### 2005 National Default Aversion Conference Workgroup Notes

#### Compiled from 4 Workgroups

## [Early Awareness]{.underline}

-   There is a lack of full disclosure at admissions level -- cost, job
    outlook

-   First generation college families do not understand room and board
    or in-state out-of-state costs.

-   Need to work with high schools

-   Students need to understand that entrance and exit counseling are
    mandatory.

-   Should focus on loan programs, not all financial literacy. Time is a
    precious resource and needs to be used wisely.

-   Need definition of financial literacy

-   Which states require financial literacy -- model programs?

-   Use Consumer Credit Counseling Service (CCCS).

-   Peer counseling is effective

-   Schools with low CDR don't have incentives to care. CDR not
    meaningful.

-   Need to involve whole campus.

-   Need to spend more time on exit counseling. Realize that most
    defaults happen in first 12 months of repayment.

-   Students trust the school and faculty more than other participants.

-   50% of students not receiving exit counseling

-   GA website for budgeting techniques.

-   Educate lenders on the use of accessing NSLDS.

-   GA outreach programs are effective. Use CCCS on campuses.

-   Spanish speaking borrowers need attention

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-   Emory High School brings freshman on campus through Admissions
    Office. Covers financial aid and money management topics.

-   On-line entrance and exit counseling does not work

-   Early Awareness materials available from FSA -- messages targeted to
    various age groups, use by counselors and students, behavioral
    scientists helped develop (one finding is that 90% of parents
    over-estimate the cost of college)

-   Georgia likes to have high school counselors, or teachers, work in
    financial aid office, with pay, during the summer.

-   Ultimate early awareness program would adopt elementary school.
    Partner with guaranty agencies and colleges.

-   Reach out to community groups, churches, grandparents.

-   15% of low-income families never apply for financial aid.

-   Require all students to complete a FAFSA in high school.

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-   Package the message. On-line counseling is not good.

-   FSA -- High school and elementary counseling materials are good.

-   GA and college adopt elementary school

-   Mentoring and peer counseling are useful

-   Borrower behavior -- FSA has a contract deliverable to share

-   One guarantor created a grace period calculator that shows how much
    money can be saved by making payments on unsubsidized loans before
    repayment begins.

-   Several guarantors host high school counseling, most will cover
    financial literacy topics.

-   Teach loan limits so that students understand the maximums.

-   Many encourage colleges to hold financial literacy sessions that are
    tied to entrance and exit sessions.

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-   One institution ( DeVry) said some of their campuses have financial
    literacy type classes offered for credits. Remember that some
    professors already teach these concepts, so it may be easier to get
    approved. To work best the university President needs to kick start
    a university-wide initiative.

-   One guarantor writes up an e-mail blast sent to schools for use in
    school-to-student communications. The blast usually has links to
    sites students or borrowers would find helpful.

-   One guarantor recently started peer counseling using work-study
    students to mentor college students.

-   One agency works a portfolio early through e-mail contact to keep
    students up to date on balance information, and benefits to
    repayment. This is also seen as a way to contact those considering
    withdrawal since they know who can be contacted, and it also ensures
    students receive this balance information before they ever leave
    school.

-   Two guarantors mentioned an elementary school program that touches
    on "what do you want to be"? How do you get to be an "x"? One
    mentioned coloring books and age-appropriate activities. One
    mentioned a program that brings 5^th^ graders to a college campus
    for a day.

-   Several guarantors mentioned working with middle school students in
    the same way, but beefing up the education planning and budgeting
    materials (ex. How to balance checkbooks).

-   One agency issues grants and many proposals they see have a
    financial literacy component- and most of the grant requestors ask
    that the agency conduct those sessions on their behalf.

-   Several guarantors provide borrower letters that schools can use for
    mailings.

-   Provide counselors at high school level specifically trained and for
    the purpose of financial counseling.

-   Have college, lenders, GA's and Third Party Servicers "Adopt an
    School" to provide financial literacy -- elementary and/or High
    School

-   Have High Schools provide Peer counselors to Elementary schools for
    Financial Education/Literacy and colleges provide peer counselors to
    High schools.

-   Understanding of Private loans, Credit cards and other borrowing on
    overall impact of credit and repayment and overall expense to
    income.

