Federal Loan Servicer Panel Discussion

1. Session14 Federal Loan Servicer Panel Discussion Sue O’Flaherty| Nov. 2012 U.S. Department of Education 2012 Fall Conference

2. Department of Education Loan Services Session Format • Servicing Background • Overview of Loan Lifecycle including Frequently Asked Questions • On-boarding • In-School • Grace • Repayment • Delinquent Repayment • Questions for our Servicers

3. “TIVAS” Title IV Additional Servicers Federal Loan Servicers “TIVAS” An acronym used by FSA which stands for the Title IV Additional Servicers. In communications with schools, borrowers, and the financial aid community, FSA uses the term “federal loan servicers.”

4. Meet the Panel Members

5. Our Federal Loan Servicers: • Comply with legislative regulatory requirements and provide unique services • Educate and inform borrowers regarding the tools and options available to assist them in the management of their student loans • Offer multiple repayment options tailored to borrower preferences (i.e. online payments, ACH, check, etc.) • Provide self-service tools for borrowers and options to receive bills and/or correspondence electronically • Offer dedicated services to schools to help manage cohort default rates

6. Federal Loan Servicers - TIVAS COD S E R V I C I N G • COD LDE • Origination • Disbursement • Loan Allocation • Servicer Assignment • Customer Service • LDE : Loan Distribution Engine: interface to assign loans to the federal loan servicers. • “Booked” Loan: occurs when the COD system accepts an origination record; links p-note to the record and accepts actual disbursement. • The federal loan servicer is assigned upon “booking” of loan.

7. Not-For-Profit Servicers Federal Loan Servicers “Not-For-Profit awarded federal loan servicing contracts under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation.

8. Not-For-Profit Servicers • Federal loan servicing contracts awarded under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation • We continue to expand our federal loan servicer team as our loan portfolio grows • Whether individual or team award, our customers will know and face one servicer

9. Not-For-Profit Servicers There are seven more NFP’s tentatively scheduled to go live in 2013. The solicitation is open until 12/2013 so there is a potential for more NFP’s to be added.  

10. Challenges and Benefits • The federal loan servicers and FSA collaborate on solutions to borrower, school, regulatory and operational issues • Through the multi-servicer, borrower-centric approach, schools will notice different processes and procedures offered by the servicers • The competitive structure of the servicing contracts allows for more innovation and creativity • More similarities than significant differences

11. Measuring Performance

12. Allocation Methodology • Allocations are based on rankings • Survey results • Repayment statistics • Most points for first place • One point for last place • Percent of new loans = percent of points

13. Department of Education Loan Services Session Format • Servicing Background • Overview of Loan Lifecycle • On-boarding • In-School • Grace • Repayment • Delinquent Repayment • Questions for our Servicers

14. Loan Lifecycle • From a servicing perspective there are various stages that make up a borrowers “loan lifecycle” in which specific activities and questions arise • Although the stages are student/borrower lifecycle stages, we know that schools have a significant role in each of these lifecycle stages • Specific activities are completed in each of the lifecycle stages and student borrowers contact their Financial Aid Administrators with questions throughout the stages

15. Servicer Role - Loan Lifecycle • Prepare for Successful • Transition to Repayment • Early intervention • Repayment options • Repay plan modeling • Reminder to set up acct • “We’re here to help” • Establish Customer • Relationship • Contact information • Online acct set-up • Tools available • “We’re here to help” • Focus on Healthy Repayment • Predictive modeling/segmentation • Reminders of repayment solutions • Proactive skip-tracing • Increasing intensity of contact • “We’re here to help” • Ensure Successful • Transition to Repayment • Early intervention assistance • Repayment options • Promote auto-debit • Repayment tools available • Billing reminders • Transaction updates • Outreach to at risk borrowers • Repayment counseling • Self-service options • “We’re here to help” • Maintain Contact • Obligation reminders • Financial Literacy • NSLDS Update/exchange • Answer questions • “We’re here to help” • Communication Channels • USPS • Email • Phone • Web • Social media • Text • Tools Available • Financial Literacy • Self service options • Numerous payment options • Repayment plan modeling • Call center agents • Services Offered • School default management assistance • School access to borrower acct info • School call center • School webinars/relevant servicing info

16. On-Boarding : Things to Remember… • The federal loan servicer is assigned upon the “booking” of the loan. Booking occurs when COD accepts an origination record, links to the p-note, and accepts an actual disbursement. • COD checks to see if the borrower has a previous loan and sends the next loan to the same servicer. If it is a new borrower, the allocation scores are used to determine which servicer receives the new borrower. • New borrowers are assigned to Great Lakes, FedLoan, Nelnet, and Sallie Mae based upon percentages assigned by FSA. The percentages of new loans each servicer receives is based on its performance (default rates & customer service scores).

