STUDENT LOANS, DEFAULTS, AND THE IMPACT ON COMMUNITY COLLEGES
Debbie Cochrane The Institute for College Access & Success
Ben Miller New America
February 9, 2015
2015 Community College National Legislative Summit Higher Education Policy Academy
Public College Costs and Aid for Low-Income Students
____________________________________________________ Tuition $2,630 $7,910 33%
+ Non-tuition costs $12,590 $13,980 90% ____________________________________________________ Total costs $15,220 $21,890 70%
- Grant aid $5,180 $8,450 61% ____________________________________________________ Net price $10,040 $13,440 75%
2-year 4-year Comparison
Notes: Includes students with an EFC of zero who enrolled full-time for the full 2011-12 year at a single institution. Calculations from U.S. Dept. of Education, NPSAS.
Community Colleges and Loans
17 percent of community college students borrow. Community colleges are the only colleges where
graduates typically have no debt. About one million community college students are
enrolled at schools that do not offer federal loans. Many community colleges are concerned about
cohort default rates (CDRs), a primary measure of federal accountability.
Protecting Colleges and Students
Edmonds Community College, WA
Grossmont College, CA
Guilford Technical Community College, NC
Iowa Western Community College, IA
Lane Community College, OR
Minneapolis Community and Technical College, MN
Moraine Park Technical College, WI
St. Philip’s College, TX
Valencia College, FL
Summary of Findings
Clear and strong link between NON-completion and default
Across all colleges in survey: 9% of program completers defaulted, compared to 27% of
those who did not complete 16% of borrowers who completed at least 15 credits
defaulted, compared to 38% of those who did not complete 15 credits
Efforts to promote student success & completion
are default prevention efforts
Summary of Findings, Cont’d
Apart from completion, more differences than similarities: in default rates, gaps, and the make-up of borrowers
Distribution matters: for example, program completers
comprised 13% to 41% of borrowers entering repayment At some colleges, “higher risk” borrowers at some colleges
defaulted at rates similar to lower risk borrowers
Default prevention strategies are not one-size-fits all
Protecting Colleges and Students, In Colleges’ Words
“When a default rate spikes unexpectedly, it is critical to work quickly to identify what's going on and to take action. Our participation in the ACCT and TICAS study helped us to do just that, by shedding light on risk factors so we could reach out to our students more effectively and reduce default rates going forward.” —Dr. Mary F.T. Spilde, President, Lane Community College
“ACCT and TICAS have provided valuable insight into how we can combat the default rate at Iowa Western, with our unique students. This cannot be a one-size-fits-all approach. We now know, if we are to move the needle, we must expand the definition of student success to include financial success as well as academic success, and we must make default prevention an institutional priority.” —Dr. Dan Kinney, President, Iowa Western Community College
Institutional Policy Recommendations
8
Direct Loan participation is important
Routine analysis of CDRs, tailored to college
Default reduction as a campus-wide endeavor
Consider and evaluate third-party partnerships
Reexamine loan practices and packaging
College-driven borrower outreach strategies
CDR appeals when necessary
Trustees Can:
Ask for updates on annual CDR releases
Request that analyses of federal loan borrowers and repayment be conducted and presented to the board
Probe links between student loan repayment and student success
Review third-party contract recommendations to with an eye toward effectiveness
Federal Policy Recommendations
Use Student Default Risk Index (SDRI) for accountability
Type of College Share borrowing
Stafford loans, 2011-12
FY 2011 Three-year
CDR
Student Default Risk
Index (SDRI)
All colleges 41.7% 13.7% 5.7
Public 4-year 47.4% 8.9% 4.2
Nonprofit 4-year 57.8% 7.0% 4.0
Public 2-year 16.9% 20.6% 3.5
For-profit 69.6% 19.1% 13.3
Notes: Calculations based on U.S. Dept. of Education data (NPSAS and official CDRs).
More Federal Recommendations
11
Improve CDR appeals
Enhance & exit counseling resources
Make data sources (NSLDS) more user-friendly
Study pro-rating federal loans based on enrollment
intensity
Auto-enroll severely delinquent borrowers in IBR
Streamline and simplify student loan servicing
ED employs 11 companies to service Direct Loans
12
The “Big Four” • Navient (Sallie Mae) • Nelnet • Great Lakes • Fed Loan (PHEAA)
The Nonprofits • Aspire (IA) • CornerStone (UT) • Edfinancial (10 states) • Granite State (NH) • OSLA (OK) • VSAC (VT) • MOHELA (MO)
Nonprofits will start receiving 25% of all new loans (previously got
only 100k one time)
ED changed contract terms last fall to increase $ for current loans
13
2009
2014
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Current 6 to 30 31 to 90 91 to 150 151 to 270 271+
Mon
thly
Per
-Bor
row
Pay
men
t
Days Delinquent
Per-Borrower Loan Payments, By Loan Status
Servicers receive set dollars per borrower based upon loan statuses
14
Borrower Status Per-Month
Payment ($)
In-School 1.05
Grace 1.68
In Repayment 2.85
Service Members (any status) 2.85
Deferment 1.68
Forbearance 1.05
6-30 Days Delinquent 2.11
31-90 Days Delinquent 1.46
91-150 Days Delinquent 1.35
151-270 Days Delinquent 1.23
271+ Days Delinquent 0.45
Servicers get future loans based upon relative performance on 5 metrics
15
Metric Weight
Borrower survey 35%
Federal student aid personnel survey 5%
Default rate 15%
% Borrowers that are current 30%
% Borrowers >90 and <271 Days Delinquent
15%
Current issues with servicing 16
Branding Complaint tracking Income-Based Repayment Enrollment School to servicer handoff
Branding 17
Branding 18
Branding 19
Branding 20
Branding 21
Next steps on servicing
New competition not until 2019 Common branding Complaint system Multi-year IBR authorization
Pay as You Earn Expansion
Expands current income-based repayment system to older borrowers
Pay 10% discretionary income instead of 15% Forgiveness after 20 years, not 25 Helps borrowers w/loans before Oct. 1, 2007 Also some borrowers between Oct. 1, 2007 and
Oct. 1, 2011 Requires rulemaking sessions, start Feb. 24
Questions? Contact Us:
Debbie Cochrane [email protected]
510-318-7900
Ben Miller [email protected]
@EduBenM