-   Identify high-risk students (first generation college,
    low-income/minimal financial resources etc.), the earlier the
    better, for financial literacy, education and assistance guidance.

# ***Borrower Services***

-   When and what does a borrower need? Prior to school, in school,
    exit, repayment,

-   Grace period counseling works -- identifies need for skip-tracing
    early

-   Withdrawn student s need to be identified quickly -- GA / NSLDS

-   10% of mail is returned. Schools do not verify references.

-   "Jump Start" and "360 Degree" programs are good.

-   GA provides counseling 90 days prior to grad date

-   Give schools option of who is to perform grace period counseling --
    GA / Lender / School

-   Have default prevention session for lenders.

-   Identify database of financial aid resources for lenders and schools

-   More disclosure with borrower, effects of credit rating, send
    quarterly statements so loan amount is always reinforced.

-   Research on consolidation and default rates. Different message
    needed.

-   Mentor programs are good.

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-   ED sponsors Sesame Street, should now sponsor a mini-series on
    opening savings account, buying a car, paying for college, show on
    MTV, use college theater arts students to develop and perform skits
    (Red Corvette years ago). Create national prize, judged by NCHELP,
    with entries on the web so all can use.

-   One on one counseling works best, small groups of 20 next best.

-   ED should look at default volume vs. number of borrowers.

-   Need incentives provided by ED and NCHELP for timely reporting by
    schools to NSLDS -- benefits of on-line updates, especially with
    withdrawals.

-   Use Mapping Your Future on-line. Educate lenders on use.

-   School should always verify loan references -- very important

-   Schools and lenders need to work in partnership with loan counseling

-   Engage faculty

-   Schools don't understand FERPA and what can be shared with lenders,
    servicers, GAs.

-   College presidents need to be more visible with importance of
    default rates and student retention programs.

-   Convene national meeting of FAOs, [GAs]{.underline}, lenders,
    servicers, and enrollment managers to share strategies.

-   Community needs to lead the way.

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-   One-step shopping -- full disclosure / COE

-   Impact of private loans -- borrower and communications

-   Credit card counseling on campus

-   Grace period counseling

-   Identify and communicate with withdrawn students

-   Retention programs are important

-   "Frequent Flyers" -- rolling delinquencies -- package the message
    differently.

-   Payments thru GAs -- posting issues. Use of "Hot transfers" and "Pay
    Pal"

-   Skip-tracing challenges -- parents and references -- verify annually

-   Entrance counseling to include financial literacy

-   60-day notice before First Payment Due -- very important

-   Multiple DAARs -- different messages.

-   Reward payment behavior

-   Target high dollar defaults / low CDR schools

-   Student personnel offices work on peer counseling

-   Late Stage Delinquency Assistance (LSDA) -- very valuable and works

-   Signed letters from FAO are effective

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-   Entrance counseling is more effective in the second semester when
    students are more receptive ( ECMC research).

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-   Financial literacy training is important, and some have equated it
    to allowing students to understand the full impact of private loans.

-   Lenders marketing directly to students will usually buy credit
    report lists of student loan borrowers. They then send letters
    stating "You're eligible for...". Most students have a hard time
    refusing offers of money and then cannot manage the debt.

-   Some schools are making an entrance-counseling session mandatory
    each year of attendance. Many incorporate budgeting as a concept.

-   "Money Matters Too" and "Life Skills" are programs available to
    schools for delivery on campus. Both cover financial literacy
    topics, and come with speaker notes.

-   Losing touch with borrowers is very easy. Some suggestions to combat
    that are to follow up on return mail and bounced back e-mails early.
    Another was to send timely newsletters that provide useful
    information so that students will notify you when they move or
    change an e-mail address. One guarantor does this sending job search
    tips, budgeting pointers, etc.

-   Some schools allow credit card marketers on campus, but they require
    those companies to also conduct financial literacy presentations.

-   Know that when working with borrowers, many are not brand loyal,
    they are more concerned about the benefit they'll see.

-   Generation Y sees not-for-profits as a more trusted source since
    they feel they aren't being sold to. Although many don't believe
    they aren't being sold to since that's what they've grown up with!

-   Know the at-risk borrower factors in your portfolio. Many of them
    can be school types, geographic areas, skip borrowers, or repeat
    delinquency borrowers ("frequent fliers").

