# Presentation: 512412

## Reducing Delinquency and DefaultHow Schools Can Help

- Reducing Delinquency and DefaultHow Schools Can Help

## Agenda

**Questions**

**Focus on LSDA**

**How Schools Can Help**

**Some Interesting Statistics**

## SomeInteresting StatisticsAnd What They Mean

## Official Cohort Default Rates

## Makeup of Cohort Rate

- The Direct Loan Servicer
- Pre-Default Initiatives
- Pre-Repayment Counseling: contact borrowers via telephone or email during their grace period or just as they enter repayment, advise of repayment responsibilities/ payment plan options.
- Identified ‘at risk borrowers’ based on loan and borrower specific attributes
- Increased the number of ‘special call campaigns’ based on delinquency level or attribute risk, and increased the number of telephone call attempts to as many as 6 per month to make contact
- Begin at 15 days delinquent
- Increase attempts re-180 days delinquent

-             Keeping CDRs down:      Lenders/Servicers are working hard

##        Keeping CDRs down:    Lenders/Servicers are working hard

- The Direct Loan Servicer
- Pre-Default Initiatives
- Priority handling of deferments, forbearances and correspondence received on delinquent accounts
- Expanded Direct Loan web site capability, including Online Advisor, providing borrowers with additional information and capabilities to manage their account
- Monthly calling efforts to each borrower throughout the delinquency period, up to the 360th day of delinquency
- Generating e-mails to targeted populations of borrowers

-        Keeping CDRs down:    Lenders/Servicers are working hard

** **

## What Does All This Tell Us?Relying on a Due Diligence- Centered Strategy...

- Innovation, hard work: Lenders, GAs and the DL Servicer have succeeded in reducing delinquency and default
- We’ve leveled off: 5%-6% for 4 years.
- All schools contribute, via both rate and volume, to loan default.

##             What Does This Tell Us?  The work of Lenders and Servicers is not enough.

- All schools can play crucial role in reducing both rate and volume of default below current levels.
- Data/experience suggest that schools can make a big impact:
- Helping students
- Reducing rate/frequency of loan default
- Increasing the integrity of the loan programs
- School-based strategies will work.

##         Default Prevention Plan          School Based Strategies

- Success is achieved when solidplans are developed and executed
- Plan pulls together people and resources toward a common goal
- ED Default Management sample plan
- Dear Colleague Letter GEN-01-08 Revise the plan as needed

##       Default Prevention Team	   School Based Strategies

- Team members should include
-  senior school official
-  representative from all offices
-  student representative
- Meet regularly
- Evaluate progress
- Celebrate and promote your successes

##      Set Default Reduction Goals           School based strategies

- Coming Soon, The New and Improved:
-           Unique School Report
- How does your CDR compare with:
- Schools of the same size and type?
- Schools in your state?
- Your previous CDR?
- Use the targets to set goals

##                So Who’s Defaulting?                Aiming at the right target

- 	Students who did not complete the 	academic program for which they 	enrolled.
- 	Students who are unresponsive to 	repayment counseling by lenders, 	GAs or the Direct Loan Servicer.

##                So Who’s Defaulting?                 Aiming at the right target

-             Three Intervention Opportunities
- Students who fail to complete:
- support student success.
- Students who leave early:
- report, counsel.
- Students who fail to respond:
- contact, counsel, help connect delinquent ‘non-responders’ with lender, GA or the DL Servicer to resolve delinquency.

##          Failure to Complete:	          Identify the problem.

- Identify defaulters
- Check your LRDR
- Analysis: understand how to help.
- Who are your defaulters?
- Did they leave early?
- Where there warning signs?
- Common characteristics?

##          Failure to Complete:                  Identify the solution

- The solution: must be founded on your data.
- Allies: Faculty, administrators, 				student success specialists
- Goal: Your intervention will help students to be more successful, especially those at risk of dropping out.
- Alignment with institution’s core mission.
- Increased student success = reduced default
**Admit, educate, graduate, employ**
**“****Access”...to graduation, not just admission**

##        For those who do leave early...

- Timely, accurate enrollment change information to NSLDS.
- Notify lender, GA, DL Servicer: Create maximum opportunity for lender, GA, DL Servicer to work with borrower to avoid default.
- Provide lender/GA/DL Servicer with useful contact information.

##     For those who did leave early... 

- Early departure: how quickly do you find out?
- Can you easily, successfully contact most students who leave early?
- Did you collect sufficient contact information while the student was enrolled?
- Contact dropouts immediately
- Debrief ‘student success’ issues
- Grace/pre-repayment counseling

## 	        Non-Responders

- Late Stage Delinquency Assistance (LSDA)
- Collaborate with GA and/or Direct Loan Servicer:
- 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.