17. On-Boarding Here’s how it works… • When we assign a student or parent borrower’s Direct Loans to a federal loan servicer, the servicer corresponds with the borrower. • The “welcome” correspondence notifies the borrower of the servicer, toll-free phone number, and website information. • Always refer borrower to NSLDS if they need to identify their federal loan servicer. The federal loan servicers report loan information to NSLDS on a weekly basis. 

18. In-School – Servicer Overview Presented by: Brett Lindquist – Great Lakes • The in-school stage begins when a loan is assigned to a TIVAS from the COD system and ends when a student drops below half-time enrollment • During the in-school stage, new loans are assigned to a servicer; in the case of an unsubsidized loan, interest accrues; financial literacy education; and borrowers learn about their servicer

19. In-School Stage: Commonly Asked Questions Interest Statements: • How and when do borrowers receive interest notices? • How do borrowers make interest payments on their unsubsidized loans while in school? Loan Cancellation: • When a school cancels or reduces a students loan, do they need to notify the servicer? Presented by: Brett Lindquist – Great Lakes

20. In-School Stage: Commonly Asked Questions Borrower Contact: • What types of servicer communications and contact occurs while the borrower is in school? • What happens to the borrower if the school is unaware that the borrower has left school? Presented by: Brett Lindquist – Great Lakes

21. Grace Period - Servicer Overview Presented by: Jim Harris – Nelnet • The Grace Stage or “period” of the lifecycle begins when the student drops below half-time enrollment or graduates. Grace ends 6 months from the point of time from when the student ceased to be at least half-time • The grace period is important so that borrowers can select their payment period; continue to become familiar with servicer; financial literacy education; and prepare for the first payment

22. The Grace StageCommonly Asked Questions Borrower Communication: • How often and at what key times do the servicers communicate with the borrower during the grace period? Entering Repayment: • What is the servicer process if the student hasn’t selected a repayment plan? • When is interest capitalized? • How early can borrowers apply for IBR? Presented by: Jim Harris – Nelnet

23. The Grace StageCommonly Asked Questions What happens to the borrower if the school is unaware that the borrower has left school? Reminder to Schools: • When a borrower leaves campus, promptly report to NSLDS. • Of the borrowers who defaulted, most did not receive their full 6-month grace period due to late or inaccurate enrollment notification by the school. Presented by: Jim Harris – Nelnet

24. Repayment - Servicer Overview Presented by: Dan Weigle – FedLoan Servicing • The repayment stage begins when the borrower’s grace period is over and ends when their loan is paid in full • During this stage, borrowers receive billing statements and make payments; they may change their payment plan and or obtain deferment/forbearance status; receive 1098 Interest documents for tax filing; and pay off their loan in full

25. Repayment Stage Commonly Asked Questions Making Payments: • What are the various ways a borrower can make payment on their loan (i.e. mobile devices)? • How and when do borrowers get a .25% reduction for automatic payments? Trouble Making Payments: • How do the federal servicers counsel borrowers if they are having trouble making their loan payments? Presented by: Dan Weigle – FedLoan Servicing

26. Repayment Stage Commonly Asked Questions RepaymentIn-School Status • What happens when a borrower returns to school? Are they assigned a new servicer? Public Service Loan Forgiveness (PSLF) • When should borrowers sign up for Public Service Loan Forgiveness and what is the process? Presented by: Dan Weigle – FedLoan Servicing

27. Delinquency - Servicer Overview Presented by: Bob Leary – Sallie Mae • Delinquency stage begins when the loan becomes past due – that is, when the borrower does not make the scheduled payment. Collection continues until the past due amount is satisfied or resolved • During delinquency, servicers contact borrowers by phone, e-mail, and mail and work with the borrower to resolve the delinquency

28. Delinquency Stage Commonly Asked Questions Delinquency – Borrowers • How early do servicers start to contact delinquent borrowers? • Is the borrower defaulted at 270 days delinquent? • What is the latest outreach effort to a delinquent borrower from the servicers? Presented by: Bob Leary – Sallie Mae

29. Delinquency Stage Commonly Asked Questions Delinquency – Schools • Can schools stay on the phone with the borrower and talk with a servicer school support team (i.e. three way call)? • How do the servicers work with schools around delinquency efforts? Presented by: Bob Leary – Sallie Mae

30. Centralized Loan Information - NSLDS: NSLDS Reports for Default/Delinquency Prevention: School Portfolio Report Delinquent Borrower Report Individual Servicer Reports Provide greater level of detail Offer customization options Include only loans serviced by that organization Reporting Resources:

31. Department of Education Loan Services Session Format • Servicing Background • Overview of Loan Lifecycle including Frequently Asked Questions • On-boarding • In-School • Grace • Repayment • Delinquent Repayment • Questions for our Servicers

32. Questions Thank You! Sue O'Flaherty 202-377-3393 Sue.Oflaherty@ed.gov