1. Default Management Suggestions for Your Campus Materials developed and provided by College Foundation, Inc. (CFI)

2. Objectives Regulatory Requirements The Value of a Campus Default Management and Prevention Plan Developing Your Plan Analyzing Data Plan Components Questions to Ask Yourself Additional Resources

3. Regulatory Requirements 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 (34 CFR 668.14(b)(15)).

4. Regulatory Requirements All schools are required to comply with regulations concerning –Entrance Counseling –Exit Counseling –Timely reporting of accurate enrollment information to the U. S. Department of Education

5. Department of Education Recommendation The Department recommends that every school implement a default prevention and management plan to: –Promote student and school success –Preserve the integrity of the loan programs –Reduce costs to taxpayers

6. Value to Your School Default Management promotes student and school success by –Increasing retention –Reducing delinquency and default

7. Value to Your School Default Management preserves the integrity of Loan Programs –Public perception is important –Avoid limitations on participation in aid programs due to excessive cohort default rates

8. Value to Your School Default Management reduces costs to taxpayers –It is the taxpayers’ money we are spending –Schools have a fiduciary responsibility to comply with regulations and protect the public’s interest in student financial aid funds.

9. Value to Your Students Default Management helps your students –Learn good debt management practices –Establish a healthy credit history Everyone wins!

10. Consequences of Default Borrower Consequences: –Loan balance increases –Default is reported to credit bureau –Wages may be garnished –Federal income tax refund may be seized –Ineligible for additional federal student aid

11. Consequences of Default School Consequences –Loss of participation in Title IV student aid programs (FFEL, Direct Loan, Pell, etc.) –School may be provisionally certified for participation

12. Consequences of Default TIV participation is in jeopardy if –Federal Perkins Loan default rate ≥ 15% –FFEL or Direct Stafford default rate ≥ 40% in most recent fiscal year Or –FFEL or Direct Stafford default rate is ≥ 25% in three most recent fiscal years

13. Consequences of Default – HEOA FY 2012 – the 25% threshold becomes 30% Beginning with Fiscal Year 2009, the new CDR formula will include students who default by the end of the second fiscal year after beginning repayment –Includes a longer repayment history –Most schools will likely see in increase in their cohort default rates (CDR)

14. Consequences of Default - HEOA Expect to see CDR based on longer period of time after October 2013 Borrowers entering repayment this fiscal year (Oct 1, 2008 to Sept 30, 2009) who default on or before Sept 30, 2011 will be the first group in the CDR based on the longer period of time

15. Consequences of Default - HEOA If a low percentage of school’s students borrow loans, the school is exempt from the default threshold requirement. –Participation rate index measures the number of students who borrow compared to the number of regular students at the school –The participation rate index will increase from.0375 to.0625 per HEAO

16. Consequences of Default - HEOA US Department of Education will report –Life Cohort Default Rates as well as the currently reported Fiscal Year CDR –Listed for each category of institution CDRs will be listed on the U S Department of Education’s College Navigator Website

17. Developing Your Plan Consider –Staff and resources –Peer institutions’ activities –Partners (lenders, servicers, guarantors) –Evaluation of success It takes a campus to develop and implement a successful default management plan.

18. Developing Your Plan A comprehensive plan begins at the early stages of enrollment and continues after a student leaves your campus. A comprehensive plan involves more than the financial aid staff.

19. Analyzing Default Data Who is defaulting? Types of data you might analyze: –High school attended –Program of study –Demographic information –Grades Why are they defaulting? Remember that you cannot discriminate against groups of students.

20. Who Defaults? Major indicators that default is more likely: –Students who do not graduate –Students who perform poorly and do not make effort to improve their performance X

21. Who Defaults? Other characteristics of those likely to default include: –Failure to provide updated contact information –Face poor job prospects –Have other financial burdens –Marriage to another student with debt

22. Identifying Delinquent Borrowers NSLDS Date Entered Repayment Report –Available upon request –Dept recommends that schools compare the DER Report to their records bi-monthly. –Benefit: Borrower enters repayment in the correct cohort year and school’s cohort default rate is more accurate

23. Analyzing Default Data Review the draft and official Cohort Default Rate data - Loan Record Detail Report (LRDR) –Is your rate accurate? –Does it include the correct borrowers and loans? –Challenge incorrect data

24. Identifying Delinquent Borrowers Check with your lender partners for on-line tools available for financial aid administrators to: –Identify students who are at various stages of repayment or delinquency –Provide updated contact information to the lender

25. Plan Components: Entrance Counseling Enhance your entrance counseling –Delivery method: In person or on-line or both? –Gather additional information: Additional references Other family members (beyond those requested on the loan application) Cell phone numbers Email addresses Reminder: Entrance counseling is a school responsibility.