-   One VFA includes early withdrawal counseling. Their approach is to
    get a student back to school. When working with students they ask
    why they withdrew to help find the right program for that student.
    They also talk about the loan obligation and repayment options. If a
    student plans to re-enroll, the guarantor will follow up at that
    time to see if they did. If not, they call the student.

-   Grace and withdrawal counseling of some type is done by several
    guarantors. Postcards are sent advising the borrowers or
    responsibilities and rights. Again it was stated that guarantors
    need to get this information as soon as possible from the schools.
    If the schools report directly to guarantors, do they still need to
    report to Clearinghouse or NSLDS. Could Meteor provide more
    up-to-date information?

-   One guarantor uses "hot transfer" calls where they transfer borrower
    calls directly to the lender using a guarantor contact number. They
    then check on these accounts 15 days later to make sure the
    delinquency was resolved. This data is tracked as an employee
    performance measurement.

-   One guarantor calls references if there is no contact with a
    borrower after a certain number of attempts- even if the borrower
    isn't delinquent.

-   The best skip sources mentioned were parents, endorsers, and
    ex-spouses or family!

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-   A single point of contact to get important information should be
    provided. It could be a web site or a phone number.

-   Many borrowers would prefer a single lender- one for private and
    federal loans if possible.

-   Guarantors should be able to accept payments on behalf of lenders
    when they have a borrower on the phone willing to pay. PayPal is an
    option. They should also be able to set up direct payments as well
    (rather than simply just provide lender's form).

-   Skiptracing is very important to avoid losing borrowers. The growing
    difficulty we all face is that many borrowers now have cell phones
    and no landlines. While this number can remain with a person longer,
    it's more difficult to find if you don't have that cell number. And
    since many numbers are now portable, you may have a borrower living
    in CA with a NY area code- if you call them at 9AM NY time, you're
    calling at 6AM Pacific and violating FDCPA. This is important to
    remember!

-   Counseling should be tailored since a "one size fits all" approach
    doesn't work. This is time intensive and costs money, but it would
    prove to be more effective.

-   Work with lenders to make forbearance not as easy. At times lenders
    have a borrower on the phone and they'll rely on forbearance as soon
    as a borrower says he's struggling. By asking "When will you be able
    to make your next payment?" before offering a forbearance, you may
    get a borrower into repayment sooner- and leave that borrower with
    forbearance when they might need it in the future. Don't immediately
    offer a 12-month forbearance!

-   Work with struggling students- those not making satisfactory
    academic progress. Finding these borrowers may be difficult due to
    FERPA, but how can guarantors help schools work with these students?
    This is something we should all be doing.

-   Can we speak more openly with "influencers" (parents) to help get
    information to borrowers that aren't returning our calls? Get legal
    advice of course, but see if the parents are listed as references
    and then decide what you can or can't do.

-   Borrowers should be provided absolute cost of attending a school,
    including living expenses, fees, other "hidden" cost.

-   Highest percentage of defaults is from drop outs

-   Schools should have retention officers and retention programs geared
    to high-risk students including access to need based financial aid
    to reduce drop out rate.

-   High drop out rate should be utilized to determine future access to
    financial aid.

-   Behavioral training to encourage repayment, not the current focus of
    "not having to pay"

-   Lenders, schools and counselors should encourage making some payment
    vs. no payment at all.

-   Guarantors should be able to take payment, not just refer borrower
    to lender.

-   Eliminate "on-line" exit interviews, as they do not work.

-   Entrance counseling needs to be mandatory

-   Include debt management education

-   GA using school logo on postcards was not effective.

-   Utilize mentoring and peer counseling

-   Require in-person exit interviews or no transcripts or diploma.

-   Provide 60 day notice prior to end of grace period or first payment.

-   Provide ramifications of in-school consolidation -- loss of grace
    period.

-   Utilization of NDNH prior to default

-   Second highest indicatory of default is a skip.

-   Utilize NDNH date to locate borrowers.

-   Cannot use NDNH data for enforcement during pre-default therefore
    data would be only used to assist borrowers.

# ***Measuring Effectiveness***

-   CDR is Key Preference Indicator (KPI)

-   Postcards are a waste of time

-   Hard to measure auto-dialer success

-   "Exit Express" via Mapping Your Future can be used by schools to
    track promises and resolutions. Does not track delinquency rates.

