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Successful Repayment and Default Prevention: It’s Not an Information Problem; it’s a Motivation Problem Presented: March 26, 2014 Rebecca Isaacs NMEAF.

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Presentation on theme: "Successful Repayment and Default Prevention: It’s Not an Information Problem; it’s a Motivation Problem Presented: March 26, 2014 Rebecca Isaacs NMEAF."— Presentation transcript:

1 Successful Repayment and Default Prevention: It’s Not an Information Problem; it’s a Motivation Problem Presented: March 26, 2014 Rebecca Isaacs NMEAF

2 Public education Professors must take attendance— accountability Recruiters must share their experiences Student ambassadors’ communication It takes a campus, not just the financial aid office, to create financially smart students Saturday, April 18, “It Takes a Campus”

3 You have to begin on day one. “I didn't know anyone on campus except my brother. I didn't know how to pick the right classes or find the right buildings. I didn't even bring the right size sheets for my dorm room bed.“ Saturday, April 18, Obama’s Launch Plan [www.rueters.com[www.rueters.com, Michelle Obama, “Obamas Launch Plan to Get More Low-income Kids to College,” January 16, 2014]

4 Saturday, April 18, [Homeroom, US Department of Education Blog, “Making College Affordable for Every American”, August 22, 2013 ]

5 FSA Recommendations Fully Implement the Department’s Plan: Engage Campus-Wide Stakeholders Identify Your Unique Borrower Profiles Set and Track Goals Implement Borrower Awareness Programs Strengthen and Enhance Orientations Strengthen Entrance and Exit Counseling Track Riskiest Borrowers Partnerships Saturday, April 18,

6 6 6 U.S. Department of Education Fact Sheet, September 2013 “… Schools have increased borrower awareness of obligations through incorporating borrower topics at orientation sessions and providing enhanced entrance and exit counseling. Other best practices include borrower tracking, increased contact with delinquent borrowers…and partnering with other stakeholders to optimize default prevention, resolution, and reduction.” [Fact Sheet September 30, 2013.]

7 Saturday, April 18, NY Times Editorial Columnist, Gail Collins “…Don’t you think there should be someone in charge of calling [students] once a week and yelling: ‘$800 a month until you’re 51 years old’?” [New York Times, “The Lows of Higher Ed”, September 14, 2012]

8 Motivate the borrower to make the first payment: Take action: Motivate borrowers to get started on the right foot to successful loan repayment. 7 out of 10 borrowers that ultimately default never made their first payment. Saturday, April 18, Primary Objective

9 Saturday, April 18, Student Facts: Who struggles most? Students who drop out of college before earning a degree.

10 Motivation You still have to pay your loans! Get back to school… –How close are you to graduating? –Is there another option? Saturday, April 18,

11 Saturday, April 18, Saturday, April 18, Average debt of college seniors: $29,400* Monthly payment over 10 years: $338 Average debt of college seniors in NM: $17,994* Monthly payment over 10 years: $207 *The Project on Student Debt, The Class of Student Facts:

12 Saturday, April 18, Saturday, April 18, A successful financial education program must be strong enough to influence the behavior of the most difficult students. The students most likely to default are the most difficult students to influence. We have a motivation problem, not an information problem. Consider this…

13 Saturday, April 18, Debtor Psychology Two Obstacles: Avoidance: “I don’t want to deal with this…” Ignorance: “I don’t know what to do about this…” First obstacle is much harder to overcome than the second… AVOIDANCE IGNORANCE

14 Three Causes of Avoidance: Fear Confrontation Negative treatment Personal embarrassment Saturday, April 18, Saturday, April 18, Debtor Psychology

15 Procrastination & Apathy “It’s only a student loan…” “It’s a government loan – it will take someone a long time to come after me.” “What are they going to do, repossess my brain?” Saturday, April 18, Saturday, April 18, Debtor Psychology Second Cause of Avoidance:

16 Saturday, April 18, Saturday, April 18, Debtor Psychology “I cannot afford the past due amount…” “I have so many other problems…” “There is nothing I can do right now…” Third Cause of Avoidance: Feelings of Being Overwhelmed or Helpless

17 How do we overcome avoidance? Borrower Communication that is: Persistent… Relentless… Sustained… Saturday, April 18, Saturday, April 18, Debtor Psychology Marketing Rule of 7

18 Second Obstacle: Ignorance Lack of Information about options and resources Confusion about who to call Saturday, April 18, Debtor Psychology Saturday, April 18,

19 How do we overcome ignorance? Give recommendations, not information We must tell borrowers what to do and how to do it. “Contact your servicer” “Ask About…” “Here are links, resources, contact points…” Saturday, April 18, Debtor Psychology Saturday, April 18,

20 Cohort analysis: What demographics make up the largest default group? Change your processes accordingly. Track your changes. Develop counseling for your dropouts. You will be surprised at your successes! Saturday, April 18, Case Study

21 Start at the beginning… Entrance counseling Communicate every time they borrow Suggest actions that can trigger successful borrowing s and text messaging are simple and affordable means of communication Saturday, April 18, Student, This semester, you borrowed: $X Your total loan amount so far is: $X Your monthly payment will be: $X Here are some resources to help you with successful loan repayment. Love, School

22 Yes; I did say text messaging! Saturday, April 18,

23 Saturday, April 18, “I authorize my schools… and their respective agents… to contact me… at … my cellular telephone… using automated dialing equipment or artificial or prerecorded voice or text messages.”

24 “Mandated exit interviews are not a “teachable moment” for this information; we need to inform students more smartly. Consideration should be given to information at the time repayment kicks in --- usually six months post-graduation.” [Inside Higher Ed, Karen Gross,Student Loans I: Yes, Something Is Wrong, March 21, 2014] Karen Gross is president of Southern Vermont College and a former policy adviser to the U.S. under secretary of education. Saturday, April 18, Don’t Stop! One-off communications ARE NOT enough!

25 Saturday, April 18, 2015 Call Center s Text Messages Web Resources Skip Tracing Targeted Mailings Persistent, relentless and sustained communication of recommendations, options and resources. 25 Communication Strategy: Saturday, April 18,

26 Recommendations Sponsor or Link to Online Resources: U.S. Department of Education Resources Link to other Commercial Resources Saturday, April 18, Saturday, April 18,

27 Recommendations Timing of Borrower Communication Begin NO LATER THAN 60-Days Delinquent - Why? 60-Days Delinquent = 3 Payments Due Average 1 st Year Student Owes: $150 Average Senior Owes: $900 Avoidance in full swing… Saturday, April 18, Saturday, April 18,

28 Communications Schedule Saturday, April 18, Saturday, April 18, SundayMondayTuesdayWednesdayThursdayFriday Week 1 2PM Text 4 PM PM Phone Week 2PM Phone 4 PM Week 3 3PM PM Phone Week 4PM Phone 2PM Text 1PM Sample communication schedule, days

29 Communications Schedule Saturday, April 18, Saturday, April 18, Sample communication schedule, days SundayMondayTuesdayWednesdayThursdayFriday Week 1 2 PM Text 4 PM PM Phone Week 2Text 2 PM PM Phone 4 PM Week 3 3 PM Text 1 PM PM Phone Week 4PM Phone Text 3 PM 2 PM

30 Results – How Do You Know? Follow delinquency This month’s 60-day delinquency is next month’s 90-day delinquency. You want the month-to-month delinquency trends to aim downward. Saturday, April 18, Saturday, April 18,

31 Conclusion Communicate where students are… Use automation… Don’t stop… Questions? Saturday, April 18, Saturday, April 18, Rebecca Isaacs NMEAF


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