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Cohort Default Rates Behind the Numbers

Cohort Default Rates Behind the Numbers. An old problem and new issues. The leading contributor to defaults . Status of Defaulters. Servicing the “old” way . Lender involved The “one lender rule” Multiple players working on the same account, Lender, GA, Servicer .

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Cohort Default Rates Behind the Numbers

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  1. Cohort Default RatesBehind the Numbers An old problem and new issues

  2. The leading contributor to defaults

  3. Status of Defaulters

  4. Servicing the “old” way • Lender involved • The “one lender rule” • Multiple players working on the same account, Lender, GA, Servicer

  5. New Challenges to Manage Defaults • Dual Programs • Three year Cohort Formula • DL Servicing transition from ACS • Four New Servicers • Multiple new non profit Servicers • “Put” Loans • Gainful Employment • Risk Management

  6. Dual Programs • What is the impact of a student borrowing a Direct Loan and a FFEL Loan? • Split Servicing • Private Sector Title IV Additional Servicers (TIVAS) • Where a borrower has a DL (ACS) and a FFEL loan, Ed will make an effort to move both loans to the TIVAS.

  7. The Three Year CDR Old Calculation: Borrowers who entered repayment and defaulted during a two year period Borrowers who entered repayment during the cohort year For example: Two year 2010 CDR 10/1/09 – 9/30/11 10/1/08 – 9/30/09 New Calculation: Borrowers who entered repayment and defaulted during a three year period Borrowers who entered repayment during the cohort year For example: Three year 2010 CDR 10/1/09 – 9/30/12 10/1/08 – 9/30/09

  8. Puts • May 7, 2008, the Ensuring Continued Access to Student Loans Act (ECASLA) was signed into law, thus creating the PUT Program • Deadline extended to October 15 2010 • HESC Loans to be put from 7/09 – 6/30/10 • 409,603 loans will be put • SLMA, Citibank, Wells Fargo, Nelnet

  9. What happens to Puts • Title Four Additional Servicers (TIVAS) • Great Lakes, PHEAA, Nelnet, and Sallie Mae

  10. Non Profit Servicers • Many additional Non –Profits • 100,000 Accounts • Fisma Compliant

  11. Current Challenges To Managing Defaults • Establishing contact with a borrower • Focus on the borrowers that need assistance • Managing multiple servicer relationships • Maintain contact over a three year period • Converting the borrower to active repayment • Moving to a deferred status?

  12. Conversion to Repayment • Early Outreach to Withdrawn Students • Develop a long term strategy of borrower contact • Countdown E-mails During Grace • Encourage Response E-mail

  13. Exit Counseling • Information on repayment plans • Info on Income –Based Repayment (IBR) • Info on changing repayment plans • Loan forgiveness provisions • Forbearance provisions • Consequences of default • Consolidation Loans, tax benefits

  14. New Exit Counseling • Limit the confusion • Show them how to find their servicer • Don’t provide too many options • Direct them to one number

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