Presented by Dan Weigle Manager, School Support Services FedLoan Servicing dweigle@pheaa.org

1. Loan Servicing & Loan Default Presented by Dan Weigle Manager, School Support Services FedLoan Servicing dweigle@pheaa.org

2. Agenda • Role of the servicer • Communication milestones • Servicer support activities • Default statistics • School involvement

3. Federal Loan Servicers

4. “TIVAS” Title IV Additional 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.”

5. 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.

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

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

8. Not-For-Profit Servicers

9. Measuring Performance

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

11. Due Diligence Requirements

12. 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” • Focus on Healthy Repayment • Predictive modeling/segmentation • Reminders of repayment solutions • Proactive skip-tracing • Increasing intensity of contact • “We’re here to help” • Establish Customer • Relationship • Contact information • Online acct set-up • Tools available • “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

13. Communication Milestones FedLoan Servicing In School to In Grace Communications Note: This is the FedLoan Servicing communication timeline. While other timelines may vary, most servicers will have similar milestones.

14. Communication Milestones FedLoan Servicing In Grace to In Repayment Communications

15. Servicer Support Activities Federal Loan Servicers: • Provide outbound targeted calling campaigns along with inbound call center representatives to help borrowers become current • Utilize electronic communication methods, such as e-mail, to keep borrowers informed about account status • Work with schools to obtain current available contact information - Utilize a variety of tools to get the most current data to contact borrowers (skip tracing on delinquent accounts) • Work in partnership with the school community to assist borrowers in the later states of delinquency

16. Servicer Support Activities Cure Rates • Over 95% of delinquent contacts result in a cure within 30 days of contact • 1/3 of borrowers that hit 30 days delinquent cure before 60 days delinquent • 87% of borrowers that hit 270 Days delinquent continue to fall delinquent

17. Default Statistics

18. Strategies for Targeting At-Risk Borrowers • Financial Aid Awareness Counseling • Understand Income Driven Repayment Plans • Sign-up for Account Access Target Groups

19. NSLDS Reports Use the NSLDS Delinquent Borrower Report to produce letters to delinquent borrowers who have loans serviced by any federal servicer.

20. Engaging At-Risk Borrowers In School Target at-risk borrowers with early/extra exit loan counseling, financial literacy training, and collect additional contact Information. Which at-risk borrowers? • Students on academic probation • Students who express intention to withdraw • Students currently enrolled in programs producing a disproportionate number of defaulters

21. Engaging At-Risk BorrowersIn Grace Steps to take: • Validate contact information • Re-enrollment assistance • Transfer assistance • Prepare borrower for repayment • Provide employment counseling and search preparation • Job placement assistance • Assist in establishing a relationship with servicer

22. Engaging At-Risk BorrowersIn Repayment Reach out to at-risk borrowers and facilitate the critical contact with the loan servicer to prevent default. • Early Stage Delinquency: Target borrowers 30-60 days delinquent • Mid Stage Delinquency: Target borrowers 60-270 days delinquent • Late Stage Delinquency : Target borrowers 270+ days delinquent

23. Are You Making an Impact? Track Your Efforts Categorize your efforts, track your success, and make adjustments. Establish an action plan and follow the students targeted to determine their success.

24. How to Help Defaulters When federal student loans default, borrowers are provided with opportunities to clear their credit history. Borrowers with defaulted student loans can regain eligibility for federal student aid and return to good standing with their loan servicer. What needs to happen: • To regain Title IV eligibility a student must make at least six voluntary on-time payments for six consecutive months. • To rehabilitate a defaulted loan a student must make at least nine full voluntary payments within 20 days of their monthly due date over a 10 month period. • Consolidation is an option to bring the account current, but does not remove the default record from a student's credit report. • Pay the loan in full.

25. How to Help Defaulters Benefits of rehabilitating defaulted loans: • Students will regain all benefits such as deferments, forbearance, loan forgiveness, and repayment options. • Regain eligibility for federal student aid. • Default status will be removed from credit report. • Wage garnishment and withholding of income tax return will cease. Who to contact: • Debt Management Collection Services (DMCS) • 1-800-621-3115 • The U.S. Department of Education's Federal Student Aid Ombudsman • 1-877-557-2575 • fsaombudsmanoffice@ed.gov

26. Resources • Cohort Default Rate • The Cohort Default Rate Guide http://www.ifap.ed.gov/DefaultManagement/guide/CDRGuideMasterVersion.html • Delinquency and Default Management • Electronic Announcement – Delinquency Prevention Activities and Webinars -- Monitor IFAP for updates http://www.ifap.ed.gov/eannouncements/071411DefaultPreventionResourceInfoSite.html • Assessments • FSA Assessments http://www.ifap.ed.gov/qahome/qaassessments/defaultmanagement.html • Presentations • Federal Loan Servicer Panel Discussion • http://ifap.ed.gov/presentations/2012FSAConference.html

27. Questions Dan Weigle Manager, School Support Services FedLoan Servicing 717.720.2955 dweigle@pheaa.org