## FSA Resource Contacts

- FSA Default Management Division
- Telephone: 202-377-4259
- Email: fsa.schools.default.management@ed.gov
- The Cohort Default Rate Guide
_**http://www.ifap.ed.gov/drmaterials/finalcdrg.html**_
- FSA Assessments
_**http:ifap.ed.gov/qamodule/DefaultManagement/DefaultManagement.html**_

##          Resources

**National Default Prevention Listserv**
- Hosted by Rutgers University
- Forum for all participants involved in financial aid to exchange ideas
- Regular postings by FSA

##            Resources

**    ****National Default Prevention Listserv**
- To subscribe, send a message to:
**LISTSERV@EMAIL.RUTGERS.EDU**
- with the following command in the body:
**SUBSCRIBE**
**DEFAULT_PREVENTION@EMAIL.RUTGERS.EDU**
**Your Name**

##     Resources:          Borrower Education 

- Lenders and Guarantors
- Jump$tart Coalition For Personal Financial Literacy     _http://www.jumpstart.org/_
- Mapping Your Future       _http://www.mapping-your-future.org_
- Local Credit Counseling Resources

##       Resources:	   NSLDS For Students

##        Resources:             NSLDS For Students

- Loan information for students and parents available 24/7:
- Date of loan
- Amount borrowed
- Loan balance
- Interest rate and amount accumulated
- Loan status codes (in repayment, paid in full, or in default)

##                Default Prevention 

- Who should get involved?
- All schools
- What can I do?
- Help students, school, taxpayer
- Promote integrity of loan program, institutions
- The last 5%
- Only Schools Can Do This Work

## LATE STAGE DELINQUENCY ASSISTANCE

- Focus on LSDA

- How does it work?
- Why does it work?
- Is it for my school?

## Borrower Delinquency Pattern

## Defaulter Characteristics

*	**12 month average of Stafford borrowers - all cohort years*

- 84% do not receive the advantage of the full 6 month grace period as a result of late enrollment notification
- 71% have withdrawn from school and did not complete studies
- 43% have had bad telephone numbers at the time of default
- 58% have not successfully been contacted by telephone during the 360 day collection effort during delinquency

## LSDA      Minimal Workload

##           LSDA Results are Dramatic!

## Tools: LSDA User’s Guide

- Tools: LSDA User’s Guide
- For FFEL Schools** **
- Describes how to implement LSDA process
**Introduction**
**Late Stage Delinquency Assistance Initiative**
**Ideas and Tips**
*.*

## Tools: LSDA User’s Guide**  

- Tools: LSDA User’s Guide**** **
- Describes how to implement LSDA process
**Section I - Introduction**
**Section II - Late Stage Delinquency Assistance Initiative**
**Section III - WEB Tools Guide**
**Section IV - Ideas and Tips**
- 	****Available for Direct Loan and FFELP schools. **
**	****   ****Contact presenter via email.**

##                      LSDA Tools

- Direct Loan Schools
-     Web Site: Flexibility, identify unique borrower populations
- Direct Loan Servicing Center Assistance
- 	LSDA User Guide and tips
- 	3-way calls with delinquent borrowers
- 	Numbers and Hours
-  		School Services: 1-888-877-7658
- 	 	M-F 8:00 a.m. - 8:30 p.m. EST.
-  		Loan Counseling : 1-800-848-0981
- 		Available for “off hours” M-F 8:30 p.m. - Midnight 		p.m.  & Sat. 8:00 a.m. -  5:30 p.m. EST.
- FFEL Schools: Contact your Guarantor for specifics
- 	on implementing LSDA.
-      Read the LSDA Guide for FFELP schools first!

##              Why is LSDA Working ?            Late Stage Delinquency Assistance

- Schools feel it is the right thing to do.
-  Schools feel that it is very doable.
-  Students respond well to schools.
-  It doesn't take a lot of resources.
-  The results are dramatic.

## Tips for Success

- Use a light touch – remember you are there to help, not to collect.
- Call at different times of the day – more people are home in the evening and you can call from home using a calling card.
- Mailing handwritten notes has been successful.
- Use contact information from the Web,
- student Email addresses, Perkins Loan info,
- Registrar’s Office, Alumni Office, etc.
- Send out information on repayment options,
- 	deferments and forbearance.
- Connect the student with the Service Center
- 	in a three-way call.
- Be creative! You can make a difference.

## Testimonials

***“******I just wanted to drop you a note of thanks and appreciation for your help with my direct student loan.  It had become a sore issue that I found difficult to face, being that I had no answers regarding payment.  I was not aware of deferment options regarding unemployment, just those associated with schooling.  Thanks again for your help and persistence.”    ***
- 		 **~Student **
***“******I’m glad you cared enough to contact me and not give up ***
***	******on me when I had just about given up on myself.”   ***
**~** **Student**** **
***“******Borrowers are grateful that someone is willing to work with them and help them get through the critical point.  A lot of the borrowers do not realize the seriousness of defaulting and the options that are available.” ***
** ****~Margaret Pearson, San Antonio College/Career Centers**

##            Effective Implementation

- Plan
- Schedule
- Tips from others
- Make it someone's responsibility

##                    Summary                      

- Who should get involved?
- All schools
- What can I do?
- Help students, school, taxpayer
- Promote fiscal integrity of loan program
- Promote academic integrity of institutions
- Admit, educate, graduate, employment
- The last 5%
- It’s academic.

##             Summary

**When you get back to campus:**
- Identify your potential defaulters.
- Intervene early to support program      	completion.
- Report student separations timely.
- Consider outreach to dropouts.
- Provide counseling, support to late
- 	stage delinquent borrowers.
-  **Let us know how we can help you.**

## Questions and Comments

*Questions and Comments*

***Contact Us: ***
_**John Pierson**_john.pierson@ed.gov_** **_
**Craig Rorie**
- craig.rorie@ed.gov

- We Help Put America Through School

**Notes:**
Electronic Funds Transfer from a single source:
	Cash Flow is greatly improved
		reduces/eliminates the need for short-term emergency loans for
		students

	Processing time is reduced
		shortens/eliminates student lines in financial aid and business
		offices

	Paperwork is reduced
		Schools have more time to counsel students on financial aid

## Slide 42