Default Management Plans: Everything you’ve always wanted to know, but were afraid to ask!

1. Default Management Plans: Everything you’ve always wanted to know, but were afraid to ask! Scott D. Lewis Debt Management Consultant USA Funds Services MASFAA Conference November 19, 2003

2. Today’s Agenda • Are we making a difference? • The ED’s take. • Basic requirements. • Other considerations. • Campus-wide effort. • A tool kit.

3. Making a difference The State PIRG’s Higher Education Project

4. Making a difference The State PIRG’s Higher Education Project

5. Making a difference • Estimated 39 percent of all students graduate with unmanageable debt • 55 percent of African-American students • 58 percent of Hispanic students The State PIRG’s Higher Education Project

6. Making a difference U.S. Department of Education

7. Making a difference National Cohort Default Rates http://www.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html

8. Making a difference 2001 national cohort default rate Number of schools: 6,240 Borrowers in default: 130,036 Borrowers in repayment: 2,380,741 Borrower default rate: 5.4% http://www.ed.gov/offices/OSFAP/defaultmanagement/2000instrates.html

9. Making a difference 2001 MASFAA cohort default rate Number of schools: 196 Borrowers in default: 2,588 Borrowers in repayment: 67,119 Borrower default rate: 3.8% http://www.ed.gov/offices/OSFAP/defaultmanagement/2000instrates.html

10. Making a difference • Efforts of post-secondary institutions • Counseling • Education • Creative packaging • “Front-line defense”

11. Pulling it all together • A document that outlines the default prevention efforts of a post-secondary institution • A Default Management Plan

12. The ED’s Take • Sample Default Management Plan • DCL ID: GEN-01-08 Provides guidance on the development of a Default Management Plan if a school is required to use a plan, under 34 CFR668.14(b)(15), because it is participating in the FFEL or Direct Loan Program for the first time or has undergone a change of ownership. • Implementation of the sample plan satisfies those requirements.

13. The ED’s Take • Recommends that other schools consider implementing some or all of the measures described in their sample plan. • Additional ideas on default prevention can be found by visiting lender and guarantor web sites as well as referencing the DOE’s publication, “Ensuring Student Loan Repayment: A National Handbook of Best Practices”.

14. Basic Requirements • A school that successfully implements a Default Management Plan does the following: • Uses its resources efficiently. • Provides enhanced initial and exit counseling. • Works to reduce the number of dropouts and walk away students. • Works to ensure that its borrowers can repay their student loans. • Keeps in touch with its borrowers.

15. Other Considerations • A comprehensive Default Management Plan should try to encompass some or all of the following areas: • Analysis of your student population. • Hiring and training of campus staff. • Evaluation of current default management plan. • Aid packaging policy. • Education of borrowers. • Networking and development of external relationships. • Effective utilization of reports. • Development of a resource library.

16. A Campus-Wide Concern • The program must begin in the office of the President or Chancellor and include relevant senior executive officials, faculty, staff and students.

17. A Tool Kit • Institutional Pros & Cons Worksheet • Checklist for Developing a Default Management Plan • Ensuring Student Loan Repayment: A National Handbook of Best Practices • Sample Default Management Plan • Guide to Developing a Default Management Plan http://www.usafunds.org/debt_management/def_mgt_plan.htm

18. Questions ? ? ?