# Presentation: 347576

## Loan Repayment General Session

## Agenda

**Life Cycle of a Loan**
**Delinquency Management ****	****GA Perspective**
** ****	****School Perspective**
**Default Management**
**Summary**

## Life Cycle of a LoanKristie Hansen

## Everyone Has a Role

**Everyone Has a Role**

## Title IV Loan Life

- In School – from origination and booking until graduation or drop below half time.
- In Grace – from end of school for 6 months
- Repayment – from point of leaving grace through successful repayment or discharge.
-  Default – from 270 days of delinquency or until the loan is cured

## Tools for Borrowers

- Entrance, Exit Counselors
- Repayment Plan Options
- Payment Due Date Flexibility
- Entitlements
- Deferments
- Forbearances
- Forgiveness
- Loan Consolidation
- Electronic Payments (ACH/EDA, Bill Pay Services)

## Loan Life Cycle 

- COHORT  RATE

- 31 - 269
- days

- 270

**Claim Filed**

- Claim Paid

## Cohort Default Rates

**National Student Loan Default Rates**

## Common Characteristics of Delinquent and Defaulted Population

- Have withdrawn from school and did not complete their studies
- Do not get the benefit of their full 6 month grace period as the result of late enrollment notification
- Have incorrect telephone numbers

## Risk Management:  Reducing Delinquency & Default

**Tim Fitzgibbon, Iowa College Student Aid Commission**

## Default Aversion

- Required by Regulation
- Pre-claims Assistance
- Supplemental Pre-claims Assistance

## Student Loan Outfitters

- Referral service for “high-risk” borrowers
- Early awareness and delinquency prevention
- Available to all Iowa colleges and universities
- Interactive web site

## Disaster Relief Grants

- Funds available to students and families affected by natural disasters – later expanded
- Matching funds from colleges and universities
- Recipients agree to limit borrowing
- 2,100 recipients – Grants average $1,400

## Foster Grants

- Funds available to students formerly in foster care
- Recipients agree to limit borrowing
- Support from colleges and universities, and Iowa Dept. of Human Services
- 60% completion rate
- $3,000 average award

## Default Reduction Grants

- Funds available to promote innovative default prevention programs at the campus level
- Competitive application process
- Tiered award levels
- Guest speakers, academic         courses, community programs

## Student Assistant Grants

- Funds provided to hire “peer advisors”
- SAs trained in financial aid, student loan, and debt management basics
- Increase awareness, communication on campuses
- Refer students to FAOs, ED, lenders,
-    or the Commission

## Agency Servicing Center

- Iowa-based default prevention call center
- Based on Commission theme of Iowans-helping-Iowans
- Expanding Iowa work force

## Delinquency Management From a Schools PerspectiveJo-Ann CraigRutgers University

## Rutgers, The State University of New Jersey 

- Chartered in 1766; eighth-oldest college in the nation
- Located on three regional campuses in New Brunswick/Piscataway, Camden, Newark
- Enrolls a total of 51,480 students

## Rutgers, The State University of New Jersey 

** **
- 2002-03 Loan Volume
- $9.0 million Federal Perkins Loan Program
- $126.6 million Federal Direct Stafford Loan Program
- 2001 Official Cohort Default Rate of 3%

## Makeup of Cohort Rate

## Borrower Delinquency Pattern

## Late Stage Delinquency Assistance (LSDA)

- CDR of 3% - So Why?
- Began in February 2003
- Our Strategy
- Our Results

## QA Default Aversion Project 

- 22 QA schools elected to participate; 9 will report
- Examine two default prevention strategies for Stafford AND Perkins
- LSDA
- Investigate Defaulters’ Characteristics
- Develop Profiles
- Design Intervention

## Default Prevention Listserv 

- Host:  Rutgers University
- Meeting place to discuss default prevention
- Entire Title IV community welcome

## Default Prevention Listserv 

- To subscribe:
- Send e-mail to:  _[listserv@email.rutgers.edu](mailto:listserv@email.rutgers.edu)_
- In body of message enter command:
- Subscribe default_prevention your name

## ED-Collections Default ManagementGary Hopkins

- 	U.S. Department of Education		FSA - Students Channel - Collections

## Consequences of Default

- Eligibility for future Title IV Aid
- Entitlement opportunities
- Credit Rating
- Opportunity to buy a house
- To be a federal employee
- Wage Garnishment
- Treasury Offset
- Litigation
- Collection fees added to outstanding balance

## Administrative Resolutions

- Death
- Total and permanent disability
- Bankruptcy prior to October 8, 1998

## Discharges

- School Closure
- Unauthorized Signature
- Ability to benefit
- False certification

## Payment in Full:
Borrowers can always pay their balance in full and many do as soon as circumstances allow or demand.
Compromise:
On most accounts, ED or its collection agency will settle the account for an amount less than payment in full-sometimes with a single call

- Borrowers can always pay their balance in full and many do as soon as circumstances allow or demand.
- Compromise:
- On most accounts, ED or its collection agency will settle the account for an amount less than payment in full-sometimes with a single call

**Paying A Defaulted Loan**

## Rehabilitation of Debt
Making 12 consecutive on-time payments will remove the default status, eliminate the default from credit reporting and avoid any additional capitalization of interest during the rehabilitation process.  
Consolidation
Borrowers can consolidate their defaulted loan without first making payments, but borrowers are encouraged to first establish a pattern of satisfactory repayments.
Interest, and sometimes collection fees, are capitalized when the consolidation loan is made, so the new loan may accrue interest on a higher principal balance.

- Making 12 consecutive on-time payments will remove the default status, eliminate the default from credit reporting and avoid any additional capitalization of interest during the rehabilitation process.
- Consolidation
- Borrowers can consolidate their defaulted loan without first making payments, but borrowers are encouraged to first establish a pattern of satisfactory repayments.
- Interest, and sometimes collection fees, are capitalized when the consolidation loan is made, so the new loan may accrue interest on a higher principal balance.

**Paying A Defaulted Loan**

## Paying A Defaulted Loan

- Grant Overpayments
- The borrower can restore his/her eligibility for Title IV aid immediately by agreeing to make reasonable and affordable payments on the debt.

## Referring Borrowers

- Website:  www.1800iwillpay.com
- Phone Number:  800-621-3115
- Email (general inquiries): dcshelp@pearson.com
- Correspondence Address:
- 			PO Box 4222
- 			Iowa City, IA  52244-4222

## In Summary...

- Tools are available for your students through the life cycle
- You can help your students understand what lies ahead in repayment on their loan
- One of the most critical elements of successful repayment is communication

## Contact Information

**Jo-Ann Craig**
**Rutgers University**
**jacraig@rci.rutgers.edu**** **
**732-932-7057, ext. 611**

**Kristie Hansen, General Manager**
**Financial Partner Channel**
**kristie.hansen@ed.gov**
**(202) 377-3301**

**Tim Fitzgibbon****Iowa College, Student Aid Commission**** **_**timothy.fitzgibbon@csac.state.ia.us**_

**Gary Hopkins, Borrower Services****US Department of Education  ****gary.hopkins@ed.gov**