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Reducing Cohort Default Rates : Success Strategies for Your Campus NelnET - NassaU Community College - Monroe College. NYSFAAA Conference October 2013. Session Agenda . Current Data and Trends Default Prevention and Debt Management Strategies Partnering with Servicers
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Reducing Cohort Default Rates:Success Strategies for Your CampusNelnET - NassaU Community College - Monroe College NYSFAAA Conference October 2013
Session Agenda • Current Data and Trends • Default Prevention and Debt Management Strategies • Partnering with Servicers • Cohort Default Rate Review and Challenge
#1: Borrower Communication Empower vs. Enable! Students need to know… • What accepting a loan means • Where it comes from • What a Servicer is (friend not collector) • When or how they’ll pay loan back • Who is involved in the process This increase the likelihood that loans will be repaid successfully.
Borrower Communication In-school Campaigns: At first loan disbursement • Inform about Loan Servicer assignment • What a Servicer is, why they are important, create picture of servicer as friend (not as collector!) • How to find out who their servicer is • Suggest they enroll for electronic account access with servicer on their web sites.
Borrower Communication In-school Campaigns: Before semester ends • Use NSLDS Portfolio Report with disbursement date parameters to let your student know who their Servicer is. • Suggest they enroll for electronic account access with servicer on their web sites.
Borrower Communication Graduation Campaign • Remind them they’re going into repayment • Let them know they’ll be hearing from servicer • Give overview on what to do if there are repayment challenges
Borrower Communication Loan Borrowers: Your federal loan will go into repayment soon after graduation. Remember to: -Complete an Exit Counseling at www.studentloans.gov -Contact your loan servicer to set up timely payments. To find out who your servicer is, visit nslds.ed.gov
#2: Financial Literacy for Borrowers • Educate Borrowers on Financial Responsibility • Host a Financial Literacy speaker • Email the link to financial awareness counseling • Provide link to federal calculators… • On your loan request form • Accepting loan on website • Email the link to the students!
Financial Literacy for Borrowers • It is important to understand your student population. • How will you target your message to them? • Consider first time college attendees -- They often lack financial guidance and experience.
Financial Literacy for Borrowers Counseling products on Studentloans.gov highlight financial literacy concepts*Challenge: How do we get students to use it?* • Entrance Counseling- required to receive a federal loan • Exit Counseling- required when the student graduates, leaves school or drops below half-time student • Financial Awareness Counseling
#3: Communication Across Campus • Student success is everyone’s responsibility • A successful student is more likely to be successful in repayment.
Communication Across Campus • Prevention & management of loan default is school-wide effort, not sole responsibility of the financial aid office. • Important for student service & academic areas to have awareness of loan debt, how it affects the borrower and the school • Important to communicate that CDRs are a reflection of the effectiveness of academic program! • Shopping Sheet • Early Warning System
#4: Timely, Accurate Enrollment Reporting THE IMPORTANCE OF ENROLLMENT REPORTING • Critical for administration of Title IV Loan Programs • Ensures students’ rights are protected • Essential to: • Proper servicing of loan • Preventing defaults • School cohort management
Timely, Accurate Enrollment Reporting • Be sure you make it your business to know that your school is regularly reporting to NSLDS/Clearinghouse • Encourage them to report at least monthly • Be sure institution is aware of ramifications if not reporting in timely manner. • Keep back up documentation to show you have done this
#5: NSLDS & School-based Data School Reports: NSLDS • The School Portfolio Report (SCHPR1) provides details on borrowers ad loans in your current portfolio. • Based on loan repayment begin date • If your school has merged, previous school codes included. • Available in extract only. • The Delinquent Borrower Report (DELQ01) is used to assist with default prevention. Current data can be obtained on the DELQ01 webpage under the tab mark “Aid.”
#6: Working with Servicers Servicers increasingly focus on proactivecontact with borrowers. Goal: To establish early, positive relationship • Servicers provide financial education and direct services for borrowers; they provide loan training, direct contacts and counseling support for schools • Servicer reports tend to be more current and have more extensive borrower account information • Efforts underway to provide standardized report format
Servicers’ Delinquency Prevention • Provide outbound targeted calling campaigns, inbound call centers to help borrowers become current • Use variety of electronic communication (email, chat, text messaging) to update borrowers on account status • Work with schools to develop borrower messaging. Use variety of tools to get most current contact info on borrowers (skip tracing on delinquent accounts) • Work in partnership with schools to assist borrowers in the later stages of delinquency.
Profile of a Defaulted Borrower Federal Data (from ‘08 database): • 70% withdrew before completing their programs of study • 91% did not receive their full 6-month grace period due to late or inaccurate enrollment notification by schools • There is high correlation between increased financial literacy and repayment success ** New York Study: 50% of those who defaulted had a total loan balance of $0–$5,000 **
Nelnet: Trends in Borrower Repayment • Borrowers who get into good early repayment habits less likely to default. For these borrowers, delinquency more likely due to life event change, if delinquency occurs at all. • Intervention efforts more successful within the first 90 days of delinquency. From then on, there is a higher likelihood of eventual default. • Setting upauto-pay good determinant of repayment success,as well as signing up for services like Manage My Account.
