THE BIG DEFAULTERS

1. THE BIGDEFAULTERS Don’t have them be yours! Presented by: Don Buehrer Regional Director Nelnet Partner Solutions

2. Agenda – Just the facts. . . • Rising cohort default rates • Why are cohort default rates going up? • Why are the borrowers confused? • School responsibilities and challenges • All around best default prevention practices • Within the Financial Aid Office • When partnering with a 3rd Party Provider Joe Friday: “ You want this cleared up with facts, not opinions. And that’s the way it’s gonna be.”

3. Rising cohort default rates • National FY 2-year CDR has jumped 25% between 2008 and 2009 • Cohort default rates have reached their highest levels in 12 years The story you are about to see is true.

4. Rising cohort default rates • National FY 2009 2-year CDR has climbed to 8.8% • Public institutions increased from 6% to 7.2% • Total increase of 20% • Private institutions increased from 4% to 4.6% • Total increase of 15% • For-profit institutions increased from 11.6% to 15% • Total increase of 29.3% • The 2009 cohort is the first cohort year that will be monitored for the new three-year CDR • Draft FY 2009 3-year CDRs will be provided to institutions in February 2012 with official rates released in September 2012 Joe Friday: “Do you have real adventure in your soul? You better have.”

5. Rising cohort default rates Cohort default rates have increased by as much as 50% between the 2 year rate and the new 3 year rate according to U.S. Department of Education (ED) data Joe Friday: “We need tougher laws. We should really crack down on them.”

6. Why are cohort default rates going up? • More borrowers with higher loan balances • Sluggish economy makes finding jobs more difficult • Great confusion among borrowers • Lack of knowledge of their rights, responsibilities, and options • Institute for Higher Education Policy, March 2011 • Confusion on who services their loans – esp. for borrowers with split servicing • Nelnet Loan Servicing – Default Prevention Manager Joe Friday: . . .”Now can I have the facts?”

7. Why are the borrowers confused? • Ending of the FFEL Program = changes in lender to the Department of Education (ED) • Loans PUT to the Department of Education often resulted in split servicing • Department of Education owned loans continue to move to provide borrowers with a single servicer • FFEL loan portfolios may be acquired as former lenders choose to sell these assets • Some FFEL lenders being allowed to repurchase PUT loans Joe Friday: “The young people in this country are searching for a direction and they’re having trouble finding it.”

8. School responsibilities – Why is this our problem? • Schools must have a 3yr CDR less than 30% to avoid sanctions including potential loss of Title IV eligibility for the following circumstances: • Three consecutive years of 30% CDR or higher • One year with a CDR over 40% • Effective when the third 3-year CDR is published in September 2014 (Cohort years = ‘09, ‘10, ‘11) Joe Friday: “Okay mister, I get the picture now.”

9. School challenges – Why has this gotten harder? • Loss of industry partners who shared responsibility for lower default rates • Lenders • Guarantee Agencies • Schools must now work with all ED servicers (TIVAs) • Multiple sources of data Joe Friday: “And paperwork? Oh, you’ll fill out a report when you’re right, you’ll fill out a report when you’re wrong. . . you’ll fill out a report on the reports you’ve made!”

10. Default management best practices • Whose driving your default • management efforts? • School /in house • 3rd Party Provider Officer Gannon: “What were you doing all this time?”

11. Default management best practices • What works (no matter who is driving)? • Establishing financial wellness/literacy programs for all borrowers • Educate borrowers from the beginning • Build trusted relationships before entering repayment • Encourage conservative borrowing • Go beyond entrance/exit requirements Officer Gannon: “We were working the day watch.”

12. Default management best practices • What works (no matter who is driving)? • Provide individualized counseling • Provide each borrower with information for understanding their circumstances and loan amounts • Total amounts borrowed • Expected payment information • Servicer/contact information • How to access their information on NSLDS • What to do if they cannot make their payments • Find out how each borrower prefers to be contacted Joe Friday: “You’ll do leg work until you’re sure you’ve talked to everybody. . .”

