Session #32

1. Session #32 How to Create an Effective Default Management Plan Larry B. Eadie U.S. Department of Education 2018 FSA Training Conference for Financial Aid Professionals November 2018

2. What’s IncludedSections • Discussion Topics: • Regulations • What’s included in a Default Management Plan • Risk analysis • Resource Leveraging • Measuring Progress

3. Default Prevention & Management Plan Sections • Federal regulation (34 CFR §668.14(b)(15)) • Schools participating for the first time or that have undergone a change in ownership that resulted in a change of control are required to use a default prevention and management plan to participate in Title IV programs

4. Default Prevention & Management Plan Sections • Federal regulation (34 CFR §668.217) • Institutions that have a 3-Year Cohort Default Rate of 30 percent or greater for any one federal fiscal year are required to establish a Default Prevention Task Force to reduce defaults and prevent the loss of institutional eligibility

5. Default Prevention & Management Plan Sections • Federal regulation (34 CFR §668.206(a)(1)) • An institution will lose its eligibility to participate in the Direct Loan programs 30 days after receipt of notice that its most recent cohort default rate for fiscal year 2011 or later is greater than 40 percent

6. Default Prevention & Management Plan Sections • Federal regulations (668.217) • Core Default Reduction Strategies • Additional Default Reduction Strategies • Statistics for Measuring Progress

7. Default Prevention & Management Plan Sections • Which schools should adopt default prevention activities? • ALL SCHOOLS

8. Default Prevention & Management Plan Sections • What Loans are Included • Included: • All Federal Direct loans (Sub and Unsub) • Not included: • Plus Loans, Perkins Loans, FISL (Federal Insured Student Loans, Consolidation loans)

9. Default Prevention & Management Plan Sections • Why are CDR’s Important? • An incentive for schools to work closely with borrowers • Reduced costs for taxpayers • Ineligible to participate in the Direct Loan and Federal Pell Grant programs

10. Default Prevention & Management Plan Sections • Who are your school’s Defaulters? (Part A.) • One of the most important things school’s can do within a default management program is study the characteristics / similarities of your school’s defaulters

11. Default Prevention & Management Plan Sections • Who are your school’s Defaulters? (Part B) • Take their SSN’s (Loan Record Detail Report) and securely send this file to your Institutional Research department so they can give you information that you will use with your Default Aversion Plan / Committee

12. Default Prevention & Management Plan Sections • Who are YOUR school’s Defaulters? (Part C) • Age / Race / Gender • SAP status / Credits completed • Employment status • Enrollment status • Class time / Registration data • Developmental coursework required

13. Default Prevention & Management Plan Sections • Beyond the CDR - Dollars in Default • Your CDR is low – but are your dollars high? • What is your loan volume? • What is your CDR? • Can you calculate the approximate dollars in default at your school?

14. Default Prevention & Management Plan Sections • Benefits of adopting a plan • Reduces borrower defaults • Promotes school success • Avoid any negative reflection on school quality • Avoid the school being provisional certified • Avoid the loss of Title IV eligibility; and • Increase access to private loan funds

15. Default Prevention & Management Plan Sections • Default Prevention team: • Senior school officials • Representatives from various offices • Student Affairs • Academics • Enrollment Management/Admission • Other • Student representatives

16. Default Prevention & Management Plan Sections • Define the Rules (a) • Have regularly scheduled meetings • Distribute agenda/minutes, discuss agreed upon assignments • Provide training about default and prevention

17. Default Prevention & Management Plan Sections • Define the Rules (b) • Assign specific responsibilities in conjunction with your plan • Evaluate progress and adjust the plan • Celebrate and promote your successes

18. Default Prevention & Management Plan Sections • Conduct a risk analysis first: • Creates understanding of who is defaulting and why • Allows for an increase in effectiveness of default prevention efforts • Reduces waste of time/resources • Provides the right target populations to engage

19. Default Prevention & Management Plan Sections • Create a picture of borrowers at-risk • Identifying “Who” is not enough • Explaining “Why” will require input of academic, student affairs, and other professionals •  Knowing why is necessary to create targeted, useful, and measureable interventions

