REDUCING COHORT DEFAULT RATES : SUCCESS STRATEGIES FOR YOUR CAMPUS NELNET - NASSAU COMMUNITY COLLEGE - MONROE COLLEGE NYSFAAA Conference October 2013

Session Agenda  Current Data and Trends  Default Prevention and Debt Management Strategies  Partnering with Servicers  Cohort Default Rate Review and Challenge

FY Year Official National Cohort Default Rates

Default Prevention and Debt Management Strategies #1 Borrower Communication #2 Financial Literacy for Borrowers #3 Communication Across Campus # 4 Timely and Accurate Enrollment Reporting #5 Review NSLDS and School Based Data #6 Server Communication

#1: Borrower Communication Empower vs. Enable! Students need to know…  What accepting a loan means  Where it comes from  What a Servicer is (friend not collector)  When or how they’ll pay loan back  Who is involved in the process This increase the likelihood that loans will be repaid successfully.

Borrower Communication In-school Campaigns: At first loan disbursement Inform about Loan Servicer assignment What a Servicer is, why they are important, create picture of servicer as friend (not as collector!) How to find out who their servicer is Suggest they enroll for electronic account access with servicer on their web sites.

Borrower Communication In-school Campaigns: Before semester ends Use NSLDS Portfolio Report with disbursement date parameters to let your student know who their Servicer is. Suggest they enroll for electronic account access with servicer on their web sites.

Borrower Communication Graduation Campaign  Remind them they’re going into repayment  Let them know they’ll be hearing from servicer  Give overview on what to do if there are repayment challenges

Borrower Communication Loan Borrowers: Your federal loan will go into repayment soon after graduation. Remember to: -Complete an Exit Counseling at -Contact your loan servicer to set up timely payments. To find out who your servicer is, visit nslds.ed.gov

#2: Financial Literacy for Borrowers Educate Borrowers on Financial Responsibility  Host a Financial Literacy speaker  the link to financial awareness counseling  Provide link to federal calculators… On your loan request form Accepting loan on website the link to the students !

Financial Literacy for Borrowers It is important to understand your student population. How will you target your message to them? Consider first time college attendees -- They often lack financial guidance and experience.

Financial Literacy for Borrowers Counseling products on Studentloans.gov highlight financial literacy concepts *Challenge: How do we get students to use it?*  Entrance Counseling- required to receive a federal loan  Exit Counseling- required when the student graduates, leaves school or drops below half-time student  Financial Awareness Counseling

#3: Communication Across Campus Student success is everyone’s responsibility A successful student is more likely to be successful in repayment.

Communication Across Campus  Prevention & management of loan default is school-wide effort, not sole responsibility of the financial aid office.  Important for student service & academic areas to have awareness of loan debt, how it affects the borrower and the school  Important to communicate that CDRs are a reflection of the effectiveness of academic program! Shopping Sheet Early Warning System

#4: Timely, Accurate Enrollment Reporting THE IMPORTANCE OF ENROLLMENT REPORTING  Critical for administration of Title IV Loan Programs  Ensures students’ rights are protected  Essential to:  Proper servicing of loan  Preventing defaults  School cohort management

Timely, Accurate Enrollment Reporting  Be sure you make it your business to know that your school is regularly reporting to NSLDS/Clearinghouse  Encourage them to report at least monthly  Be sure institution is aware of ramifications if not reporting in timely manner.  Keep back up documentation to show you have done this

#5: NSLDS & School-based Data School Reports: NSLDS  The School Portfolio Report (SCHPR1) provides details on borrowers ad loans in your current portfolio.  Based on loan repayment begin date  If your school has merged, previous school codes included.  Available in extract only.  The Delinquent Borrower Report (DELQ01) is used to assist with default prevention. Current data can be obtained on the DELQ01 webpage under the tab mark “Aid.”

Main Menu: Requesting a Report

#6: Working with Servicers Servicers increasingly focus on proactive contact with borrowers. Goal: To establish early, positive relationship  Servicers provide financial education and direct services for borrowers; they provide loan training, direct contacts and counseling support for schools  Servicer reports tend to be more current and have more extensive borrower account information  Efforts underway to provide standardized report format

Servicers’ Delinquency Prevention  Provide outbound targeted calling campaigns, inbound call centers to help borrowers become current  Use variety of electronic communication ( , chat, text messaging) to update borrowers on account status  Work with schools to develop borrower messaging. Use variety of tools to get most current contact info on borrowers (skip tracing on delinquent accounts)  Work in partnership with schools to assist borrowers in the later stages of delinquency.

Profile of a Defaulted Borrower Federal Data (from ‘08 database):  70% withdrew before completing their programs of study  91% did not receive their full 6-month grace period due to late or inaccurate enrollment notification by schools  There is high correlation between increased financial literacy and repayment success ** New York Study: 50% of those who defaulted had a total loan balance of $0–$5,000 **

Nelnet: Trends in Borrower Repayment  Borrowers who get into good early repayment habits less likely to default. For these borrowers, delinquency more likely due to life event change, if delinquency occurs at all.  Intervention efforts more successful within the first 90 days of delinquency. From then on, there is a higher likelihood of eventual default.  Setting up auto-pay good determinant of repayment success, as well as signing up for services like Manage My Account.

Nelnet: Trends in Borrower Repayment  Good contact information on borrowers critical. Students in skip-trace status much more likely to default. Schools who collect updated contact information after entrance or exit encouraged to share with servicers.  Much of default or late delinquency group is made up of borrowers with small balances.  Late Stage Delinquency – Borrowers in this category very difficult for servicers to reach since they have avoided contact from us for so long. School intervention helps.