13. Default management best practices • What works (no matter who is driving)? • Early intervention – don’t wait until >90 DPD to start contacting delinquent borrowers Joe Friday: “ I wouldn’t want it any other way, and neither would you.”

14. Default management best practices • What works (no matter who is driving)? • Determine whether to use a shotgun or rifle approach • Most effective order and methods for outreach • How tech-savvy are your school borrowers? • Contact borrowers using their preferred method • Look into texting and social media options • Keep records as to how different borrowers respond to methods of outreach Joe Friday: “ You’ll run the files until your eyes ache.”

15. Default management best practices • What works (no matter who is driving) • Look for real solutions – not a quick fix • Make sure the person contacting your borrowers are well versed in repayment options, deferments and forbearances • Understand the underlying issues and look for solutions that will avoid rolling delinquencies • Will using a forbearance help? Or just delay defaults? • Consider the impact of using forbearances on Gainful Employment • Include all loans at all servicers to make sure nothing is missed. 1 loan defaulted = 1 defaulted borrower in your CDR calculation Joe Friday: “Sometimes the going’s rough. It has to be – but it’s the best way to get at the truth we know of.”

16. School best practices • Work on student recruiting and retention • Monitor and track students most at risk • Develop an “early warning system” • Understand why your students leave before completing their course of study • Look for trends to take action to remove barriers • Analyze your students’ data to identify those most at risk on your campus • Engage and connect with your at-risk students while on campus • Develop a Student Success program Joe Friday: “We want help; we welcome help; we’re getting help, from legitimate groups and responsible citizens.”

17. School best practices • General characteristics of students most at risk: Your campus may have other unique factors that need to be identified for at-risk students. Joe Friday: “It looked like he was going to straighten out. He didn’t.”

18. School best practices • As students enter grace • Make sure your enrollment status changes are timely • Of the borrowers who default, many do not receive their full 6-month grace period due to late or inaccurate enrollment notification by the school - Make sure borrowers are aware of their options of repayment plans and deferments and forbearances before entering repayment Joe Friday: “Because you got rights, you dig?”

19. School best practices • More recommended actions to take as students enter grace / leave your school • Validate collect additional contact information • Offer re-enrollment assistance if needed • Offer transfer assistance if needed • Provide employment counseling and search preparation • Job placement assistance Officer Gannon: “You can find enough to keep you busy right here.”

20. Best practices when working with a 3rd party default management provider • Work as partners to solve your school’s challenges • Make sure you introduce the 3rd party to your borrowers early and often! • Posters on campus • Information / links on your website • During entrance / exit counseling sessions • Include the 3rd party’s information in school publications or other borrower correspondence Joe Friday: “I’ll lay you odds it mattered to someone.”

21. Best practices when working with a 3rd party default management provider • Work as partners to solve your school’s challenges • Capitalize on the strengths of each other • What can the school do best? • What can the 3rd party do best? • Share information about your 3rd party provider across all student-facing office across campus Joe Friday: “Keep going!”

22. Best practices when working with a 3rd party default management provider • Understand the services provided to your borrowers • Be familiar with the technology and processes provided by your 3rd party from the borrower’s perspective • Be able to respond to your students’ questions if needed (across all campuses) • Be familiar with your 3rd party’s borrower contact information and website to direct your borrowers to your servicer Joe Friday: “Yeah, well they have a few things going for them. . .”

23. Best practices when working with a 3rd party default management provider • Understand the services provided to your borrowers • Have copies of borrower correspondence available in your financial aid office so your staff understands what is being communicated to the borrowers • Have your 3rd party provider review any school created messaging collateral before releasing or printing • Keep all messaging consistent Joe Friday: “ Here’s the key to this.”

24. Best practices when working with a 3rd party default management provider • Good communication and understanding between parties is the key to successful default prevention • It is all about working together as partners for a common goal! Joe Friday: “I see the results – every hour on the hour, every day.”

25. Questions about this presentation? Written and produced by: Janet Dehnert Nelnet Diversified Solutions 785.856.3707 janet.dehnert@nelnet.net Joe Friday: “This is the city, I work here.”