20. Default Prevention & Management Plan Sections • Examples of “Who” (a) • Never contacted • Developmental studies • Late admits • Early withdrawal • License exam • No exit counseling • Unsatisfactory SAP

21. Default Prevention & Management Plan Sections • Examples of “Who” (b) • Academic preparedness • Academic probation • No job in profession • Certain majors • Attendance issues • Student employment • Late majors

22. Default Prevention & Management Plan Sections • Students At-Risk • Identifying students at-risk: • Unsatisfactory academic progress • Withdrawals • Inaccurate or late enrollment change reporting

23. Default Prevention & Management Plan Sections • Resource Leveraging • Communication across campus • School-wide effort, not just the responsibility of financial aid office • Dedicated default prevention staff • Establish working relationship with borrowers • Include student retention efforts

24. Default Prevention & Management Plan Sections • Examples of “Why” (a) • Finances/need • Relationship issues • Physical & mental health challenges • Dependent-care • Transportation • Housing

25. Default Prevention & Management Plan Sections • Examples of “Why” (b) • Poor study habits • Basic skill deficits • Language barriers • Feel unwelcome, no campus connection • First generation, no role models or family support • Transition difficulties

26. Default Prevention & Management Plan Sections • Results • Your who will be unique • Your why will also be unique and is vital to understanding your at-risk population • The team you create will translate the who and why into core strategies that work to promote student success and reduce default

27. Default Prevention & Management Plan Sections • Leverage Points • Admissions •  Entrance and exit counseling •  Probation/SAP •  Registration

28. Default Prevention & Management Plan Sections • Help borrowers develop a healthy relationship with their education • Increase program completion rates • Decrease program completion time • Help non-completers find a job • Successful students = successful borrowers • Leverage efforts to increase retention, graduation, and employment

29. Default Prevention & Management Plan Sections • Default Reduction Strategies (a) • Identify and allocate the personnel, administrative, and financial resources appropriate to implement the Default Plan • Establish annual targets for reductions in your rate • Establish a process to ensure the accuracy or your rate

30. Default Prevention & Management Plan Sections • Default Reduction Strategies (b) • Talk about how you plan to enhance the borrower’s understanding of his or her loan repayment responsibilities through counseling and debt management activities • Enhance the enrollment, retention, and academic persistence of borrowers through counseling and academic assistance

31. Default Prevention & Management Plan Sections • Default Reduction Strategies (c) • Articulate how your school plans to maintain contact with the student borrower after he or she leaves your institution by using activities such as skip tracing • Your school can track borrower’s delinquency status by obtaining reports from data managers and Direct Loan Servicers

32. Default Prevention & Management Plan Sections • Default Reduction Strategies (d) • How does your school plan to enhance student loan repayments through counseling the borrower on loan repayment options and facilitating contact between the borrowers and the data manager and FFEL lenders

33. Default Prevention & Management Plan Sections • Default Reduction Strategies (e) • How does your school’s team plan to assist borrowers who are experiencing difficulty in finding employment through career counseling, job placement assistance, and facilitating unemployment deferments

34. Default Prevention & Management Plan Sections • Measuring Progress (a) • The number of borrowers who defaulted in each of the most recent fiscal years • The type and results of activities performed as described in your default prevention plan • The number of borrowers at least 30, 60, 90 days delinquent each of the recent fiscal years

35. Default Prevention & Management Plan Sections • Measuring Progress (b) • The average amount borrowed by a student each fiscal year • The number of borrowers scheduled to enter repayment each fiscal year • The number of enrolled borrowers who received default prevention counseling services each fiscal year

36. Default Prevention & Management Plan Sections • Takeaways: • A true default management program: • Has a default prevention team / plan / taskforce • Does an internal/external analysis of the characteristics of the school’s defaulters • Reaches out to students who are delinquent on their student loans

37. IFAP Default Prevention Resources Sections Default Management Website Cohort Default Rate Guide Year Official Cohort Default Rate Search Cohort Default Rate and Repayment FAQs eCDR Appeals Website NSLDS Newsletters Default Prevention Plan Overview Default Prevention Plan Regulations at 34 CFR 668.217

38. Questions and Answers