# Presentation: 460646

## Session #54

- Default Prevention
- 2008
- Mark Walsh
- Angelita Dozier

## Topics for today	

- 2005 Official CDRs
- IDCs and eCDR Appeals
- Statewide Default Projects
- Defaulter Characteristics
- Early, in-school, and late stage strategies
- Default Prevention Grants

## Topics for today (Con’t)	

- _Guaranty Agencies and Lenders_
- Regulatory Requirement
- Cohort Default Rate Release Dates
- 2005 Official Cohort Default Rates – Fast Facts
- Data Correction

## Default Prevention and Management

- Three team structure:
- CDR Operations
- CDR Challenges, Adjustments, and Appeals
- Default Prevention Outreach

## National Student Loan Default Rates

**National Student Loan Default Rates**

## Schools Subject to Sanctions  	

**     ****1993     1994     1995     1996     1997     1998    1999    2000     2001     2002    2003    2004   2005  2006  2007**

**The school numbers are pre-appeal and include only schools impacted by the three years of 25% or greater sanction.  A school can be on extended sanction and is therefore reflected in multiple year counts.  Since 1991, 1,161 unique schools were sanctioned under the three years of 25% or greater sanction.**

**Number of Schools**

**No**
**Sanctions**

**Schools Subject to Sanctions**** **** ****	**

##  National CDR by Sector

**2003**

**2004**

**2005**

## The highest CDRs

- 9.6% Puerto Rico
- 7.4% Alaska
- 7.2% Nevada
- 7.0% Arizona
- 6.9% Georgia
- 6.9% West Virginia
- 6.8% Arkansas
- 6.0% Kentucky

## 2005 Official CDR – Fast Facts

- The 4.6% CDR represents a 9.8% *decrease* from the FY 2004 rate of 5.1%
- Borrowers entering repayment *increased* 24% over FY 2004
- Defaulted borrowers *increased* 12% over FY 2004

## Incorrect Data Challenge 

- Review consists of a careful examination by the school of their LRDR, school, and outside source records
- Opportunity for schools to work with data managers (guarantors) to correct errors

## “New” eCDR Appeal Process 

- e-CDR Appeals, a new vehicle for
- schools to electronically submit
- challenges, adjustments, and
- appeals, will be a single web-based
- user interface for schools, for ED,
- and for data managers.

## What are the benefits? 	

- Eliminates the mailing and tracking of hard copy documents
- Minimizes the risk for disclosure of personally identifiable info
- Reduces the chances of late or incomplete submissions

## When is the first release?  	

- February 2008
- Schools may challenge 2006 *draft* cohort default rates via Incorrect Data Challenges
- Features automatic routing to  the correct Data Manager

## When is the second release?  	

- September 2008
- Schools may challenge 2006 *official* cohort default rates via Uncorrected Data Adjustments and New Data Adjustments

## Default Prevention Activities

- State projects are selected according to:
- Cohort Default Rate
- Volume of dollars in default
- Opportunities available to get our message out

## Statewide Default Prevention Projects Underway

- 2005: Nevada and Puerto Rico
- 2006: Ohio, Michigan, Georgia,       Florida, and Arkansas
- 2007: California and New York

## 2008 Message 

- Defaulter characteristics
- Student success and retention
- Financial literacy
- Timely/accurate NSLDS reporting
- Managing delinquency & LSDA
- Dollars in default
- Private Loans

## Defaulter Characteristics

- 89% did not receive their full 6 month grace period due to late enrollment notification (sample)
- 54% had bad telephone numbers (actual population)

**Source: January 2007 Analysis of Federal Direct Loan Portfolio**

## 94% were not successfully contacted by phone during the 360-day collection effort leading up to default (sample)
71% withdrew without completing (actual population)

- 71% withdrew without completing (actual population)

**Defaulter Characteristics**

**Source: January 2007 Analysis of Federal Direct Loan Portfolio**

## Early Stages of Enrollment

- Emphasis on Student Success:
- Students often receive up to 3 hours credit for workshops
- Orientation sessions and events to integrate students into school is mandatory at some colleges.

## Late Registration

- Has student missed classes?
- Does a late start indicate poor or no preparation?
- Is this student at an increased risk of default?

