ASSESSING YOUR DEFAULT AVERSION PLAN Champions of Financial Aid - 2017 ILASFAA Conference

Champions of Financial Aid - 2017 ILASFAA Conference Anticipated Outcomes Explore basic qualitative research of FAAs on best practices on lowering cohort default rates Influence of federal policy Outlining components of a Default Aversion Plan Impact on policies & procedures – daily business operations Champions of Financial Aid - 2017 ILASFAA Conference

Qualitative Research: Best Practices in Default Aversion Basic Qualitative Research using Transtheoretical Behavior Model with FAA interviews Different experiences in terms improving borrower awareness

Building the Framework & the Conversation Institutional response to changing borrower demographics Identifying “at risk” borrowers Identifying human capital needed w/limited resources Improving borrower awareness (direct vs. indirect costs, loan types, limits)

Quantitative Research: Training Model to Infuse Enrollment Management in-depth statistical analysis to identify students data analysis can demonstrate that every student is a potential loan repayer or defaulter Data can support financial aid staff in strategically engaging the campus community Borrow Do not borrow Repay student Loans Default on student loans

Statistical Framework cross-departmental data analysis to examine the following student characteristics: Demographic data for prospective and current students Loan repayment patterns for freshmen Satisfactory academic progress (SAP) Grade point average (GPA) and default rates Cohort graduation rates

Themes: Part One – Borrower Profile varying degrees of financial literacy aggregate loan totals household incomes shifting attitudes towards adopting one’s repayment obligations socioeconomic factors increase the amount of student loan debt accrued by low-income students and ultimately lead to higher incidences of default Residential housing

Themes: Part Two- Awareness Counseling practices should be a reflection of borrower circumstances and take into account whether they are dependent or independent use of loan request process, based on the principals of social liberation has been effective in mitigating unnecessary student borrowing The exit counseling process provides student borrowers with relevant information regarding their aggregate loan totals, various repayment options, anticipated monthly repayment amounts and information regarding possible consolidation, forbearance and deferment options “at risk” borrowers attend a mandatory entrance loan counseling session, while borrowers deemed to be less risky complete and online loan counseling session

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Themes: Part Three - Compliance institution’s benefit greatly from the tuition paid by student loan assets and therefore must assume the greatest share of liability in making sure that student borrowers can be gainfully employed By adding a third year to its cohort default rate calculation, the federal government is introducing a revised position in regards to how long higher education institutions should be held accountable for students who default non-school related factors that have been shown to influence student default (borrower characteristics, regional job market, economy) concerns over federal sanctions is the most commonly cited reason for community colleges to withdraw their participation from the Federal Direct Loan Program

Themes: Part Four – At Risk high amount of loan debt not doing well academically withdraw – officially or unofficially from the college prior to obtaining their degree borrow for expenses other than direct costs GED as opposed to a regular high school diploma low class rank

Components of the Plan Current cohort default rate, national average, state average and institutional type average Financial Literacy for Borrowers Early Identification and Counseling for Students at-Risk Communication Across Campus Default Prevention and Retention Staff Default Prevention and Retention Staff Alumni Survey on Gainful Employment by degree program Default Rate history

Impact on Policies & Procedures Automated Budget and Packaging Philosophy Allowable budget adjustments Household Income falling below poverty guideline Dependent vs. Independent Living on campus vs. Off campus In Person Borrower Interviewers Loan Request Process Campus based Federal Direct Loans Private Loans

Results of the Plan Number of ‘at risk’ borrowers declines Number of borrowers remain level but loan indebtedness declines Number of unsubsidized loans and/or private loans declines Partnering offices encourage potential borrowers to meet with the Financial Aid Office prior to borrowing Number of classroom presentations to first year and graduating students increase Number of students who decline loan offers What were your strategies? When did you say you were going to test them? What was the outcome? Presentations to administrative team or retention team on SAP or gainful employment?

Research Lewis, B.J. (2015). Connecticut Community College Default Aversion Strategies: An inquiry into the perceptions of financial aid administrators in influencing student repayment behavior. Texas Guaranteed Student Loan Corporation (2007). A Clear and Present Danger to Institutional and Student Success: A training model for embedding student loan default aversion within strategic enrollment management.

Available for Questions Maureen ‘mo’ Amos Executive Director of Financial Aid Northeastern Illinois University (mtamos@neiu.edu) For copy of institution Default Aversion Plan send email request Champions of Financial Aid - 2017 ILASFAA Conference