Nelnet: Trends in Borrower Repayment • Good contact information on borrowers critical. Students in skip-trace status much more likely to default. Schools who collect updated contact information after entrance or exit encouraged to share with servicers. • Much of defaultor late delinquency group is made up of borrowers with small balances. • Late Stage Delinquency – Borrowers in this category very difficult for servicers to reach since they have avoided contact from us for so long. School intervention helps.
Nelnet: Trends in Borrower Repayment Many borrowers have a knowledge gap when they go into repayment. They are unaware of: • What a servicer does • Who Nelnet is • That they have options in addition to standard ten-year payment, • What deferments/forbearances are • That servicers can assist them if they run into repayment difficulties Please help servicers convey these messages.
The 3-Year Cohort Default Rate • Expands the default tracking window from 2 years to 3 years • Raises penalty threshold from 25%-30% • Increases availability of “disbursement relief” from 10% to 15% (effective 10/01/11) • 34 CFR 668.217 affected the 2009 cohort year.
Your Current Active 3-year CDR Timeframes * FY 2011 is first cohort year where schools will be subject to sanction based on 3-Year CDR
The 3-Year Cohort Default Rate • First year at 30% or more • Default prevention plan and task force • Submit plan to FSA for review • Second consecutive year at 30% or more • Review/revise default prevention plan • Submit revised plan to FSA • FSA may require additional steps to promote student loan repayment • Third consecutive year at 30% or more • Loss of eligibility: Pell, DL • School has appeal rights
Limited Resources/Best Results • Identify Cohorts in effect • Work with Servicers • Pull delinquency reports by cohort year • Identify highest risk (most delinquent) • Develop plan for contact • Phone most effective • Email, Letters, Text messages if can’t reach by phone • Integrate effort with other campus offices with whom student has relationship
Limited Resources/Best Results • Use school d-base for contact info • When student in school, update contact info, references, personal email/facebook accounts, obtain authorization to text, etc. • When contacting borrower, have portfolio of loan history • Recommendations depend on characteristics of loan • Make warm transfer to Servicer while student on phone
Limited Resources/Best Results Students who withdraw are at **HIGH RISK** • Official Withdraw - Required to meet with FA • SAP, Academic Dismissals - Track, monitor separately • Unofficial Withdrawals • Receive info from academic offices, registrar others • Report to NSLDS/Clearinghouse immediately • Reach out to students by mail, phone informing them of obligation re. student loan • Update contact info, address, references, emails, etc. so you can contact in future
Other Useful Activities • Grace • Proactive outreach re. Delinquency • Break into cohort years to prioritize • Mid-stage Delinquency • Send out letters, emails, other electronic media • Refer to servicer for help/action
Cohort Default Rate Release Dates February (DRAFT) September (OFFICIALLY) Not public No sanctions No benefits Public Sanctions apply Benefits apply
Cohort Default Rate Review Challenges, Adjustments, and Appeals
When/How to Challenge • Start when you receive draft (Feb 2014) • Will receive 2011 3-yr draft • Challenge process will begin • 45-days to submit challenge • Need to be enrolled in E-CDR Watch for NYSFAAA webinar in February!!
What You Can Do Now • Draw down NSLDS Portfolio report for 2011. Focus on defaulted borrowers • Go through list - Is borrower in correct cohort year? • Verify - Did borrower default prior to 2013? • Create list of borrowers who are incorrect • Will help you develop the base of challenge (back up doc will need to be attached)
What You Will Do in February • Submit your challenges within 45 days of draft release • Back-up documentation will need to be attached • President’s letter needed (try to obtain in advance • Servicer will review challenge, and agree or not agree • You can request clarification. Servicer data mgr will need to respond to you.
What Happens Next? • You’ll receive notification • September– official rate release • At that point, some might of your successful challenges may still be in your CDR • Can do UDA within 30 days of official release, report to Data Mgr that accepted appeals not taken out of rate
Cohort Default Rate Review Data Manager • Data Manager: • Depending on the loan, a data manager may be the Federal Loan Servicer, a guaranty agency or in some instances, the Department. • Entry responsible for maintaining and managing the data used in calculating cohort default rates.
Nelnet Default Prevention Resources www.nelnetloanservicing.com • Step-by-step guide to creating default plan for your school • School best practices • Links to federal data and resources • Powerpoint presentations, videos • Default plan template • Includes financial literacy link and library of school collateral
FSA Cohort Default Rate Guide The “Cohort Default Rate Guide” (Guide) is a U.S. Department of Education publication designed to assist schools with their Direct Loan Program cohort default rate data. The Guide, on ifap.ed.gov, should be used as a reference tool in understanding cohort default rates and processes.
FSA Cohort Default Rate Review Contact Information Operations Performance Division Phone: 202-377-4259 Email: Fsa.schools.default.management@ed.gov Website: Ifap.ed.gov/default management/defaultmanagement.html E-Appeals: https://ecdrappeals.edu.gov/ecdra/index.html
THANK YOU! • Patti Noren, Director of Financial Aid Nassau Community Collegepatricia.noren@ncc.edu • Clemente La Pietra, Monroe Collegeclapietra@monroecollege.edu • Anne Del Plato, Regional Director of Partner Solutions Nelnet Education Loan Servicing anne.delplato@nelnet.net