## Late Registration

**First **
**Day**
**of Classes**

**22**

**23**

**25**

**24**

**26**

**27**

**28**

**29**

**30**

**31**

- 4

**  ****Sun      Mon    Tues    Wed    Thurs   Fri      Sat**

**2**

**3**

**4**

**5**

**6**

**8**

**7**

**9**

**Last **
**Day**
** ****to Register**

**11**

**12**

**13**

**15**

**14**

- August

- September

**Student Misses 7 Classes**

- Labor Day

-      Sun

- Mon

- Tue

- Wed

- Thu

- Fri

- Sat

## In-School & Late Enrollment

- Schools utilize system-generated reports from student records systems, weekly or bi-weekly, to identify withdrawals at the earliest stage possible.

## Distance Learning and Default                 

- FSA does not routinely collect data on default in distance education programs
- Anecdotal info = increased risk
- What is your experience?
- Are there best practices?
- How can FSA help?
- Opportunities for collaboration?

## Managing Delinquencies

- Late Stage Delinquency Assistance
- For both DL and FFEL schools
- Why can schools be effective?
- How does it work?
- Compliments guaranty agency late stage efforts

## Managing Delinquencies

- Increased due diligence on high volume borrowers
- Pre-repayment counseling
- Establish relationship
- Verify correct repayment status and check monthly payment
- Update all contact information

## Default Prevention Grants

- Encourages schools to engage in default prevention activities
- Often resources (staff time, $) are obstacles to default prevention work
- Schools are likely to maintain activities beyond the life of the grant program

## Default Prevention Grants

- Schools submit proposals
- Can fund position dedicated to default prevention
- Conduct analysis of defaulting borrowers
- Identify and share best practices identified by schools

## Financial Partners Services Default Coordination Team

-  Cohort Default Rates for Guaranty Agencies and Lenders

## Regulatory Requirement

- Under Section 430(e) of the Higher Education Act of 1965, as amended(HEA), the Department of Education is required to publish the cohort default rates of lenders,  guaranty agencies and schools participating as a lender in the FFEL Program.

## Cohort Default Rates Release Dates

- Rates are released twice a year:
- _DRAFT RATES_:
- Guaranty Agencies Cohort – mailed  in February
- Lenders - obtained from NSLDS website at _[www.nsldsfap.ed.gov](http://www.nsldsfap.ed.gov/)_

## Cohort Default Rates Release Dates

- _BENEFITS OF DRAFT RATES_:
- Guaranty agencies and lenders may review data for accuracy
- Identify any anomalies and data conflicts
- Opportunity to make necessary data correction prior to calculation of official rates

## Cohort Default Rates Release Dates (Con’t)

- _OFFICIAL RATES_:
- Guaranty Agency and Lender rates released in September

## 2005 Official CDR – Fast Facts

- Highest guaranty agency rate was 10.3%  (5.0% increase from FY 04 rate)
- Lowest guaranty agency rate was 1.5% (same rate as FY 04)
- Five guaranty agencies had a 1.0% or greater increase

## 2005 Official CDR – Fast Facts (Con’t)

- Eight guaranty agencies had a 1.0% or greater decrease

## Data Correction 

- 	Any guaranty agency or 	lender that receives an official 	cohort default rate is provided 	the opportunity to correct its 	most recent official cohort 	default rate.

## Data Correction (Con’t)

- 	Reason for Requesting a Data Correction?
- Data Conflicts** **–** **occurs when a Guaranty Agency is not able to report on a loan because of a data/identifier conflict with another loan already reported to (NSLDS).

## Data Correction (Con’t)

- Where to submit Data Corrections?
- Guaranty agencies must submit incorrect data request to the Department for corrections.
- Lenders must submit incorrect data request to the guaranty agency for corrections.

## Contact Information

- 	We appreciate your feedback and comments. We can be reached at:
- Phone:816-268-0412
- Email:mark.walsh@ed.gov
- Fax:816-268-0441

## Contact Information

- 	We appreciate your feedback and comments. We can be reached at:
- Phone: Default Coordination Team
- 		      202-377-3053
- Fax:    202-275-0913