-   "Most calls" cannot be confused with "Best calls". Auto-dialers
    provide speed, not quality.

-   Collection agencies measured "talk time" but emphasis needs to be on
    reducing repeat delinquencies.

-   Direct debit most successful

-   Need to spend time on income sensitive repayment programs to reduce
    repeat delinquencies.

-   "Hot Transfers" work. 90% resolutions within 15 days.

-   There is a propensity to default with first year dropouts.

-   Modify message with rehabs -- prevent default with this population.

-   Colleges need to improve retention programs.

-   Money goes to schools -- need to track lifetime default rates for
    schools.

-   Need common "cure rate definition" in order to measure and compare
    agencies.

-   Late Stage Delinquency Assistance (LSDA) is effective. Have system
    in place to recall claim.

-   Track rehab delinquency rate separately.

-   Stress deferment and forbearance options during claim processing and
    LSDA.

-   Institute a "Default Rescue" program.

-   Educate lenders / servicers about dollars saved in default
    prevention and aversion.

-   Define "default prevention" and "default aversion" and measure
    accordingly.

-   Create a "Where does the money go" chart and identify who benefits.

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-   Examine VFAs to determine what has been successful

-   Ombudsman offices seeing issues of consumer competence (education)
    than just default problems.

-   Have GAs and lenders attend and market default aversion / prevention
    programs and strategies.

-   GAs should connect borrowers with lenders ("Hot Transfers")

-   GAs educate schools. Visit default managers and share NSLDS reports,
    credit reports, how to skip-trace, Mapping Your Future.

-   Peer financial counseling works.

-   Pre-paid calling cards work.

-   Develop written self-assessment tool for schools and determine needs
    and ideas for improvement.

-   Enrollment manager is key. Student retention rates are measured all
    the time.

-   Solicit collection agencies to call borrowers on a weekly basis.

-   Research on what works on skip-tracing techniques.

-   GAs should share what works with mailings and phone calls.

-   Need common definition of "cure rate" in order to have all measure
    the same way and be able to compare.

-   GAs should concentrate on pre-delinquency activities

-   Change focus of default rates to cure rates.

-   Grace period counseling at day 46 with school involvement

-   Research needed on EP lenders / servicers with due diligence

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-   Collection agencies -- measurements for lenders

-   How to measure due diligence

-   Use of deferments and forbearance -- always effective

-   How to measure direct mail campaigns

-   Calculate a lifetime CDR

-   21 days to measure an action -- cause and effect (stale after that)

-   Are trigger rates useful?

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-   The existing cohort default rate is not a valuable measure. One
    guarantor takes it's own cohort information and sorts it by school
    type for comparison purposes- this makes it a bit more useful.

-   A school working with multiple guarantors can measure performance of
    each guarantor by using the Electronic Loan Detail Record that is
    provided with cohort rates.

-   The trigger rate is probably the easiest to compare guarantor
    activities, and it will show longer term trends. No known Direct
    Loan equivalent.

-   Missouri offers default prevention grants to schools, and schools
    are asked to report back on the number in deferment and forbearance,
    the retention rates, default rate, etc. This allows MO to track
    performance of the schools.

-   Measure the effectiveness of the people working delinquent accounts,
    and the numbers/rates will follow. If your phone reps are
    successful, delinquency should drop.

-   Measure the delinquency cure types. What percentage was cured
    through deferment, forbearance, payment, or default? One guarantor
    uses this as a quality measure of contractors.

-   A Common Cure Rate formula was proposed by the NCHELP Debt
    Management Committee, it's recommended that this be used as the
    industry standard. The formula used for that Common Cure Rate for
    FY2003 is listed below:

  ------------------------------------------------ -----------------------
  Please use Forms 2000 data for **Federal Fiscal  
  Year 2003** (October 1, 2002 \-- September 30,   
  2003)                                            

  **[Description]{.underline}**                    **[Data
                                                   Source]{.underline}**

                                                   

  ***COMMON CURE RATE CALCULATION***               

                                                   

  Reinsured Amount of Default Claims Paid          MR - 1A-O

  (Total monthly figure for 12 months of **FFY     Forms 2000
  03**.)                                           

                                                   

  Total Dollar Amt. of Default Aversion Requests   Agency

  (Include both new and resubmitted accounts       Tracking

  received by your agency during **FFY 02**.)      Reports

                                                   

  ***AGENCY RESUBMIT RATE***                       

                                                   

  Dollar Amt. Default Aversion Requests **Not**    Agency

  Billable for Default Aversion Fee                Tracking

  (Include resubmitted accounts received by your   Report

  agency during **FFY 02**.)                       

