is Everything

21. Communication - Outreach FSA has reached over 8 million borrowers in FY16 with information about income-driven repayment plans and potential loan forgiveness.

22. Communication - Outreach

23. Communication - Stages Communications In School • Entrance and Exit Counseling • FSA New Borrower Letter Introduces Servicer • Servicer Welcome Letter and Packet • Quarterly Interest Statements • Additional Communications Include Self-Service Features, Balance, and Entering Grace

24. Communication - Stages Loan Awareness In Grace • Understanding Borrowing • Benefits of ACH • Quarterly Interest Statements • Income-Driven Repayment and Public Service Loan Forgiveness Benefits

25. Communication - Stages Communication Methods Income-Driven Repayment a • Inbound/Outbound Calls • Servicer and FSA Websites • Text Messaging • Monthly Statements • Delinquency Letters and Emails • Mail Inserts • Responses to Written Communications • Social Media • Proactive Email Campaigns • Re-disclosure Statements and Regular Correspondence • FSA Campaigns Repayment Payment Vehicles • Online • Regular Telephone • Smart Phone • Mail • Auto-pay • 3rd Party Bill Pay

26. Communication - Stages Discharge Awareness • Identifying Eligible Borrowers • Proactive Email Campaigns • Specialty Call Lines • Additional Follow-Up Outreach • Identified Dispute Process • On-Line Assistance and Web Links Discharges

28. Targeted Improvements

29. Military Benefits • Increased Efforts to Promote Awareness of Servicemember Benefits • Servicemembers Civil Relief Act (SCRA) Interest Rate Cap • Military Service Deferment • Dedicated Phone Lines for Servicemembers • Prior Military Service Members at Servicers Available to Assist • Monthly Data Comparison to Department of Defense Database for Active Servicemember Match to Automatically Apply SCRA Benefits

30. Targeted Improvements

31. Process Changes • Billing Statements and Interest Notifications • Additional Time Frames to Send Interest Notifications • Aligned Messaging • Payment Processing – In Progress • Defined Receipt Date • Payment Allocation (Over and Under Payments) • Credit Reporting • Joint Effort With Treasury and Consumer Financial Protection Bureau

32. Process Changes • Social Security Administration (SSA)/Total and Permanent Disability Data Match • Joint Effort With SSA to Match All Student Loans (FFEL and DL) Borrowers to SSA MINE 5-7 Rating • 1stQuarter Resulted in 480,000 Matches • FSA Feedback System • Soft Launch in April • Queues for All Servicers and FSA Operations Units

33. Agenda General Servicing Updates • Contract Updates • Servicing Portfolio Key Project • Standardization of Processes – Consistency • Program Changes Looking Ahead Questions/Answers

34. Looking Ahead • IDR Pilot – Verbal Acceptance • Focus on 3 Cohorts • New to Income-Driven Repayment Program • Married Borrowers • Recertification Borrowers • More Military Benefit – Automation • Use of the Department of Defense Database for Military Deferments and Qualified 0% Interest Benefits • Borrower Outreach and Communications • Servicer Recompete

35. Agenda General Servicing Updates • Contract Updates • Servicing Portfolio Key Project • Standardization of Processes – Consistency • Program Changes Looking Ahead Questions/Answers

36. QUESTIONS? Lisa Oldre lisa.oldre@ed.gov 202-377-3249 Destre Holloway destre.holloway@ed.gov 816-260-8714