2011 WASFAA Conference Financial Literacy, Debt Management and Default Aversion - Finding Synergy for Success ● ● ● Performance Management for Student Loans

Performance Management Program Overview The program is a holistic portfolio management concept:  The portfolio is defined as the institution’s entire body of current or former students having Title IV loans  At any point in time, up to 4 cohorts are actively touched by program activities  Each cohort moves through the program with strategies targeted to the life cycle of the loans  Program activity begins at entry into the loan grace period  Program activity terminates at the end of the 3 year cohort measurement period Remedial/Maintenance Mode (Repayment / Delinquency) Preventive Mode (In School / Grace) 45 Month Performance Management Program REPAYMENT COHORT 1 REPAYMENT COHORT 2 REPAYMENT COHORT 3 REPAYMENT COHORT 4 Cohorts are dynamically defined as loan records indicate changes in graduation dates Message and media are tailored to loan stage and action/response activity Status Changes Status Changes Status Changes High Intensity/Broad ScopeLower Intensity/Targeted Scope Campaign Dynamics

Cohort Treatment Model 2 Lifecycle Strategies GRACE ESTABLISHED PAYERS DELINQUENT OR DEFAULT IN-SCHOOL Message Response Cycle Message Response Cycle Message Response Cycle Message Response Cycle Message Response Cycle Message Response Cycle Message Response Cycle High intensity Establish relationship Create awareness Remind/Inform/ Educate Informative tone Risk based intensity Remind/Educate/Call to Action Remediate Tone varies from complimentary to urgent End of Measurement Period Remedial/Maintenance ModePreventive Mode Results are measured from movement of account statuses Message Response Cycle Activity begins 90 days before Grace Loans in a given cohort are treated based on their stage of life: Each cohort receives communication strategies based on borrower status Cohort is dynamically defined as drop-outs introduce themselves to a cohort and expected graduation dates change Strategies adapt to changes in loan status, previous outreach activity, and cohort membership Loan Status Changes Status changes drive loans into campaign strategy segments

Model Communication Strategy 3 GRACE ESTABLISHED PAYERS DELINQUENT OR DEFAULT IN-SCHOOL Remedial/Maintenance ModePreventive Mode Communication Channel and Intensity: Actual strategies will utilize all the available contact information Intensity is front-loaded – the emphasis is to pre-emptively avoid delinquency Segmentation of intensity and channel will evolve with each portfolio Auto Messaging SMS Auto Messaging SMS Auto Messaging SMS Phone Calls times/month 1 time/month times/year Auto Messaging SMS Phone Calls times/month1 - 3 times/month 1 -2 times/quarter

Communications Design and Content: Communication is done on a first-party basis – in the name of the school School provides naming and branding guidelines for customization of communications Communications cycle can be coordinated with school-based outreach communications or programs (e.g. exit counseling) Based on lifecycle and previous activity, communications contain elements of: Consumer credit education (responsible use of credit) Specific loan education (options for dealing with their particular loans) Guidance (“how to” get a forbearance, request loan forgiveness program, etc.) Calls to action (“protect your credit rating”, “update your address”, “call your servicer with your enrollment status”) Congratulations (linking the value of academic success to their loan responsibilities) Feedback and Segmentation Cycle: A borrower’s response to a particular communication will drive subsequent iterations of the communication strategy. Borrower Response Acknowledgement No Response Transfer to Servicer “Opt out” / “Do not call” New Strategy Segment Special Handling Segment Base Strategy Segment Communication Delivery

Program Delivery Data and Analytics : Program is built upon a robust foundation of servicer, NSLDS, and school information systems data to provide the most accurate up-to-date data available for identifying loan status. Program activity information is fed back into the data warehouse and tagged to each loan. Ongoing data analysis refines segmentation and messaging. Reporting focuses on changes in loan statuses over time to manage effectiveness of the program. Implementation of Loan Science’s Federal Loan Data Warehousing solution is a prerequisite to the program. Key Considerations: Program is primarily preventive, not remedial, so allocation of student population in every cohort to the program by March 1 each year is essential. Program can be customized to integrate school based activities.

December, 2010 Loan Science Proprietary and Confidential 6  Early intervention communication campaigns run during the grace period  Control group set aside for performance measurement  Communications emphasized staying in touch and value of managing credit responsibly Case Study: Early Intervention Cut Early Charge-offs by 50% CurrentDelinquentForbearanceDefaulted Action Group37.6%26.1%3.0%4.6% Control Group34.7%29.3%3.1%9.3% Variance %8.3%-10.9%-2.8%-51.0% Loan Performance: Status of Loans after 10 Months in Repayment* * % of Balances (Active + Charged Off). Loan Status as of March 31, Borrower Response: Demographic Update Activity Notes  Response to program action is indicated by loans having an address or phone number update event.  Recipients of early intervention communications were much more likely to keep their contact information updated.  Positive behavioral difference in action group persists up to 24 months after last communication. Notes  Action group loans have experienced half the defaults of the control group.  Action group loans are more likely to be current and less likely to be delinquent.  Action group loans are no more likely to use forbearance than control group loans.

December, 2010 Loan Science Proprietary and Confidential 7 Case Study: Portfolio Performance Comparison * % of Balances (Active + Charged Off). Loan Status as of March 31, Key Portfolio Performance Metrics  Compares the net flow rates, delinquency and losses of two pools* of PSL DTC loans.  Portfolio A receives full active portfolio management while Portfolio B receives typical loan servicer “due diligence” treatment. Net Flow Rates** measure the effectiveness of collections over all stages of delinquency. The result is directly reflected in portfolio delinquency rates... *Both pools are direct-to-consumer Private Student Loans issued during with essentially the same terms, pricing and credit parameters. **Cycle 2 to Write-Off Net Flow Rate is the cumulative percent of 30 day delinquent accounts (2 cycles past due) that roll to charge off at 6 cycles past due (150+ days past due).... and dollars of credit losses.

2011 WASFAA Conference Financial Literacy, Debt Management and Default Aversion - Finding Synergy for Success ● ● ● Performance Management for Student Loans