                                                   

  Total Dollar Amt. of Default Aversion Requests   Agency

  (Include both new and resubmitted accounts       Tracking

  received by your agency during **FFY 02**.)      Reports
  ------------------------------------------------ -----------------------

-   A lifetime default rate would be much more useful to track trends
    and to see how defaults truly affect portfolios.

-   Peer standards of some kind would be useful. All guarantors have
    different populations to work with, and that will make exact
    comparison difficult. Effectiveness would be relative to a moving
    target, but it would provide a way for like guarantors to see who is
    performing well.

-   Isolate the variables such as portfolio type (school mix),
    geographic areas, etc.

-   Consider changing the wording of default press releases: "95% in
    repayment" sounds much better than "% default rate".

-   Track the number of borrowers going into successful repayment. What
    is successful repayment? One option was to count the number of
    borrowers that make the first payment on-time. If we measure entire
    portfolios, be sure to consider deferment and forbearance accounts
    since that can skew numbers in actual repayment.

-   Define cure- is it zero days delinquent, less than 30, or less than
    60? If this is going to be used as a measure it should be
    consistent.

-   Consider a national methodology, but allow for local application. We
    all said consistency is important, but the uniformity is more
    important in how we measure not exactly what we measure.

-   There should be a consistent, easy way to track recurrence rates.
    This rate shows how successful your contact with a borrower was- if
    you keep them out of future delinquency, you've done a better job.
    Consider- how long would you watch to see if successful? 1 year, 5
    years?

-   Measure rolling delinquencies

-   Measure the percentage of borrowers that are never delinquent.

-   Measure the percentage of current borrowers. This would be a better
    financial model since it sends the message that guarantors receive
    fees for keeping accounts current. Now guarantors receive a one-time
    fee if an account hits 60 days delinquent.

-   Measure and publish the lender/servicer delinquency rates at 0-60
    days (prior to DAAR filing)

-   Cohort rates should measure dollars, not number of borrowers.

-   Consider allowing rehabilitated accounts to be taken out of cohorts
    based on the date of the first qualifying payment, not the rehab
    date. If a borrower is in a cohort and made the first qualifying
    payment within that cohort, allow it to be removed. The current
    structure makes it very difficult for a rehabilitation benefit.

-   If we make any changes to cohort rates or measurements, be sure to
    include schools in the discussions. Our changes could have an impact
    on schools---keep this in mind.

-   Focus on causes and effects.

-   Default rates should not be measurement criteria, rather in school
    retention, skip prevention/location and high-risk students

-   Efforts need to be made to improve retention rates and associated
    assistance to high-risk borrowers.

-   Ensure that all entities are sending the right message -- repayment
    -- not encourage non-payment.

-   Repayment education/behavioral training should not be after default
    through rehabilitation but during delinquency pre-default.

-   Lender/servicers should be measured on a national level for
    delinquencies and cure rates.

-   Measurements should include types of cures, payment cures vs. paper
    cures.

-   Should be part of exceptional performer designation.

-   Late stage delinquency cure rates should be tracked by
    lender/servicer to determine extent of effort and success rate prior
    to final late stage effort.

-   Track by guarantor, lender and school

-   Should include dollar amounts not just number of accounts.

-   Measurement should include borrowers who never go delinquent and
    those who are repeat delinquencies.

-   How is a rehabilitated loan counted in the lifetime default rate?

-   How is a loan consolidation after default counted in the lifetime
    default rate?

-   Accounts should be permitted to come out of the default rate
    calculation if "cured" through payment in full, compromise,
    consolidation or rehabilitation.

-   How are underlying loans of a consolidation treated if the
    consolidation loan re-defaults? Who gets the "penalty" for the
    default of the consolidation?

-   Tracking of grace counseling measurements should be included in
    schools and lender measurements