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 2009 Official FY 2010 Official12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

13.4%

14.7%

Issue Date

Cohort Years

Cohort

Defa

ult

R

ate

FY 2010 3-Year Official National Cohort Default RatesNumber of

SchoolsBorrower Default

Rate (%)Number of Borrowers

DefaultedNumber of Borrowers Entered Repayment

Public 1,619 13.0% 250,661 1,922,773 Less than 2 yrs 139 16.5% 1,315 7,963 2-3 yrs 840 20.9% 125,764 599,467 4yrs(+) 640 9.3% 123,582 1,315,343Private 1,712 8.2% 72,347 879,269 Less than 2 yrs 41 21.8% 1,097 5,020 2-3 yrs 168 14.2% 2,305 16,217 4yrs(+) 1,503 8.0% 68,945 858,032Proprietary 2,187 21.8% 277,088 1,270,965 Less than 2 yrs 1,117 20.9% 34,811 165,921 2-3 yrs 743 21.4% 71,853 334,459 4 yrs(+) 327 22.1% 170,424 770,585Foreign 432 4.6% 449 9,562Unclassified 1 0.0% 0 1Total 5,951 14.7% 600,545 4,082,570

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 www.studentloans.gov-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 Email the link to financial awareness counseling Provide link to federal calculators…

On your loan request form Accepting loan on website Email 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 (email, 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 668.217 affected the 2009 cohort year.

CDR Denominator:Enter Repayment

Numerator:Default

Publish Rates Cohorts used for Sanctions

FY 2011*

10/1/10-9/30/11 10/1/10-9/30/13

September 2014

FY 09, FY10, FY11

@ 30%

FY 2012

10/1/11-9/30/12 10/1/11-9/30/14

September 2015

FY 10, FY 11, FY 12

@ 30%

FY 2013

10/1/12-9/30/13 10/1/12-9/30/15

September 2016

FY 11, FY 12, FY 13 @ 30%

FY 2014

10/1/13-9/30/14 10/1/13-9/30/16

September 2017

FY12, FY 13, FY 14

@30%

* FY 2011 is first cohort year where schools will be subject to sanction based on 3-Year CDR

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 Servicerso Pull delinquency reports by cohort year

Identify highest risk (most delinquent)

Develop plan for contacto Phone most effectiveo Email, Letters, Text messages if can’t reach by phoneo Integrate effort with other campus offices with whom student

has relationship

Limited Resources/Best Results

Use school d-base for contact infoo When student in school, update contact info, references,

personal email/facebook accounts, obtain authorization to text, etc.

When contacting borrower, have portfolio of loan historyo Recommendations depend on characteristics of loano 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 otherso Report to NSLDS/Clearinghouse immediatelyo Reach out to students by mail, phone informing them of

obligation re. student loano Update contact info, address, references, emails, etc. so you

can contact in future

Other Useful Activities

Graceo Proactive outreach re. Delinquencyo Break into cohort years to prioritize

Mid-stage Delinquencyo Send out letters, emails, other electronic mediao Refer to servicer for help/action

Cohort Default Rate Release Dates

Not publicNo sanctionsNo benefits

PublicSanctions applyBenefits 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 2011 3-yr drafto Challenge process will begino 45-days to submit challengeo Need to be enrolled in E-CDR

Watch for NYSFAAA webinar in February!!

What You Can Do Now

Draw down NSLDS Portfolio report for 2011. Focus on defaulted borrowerso 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 releaseo Back-up documentation will need to be attachedo President’s letter needed (try to obtain in advanceo 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 releaseo At that point, some might of your successful challenges

may still be in your CDRo 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

www.nelnetloanservicing.com

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 InformationOperations Performance Division

Phone: 202-377-4259

Email: Fsa.schools.default.management@ed.gov

Website:

Ifap.ed.gov/default management/defaultmanagement.html

E-Appeals: https://ecdrappeals.edu.gov/ecdra/index.html

THANK YOU!

Patti Noren, Director of Financial Aid

Nassau Community Collegepatricia.noren@ncc.edu

Clemente La Pietra,

Monroe Collegeclapietra@monroecollege.edu

Anne Del Plato, Regional Director of Partner Solutions

Nelnet Education Loan Servicing

anne.delplato@nelnet.net