Tony Glad, Executive Vice President ANZFAA – Sydney 2010

A high Cohort Default Rate can:  Result in a loss of eligibility for Title IV loans  Possibly reduce school eligibility for other sources of funding  Affect disbursement policies  Cause extra work to reduce default rate  Cause students to reconsider attending an institution

 Loan default rates are on the rise  Educational costs/student debt are rising  The economy  “New” three-year Cohort Default Rate (CDR) calculations and sanctions  “New servicers” - Guarantors and FFELP lenders are no longer strong players

FY 2003FY 2004FY 2005FY 2006FY ,568144,128161,951204,507225, %+12.3%+26.4%+10.2%

FY 2005FY 2006FY 2007 School Type Default Rate # Default Borrowers Default Rate # Default Borrowers Default Rate # Default Borrowers Public4.3%78,0404.7%94,6275.9%102,919 Private2.4%23,4112.5%26,7353.7%29,558 Proprietary8.2%60,3799.7%82, %92,731 Foreign1.0%1211.2%1502.2%163 Total4.6%161,9515.2%204,5076.7%225,371

 Cohort Default Rate data is retrospective, and latest published figures are from 2007  US economy started to decline in 2008  Unemployment began to increase  Interest rates on Stafford and PLUS locked in at 6.8% and 8.5% (July 1,2006)mean higher monthly payments than early 2000’s

 The Higher Education Opportunity Act of 2008 expands the cohort default rate window from 2 years to 3 years.  Essentially, borrowers have a longer period in which their defaulting can affect their school’s default rate.  Would take foreign schools from 2007 CDR 2.12% to 3.61%.  Curious about you?

 Three year rates won’t go into full effect until FY2011’s data is available, so sanctions based on this won’t go into effect until FY2014  New sanction levels- 3 years at 30% (up from 25%) lead to ineligibility 15% (up from 10%) for 30 day delay for 1 st yr and multiple disbursement rules

First year>30%  School must develop a default prevention plan and task force  Submit plan to ED Second consecutive year> 30%  School must review/revise plan  Submit revised plan to ED  ED may require additional efforts Third consecutive year> 30%  Loss of eligibility

 Guarantee agencies and FFELP lenders now out of the picture  Reporting of student loan amounts, revisions, refunds and cancellations must be done by school via NSLDS ◦ A return of funds to G5 is not automatically reported; school must do so via COD and NSLDS

ServicerNSLDS Code Borrower phone School PhoneWebsite ACS www.ed-servicing.com Great Lakes www.mygreatlakes.org Nelnet www.nelnet.com PHEAA www.mtfedloan.org Sallie Mae www.salliemae.com

 Multiple servicers used to create an environment of competition to ensure student borrowers receive the best in business service  All of a borrower’s loans should be at one servicer  School may not designate a servicer  Loan volume will be allocated based on default management performance and customer  Satisfaction surveys (borrower, school, ED )

 Counseling strategy  Data collection  Data reporting  Contact with student

 Solid counseling program using Entrance Counseling ◦ Required for all first time borrowers in the Federal programs ◦ Can be an institutional requirement for all borrowers  Should be done before student arrives and funds disbursed

 Studentloans.gov ◦ Links in with Direct Loan system  Mapping your future ◦ Same process many have been using ◦ Verifying if still allowed for foreign schools  In person presentation  Stronger impact and more dynamic interaction

 Must be made available to all students when they graduate or cease to be enrolled at least half-time  Harder to enforce than Entrance Counseling ◦ What things have you done?  If student doesn’t attend need to follow up

 Studentloans.gov ◦ Links in with Direct Loan system  Mapping Your Future ◦ Same process many have been using ◦ Still exists – for now  In person presentation  Stronger impact and more dynamic interaction

What must you do if a student doesn’t do Exit Counseling before leaving your university? Either:  Ensure that borrower completes interactive electronic counseling,  Mail written materials to the borrower at their last known address within 30 days after learning they withdrew or failed to complete exit counseling.

 It is important to maintain current records showing the students ◦ Mailing Address ◦ Phone Numbers ◦ Other contact information  Will be used by servicers chasing the student during delinquency (before a student defaults)

 Keep NSLDS up-to-date with all enrollment data  Easier now there is only one lender, but university now bears full responsibility for reporting – no lender or guarantor will do it on your behalf  Keeping servicer informed when student withdraws ◦ Let them know within 30 days if student leaves before expected completion date

 Students are always more likely to want to stay in touch with the university rather than a lender  Maintaining an alumni connection is often best way to make sure you have contact details