26. Plan Components: Financial Literacy Provide financial literacy information to your borrowers –Increase knowledge about being financially healthy, budgeting, avoiding debt, managing debt, repaying student loans

27. Plan Components: CFNC’s Financial Literacy 101 CFNC’s Financial Literacy 101 interactive on-line course is available to all North Carolina students. Unless stated otherwise, the tools shown in the presentation are available to ALL students, regardless of their lender choice.

28. Plan Components: Limit Access to Credit Card Companies Consider limiting credit card companies’ access to your students and to their information Adult students may already have accumulated significant consumer debt.

29. Plan Components: Interim Counseling Require annual entrance counseling Review lender disclosure statements to the student (cumulative debt) Remind student about available tools –Loan repayment calculators –Calculators that consider debt and career choices –Budgeting tools and calculators Provide contact information for their lender, servicer, guarantor Encourage them to use NSLDS for students

30. Plan Components: Calculators and Tools Stafford Loan Repayment Calculator –CFNC.org –Paying for College Tab Available to all students

31. Plan Components: Calculators and Tools Smart Borrower Calculator Available to all students

32. Plan Components: Calculators and Tools Budget Calculators Available to all students

33. Plan Components: Calculators and Tools Real World Calculator Available to all students

34. Plan Components: Calculators and Tools Lenders often provide on-line services that allow borrowers to check their loan status, balance due, etc. Example for CFI Borrower

35. Plan Components: Calculators and Tools NSLDS for Students

36. Plan Components: Communication Across Campus Information about borrower’s academic progress and enrollment status –Required to report enrollment status to Department of Education Student receives full grace period Lender and servicer can communicate with borrower appropriately –Adhering to a monthly reporting schedule keeps data up to date -- and you in compliance.

37. Plan Components: Communication Across Campus Combine efforts with academic advisors, and faculty Increased retention and improved graduation rates could lead to reduced default rates

38. Plan Components: Communication Across Campus Students who withdraw –Students who do not successfully complete their programs are more likely to default –Proper and timely R2T4 calculations Reduce student debt by returning loan funds –Exit Counseling Required when student is no longer enrolled, not just at graduation

39. Plan Components: Using Your Default Data Additional activities for those borrowers most likely to default Provide data to administration for evaluation and planning Evaluate the effectiveness of strategies

40. Plan Components: Exit Counseling Enhance your exit counseling –Delivery method: In person or on-line or both? –Gather additional information: Additional references Other family members (beyond those requested on the loan application) Cell phone numbers Email addresses Reminder: Exit Counseling is a school responsibility

41. Plan Components: Communication with Former Students How long are student email accounts active after the student leaves or graduates? Can students use job placement/career services after leaving school? Collect as much contact information as you can during exit counseling Phone calls and letters Communicate in evenings or on the weekend

42. Plan Components: Communicating With Delinquent Borrowers Early Stage Delinquency Assistance –Highly focused effort –Work with those who withdrew or failed to complete academic program –Work with those who fall into particular categories of “likely defaulter” based on your school’s research

43. Plan Components: Communicating With Delinquent Borrowers Late Stage Delinquency Assistance –Help lender/servicer/guarantor get in touch with the delinquent borrower –School contact may have a positive impact on the situation

44. Questions to Ask Yourself 1.What does our default data tell us? 2.What resources do we need for this effort to be successful? 3.Which campus offices will be involved in this effort? 4.What are our peer institutions doing?

45. Questions to Ask Yourself 5.Will we enhance our loan counseling efforts? If yes, how? 6.How will we communicate with former students? 7.How will we measure success?

46. Additional Resources CFNC.org –A service of the state of North Carolina provided by Pathways, CFI, and NCSEAA ifap.ed.gov –Tools for Schools includes information about default management under “FSA Assessments” –DCL ID Gen 05-14 (Posted 09/30/2005) – Sample Default Prevention and Management Plan (the basis for this presentation) also lists additional resources mappingyourfuture.org Ensuring Student Loan Repayment: A National Handbook of Best Practices –The Student Loan Repayment Symposium, October 2-4, 2000 – US Dept of Education)

47. Materials provided and developed by College Foundation, Inc.