Nelnet: Trends in Borrower Repayment Many borrowers have a knowledge gap when they go into repayment. They are unaware of:  What a servicer does  Who Nelnet is  That they have options in addition to standard ten-year payment,  What deferments/forbearances are  That servicers can assist them if they run into repayment difficulties Please help servicers convey these messages.

The 3-Year Cohort Default Rate  Expands the default tracking window from 2 years to 3 years  Raises penalty threshold from 25%-30%  Increases availability of “disbursement relief” from 10% to 15% (effective 10/01/11)  34 CFR affected the 2009 cohort year.

CDRDenominator: Enter Repayment Numerator: Default Publish RatesCohorts used for Sanctions FY 2011*10/1/10-9/30/1110/1/10-9/30/13September 2014FY 09, FY10, 30% FY /1/11-9/30/1210/1/11-9/30/14September 2015FY 10, FY 11, FY 30% FY /1/12-9/30/1310/1/12-9/30/15September 2016FY 11, FY 12, FY 30% FY /1/13-9/30/1410/1/13-9/30/16September 2017FY12, FY 13, FY Your Current Active 3-year CDR Timeframes

The 3-Year Cohort Default Rate First year at 30% or more  Default prevention plan and task force  Submit plan to FSA for review Second consecutive year at 30% or more  Review/revise default prevention plan  Submit revised plan to FSA  FSA may require additional steps to promote student loan repayment Third consecutive year at 30% or more  Loss of eligibility: Pell, DL  School has appeal rights

Limited Resources/Best Results  Identify Cohorts in effect  Work with Servicers o Pull delinquency reports by cohort year  Identify highest risk (most delinquent)  Develop plan for contact o Phone most effective o , Letters, Text messages if can’t reach by phone o Integrate effort with other campus offices with whom student has relationship

Limited Resources/Best Results  Use school d-base for contact info o When student in school, update contact info, references, personal /facebook accounts, obtain authorization to text, etc.  When contacting borrower, have portfolio of loan history o Recommendations depend on characteristics of loan o Make warm transfer to Servicer while student on phone

Limited Resources/Best Results Students who withdraw are at **HIGH RISK**  Official Withdraw - Required to meet with FA  SAP, Academic Dismissals - Track, monitor separately  Unofficial Withdrawals o Receive info from academic offices, registrar others o Report to NSLDS/Clearinghouse immediately o Reach out to students by mail, phone informing them of obligation re. student loan o Update contact info, address, references, s, etc. so you can contact in future

Other Useful Activities  Grace o Proactive outreach re. Delinquency o Break into cohort years to prioritize  Mid-stage Delinquency o Send out letters, s, other electronic media o Refer to servicer for help/action

Cohort Default Rate Release Dates Not public No sanctions No benefits Public Sanctions apply Benefits apply February (DRAFT) September (OFFICIALLY)

Challenges, Adjustments, Appeals Challenges (Draft) Incorrect Data Challenge (IDC) Participation Rate Index Challenge (PRI) Adjustments (Official) Uncorrected Data Adjustment (UDA) New Data Adjustment (NDA) Appeals (Official) Loan Servicing Appeal (LS) Erroneous Data Appeal (ER) Economically Disadvantaged Appeal (EDA) Participation Rate Index Appeal (PRI)

Cohort Default Rate Review Challenges, Adjustments, and Appeals Challenges Incorrect Date Challenges (IDC) Participation Rate Index Challenge (PRI) Adjustments Uncorrected Data Adjustment (UDA) New Data Adjustment (NDA) Appeals Loan Servicing Appeals (LS) Erroneous Data Appeal (ER) Economically Disadvantaged Appeal (EDA) Participation Rate Index Appeal (PRI)

When/How to Challenge  Start when you receive draft (Feb 2014) o Will receive yr draft o Challenge process will begin o 45-days to submit challenge o Need to be enrolled in E-CDR Watch for NYSFAAA webinar in February!!

What You Can Do Now  Draw down NSLDS Portfolio report for Focus on defaulted borrowers o Go through list - Is borrower in correct cohort year? o Verify - Did borrower default prior to 2013? o Create list of borrowers who are incorrect  Will help you develop the base of challenge (back up doc will need to be attached)

What You Will Do in February  Submit your challenges within 45 days of draft release o Back-up documentation will need to be attached o President’s letter needed (try to obtain in advance o Servicer will review challenge, and agree or not agree  You can request clarification. Servicer data mgr will need to respond to you.

What Happens Next?  You’ll receive notification  September– official rate release o At that point, some might of your successful challenges may still be in your CDR o Can do UDA within 30 days of official release, report to Data Mgr that accepted appeals not taken out of rate

Cohort Default Rate Review - LRDR

Cohort Default Rate Review Data Manager Data Manager:  Depending on the loan, a data manager may be the Federal Loan Servicer, a guaranty agency or in some instances, the Department.  Entry responsible for maintaining and managing the data used in calculating cohort default rates.

Nelnet Default Prevention Resources  Step-by-step guide to creating default plan for your school  School best practices  Links to federal data and resources  Powerpoint presentations, videos  Default plan template  Includes financial literacy link and library of school collateral

FSA Cohort Default Rate Guide The “Cohort Default Rate Guide” (Guide) is a U.S. Department of Education publication designed to assist schools with their Direct Loan Program cohort default rate data. The Guide, on ifap.ed.gov, should be used as a reference tool in understanding cohort default rates and processes.

FSA Cohort Default Rate Review Contact Information Operations Performance Division Phone: Website: Ifap.ed.gov/default management/defaultmanagement.html E-Appeals:

THANK YOU!  Patti Noren, Director of Financial Aid Nassau Community College  Clemente La Pietra, Monroe College  Anne Del Plato, Regional Director of Partner Solutions Nelnet Education Loan Servicing