Effective Strategies to Prevent Student Loan Defaults

2. Session 31 Default Prevention Strategies Session 31

3. Agenda • Introduction • ED Overview • Default Plan • LSDA • Questions and Answers Session 31

4. Default Prevention Strategies • Default preventionextends beyond the financial aid office and is key in reducing student loan defaults. • Educate the parents and get them involved as a partner with the financial aid office. • Promote early awareness. Juniors and seniors in high school must be made aware of what college will cost and the options they have to pay for post secondary education as well as the financial obligation they may make in order to attend. Session 31

5. The first line of defense for curtailing fraud and insuring that the student and the school are entitled to participate in student loan programs. Social Security Administration Immigration and Naturalization IRS Selective Service NSLDS Student Eligibility Processes Session 31

6. Tools for Reducing Default • Web-tools - www.nsldsfap.ed.gov • Repayment Activities • Identify the attributes for a potential defaulted borrower • Technical Assistance • Cohort Default Rate (CDR) Guide • National Default Prevention Day • Late Stage Delinquency Program Session 31

7. Default Collections Tools • Performance-based contracts with private collection agencies • Treasury Offset Program (TOP) • Administrative Wage Garnishment (AWG) • Federal Defaulted Program (FDP – wage garnishment program for federal employees) • Electronic Debit • National Directory of New Hires (NDNH) database • Review and Monitor Guaranty Agencies and Lenders Session 31

8. Why Default Prevention? • Defaults cost all participants in the student loan program: lenders, guaranty agencies and taxpayers suffer economic losses when a borrower defaults. • The Department of Education is focused on mitigating risk and managing the risk that is inherent in a loan portfolio. • Improving internal and external controls, communications, and education of the borrower about their student aid obligations are the focus of the Department. Session 31

9. Official Cohort Default Rates Session 31

10. Makeup of Cohort Rate Session 31

11. Reducing Delinquency and Default: Short Term and Long Term Solutions • What steps can I take to treat the causes of delinquency and default? • Treating the symptoms: What can I do immediately? Session 31

12. The Long Term Solution: Have a Default Prevention Plan Session 31

13. Creating a Default Prevention Plan • Collect and analyze data and draw conclusions • Create your institution wide Default Prevention Plan • Implement the Plan • Assess effectiveness of the Plan Session 31

14. What are my available resources? • Institutional student and alumni records and information • Department of Education data: • School Cohort Default Rate History Report (Loan Record Detail Report) • NSLDS School Repayment Loan Detail Report • NSLDS Financial Aid History Report • For more information refer to http://www.ifap.ed.gov/drmaterials/FinalCDRG.html • Servicer and Guaranty Agency Reports Session 31

15. What am I looking for?What does the data say? • Common characteristics • Defaulters and Non-defaulters • Borrowers and Non-borrowers • Institutional variables • Year in College • Field of Study • Demographic variables • Student Population by County • Student Population by High School • Draw conclusions from the analysis Session 31

16. Formulate a Plan • Set realistic and attainable goals • Assign responsibility for action steps • Establish time frames • Assess progress: How will you know when your goals are attained? • Inform senior management and your institution of progress Session 31

17. One Short Term Solution Late Stage Delinquency Assistance (LSDA) Session 31

18. Borrower Delinquency Pattern Session 31

19. How It Can Work • Identify the Borrower via the web site • Contact the Student and contact Servicer for three way calling to resolve the delinquency • Schools have additional tools to locate Borrowers, i.e. Alumni Association directories • Servicer will ensure Student is provided assistance • Phone script available to help provide a guide on how to counsel the Borrower/Student Session 31

20. With the Web Site you can see as little or as much as you want Session 31

21. Total Number of accounts: 615 Summary Information You can see the delinquency status of your student borrowers Session 31

22. All Years99 borrowers All Detail Information You can elect to see detail of all borrowers in the 271-360 days delinquent category 99 Session 31

23. Year 2002 Cohort Year Delinquency You can elect to see severely delinquent borrowers for a selected cohort year Session 31

24. Total Number of accounts: 44 271-360 2002 Cohort Year Delinquency Detail You can work as little or as much as you want Session 31

25. Sample Distribution of Potential 2002 Defaulters Session 31

26. Why Do It ? • Minimal effort, maximum results • Helps the Borrower/Student • Helps the school • Schools can focus on the most severe delinquencies • Use the web tools to identify the accounts you are able to help collect • Service Center is available to assist 1-888-877-7658 • No financial or contractual commitment Session 31

27. Contact information Sybil Phillips Sybil.Phillips@ed.gov, Ben Leborys Ben.Leborys@ed.gov or John Pierson John.Pierson@ed.gov Session 31

28. Questions and Answers Session 31