larry eadie, david hammond, et winzer | dec. 2014 u.s. department of education 2014 fsa training...

Larry Eadie, David Hammond, ET Winzer | Dec. 2014

U.S. Department of Education

2014 FSA Training Conference for Financial Aid Professionals

Creating a Successful Student Loan Repayment Experience

Session 36

Session Topics

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• Lessons Learned about CDR

• Basic Best Practice/The Inherent Approach

• Borrowers Communication

• Repayment Plan Promotions E-mail Campaign

• Takeaways / Question & Answer

What Have We LearnedAbout a Successful Repayment

Experience

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YOUR Default Prevention Initiative should drive your default prevention process

• Assess the resources you have available• Team participants SHOULD be across campus• Established relationship with your TIV’s• Detail responsibilities of determining risk

The prevention and management of loan default is a school-wide effort and not the sole responsibility of the financial aid office. Managing CDR, when partnering with Loan Servicers can prove

beneficial to all Stakeholders.

Communication with Stakeholders

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Challenge Focus

• Challenge: Schools often did not know what avenues to pursue for a successful challenge

• Impact: Schools may focus time and resources submitting challenges that ultimately may not produce the desired results on the CDR

• Option: Create a descriptive list of possible challenges that includes the impact on the CDR for pursuit by the schools preferably in an Excel spreadsheet format

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Challenge Focus

• Participation Rate Index

• Incorrect Data Challenge• Incorrect last date of attendance at least half-time • In-school deferment or forbearance received• Incorrect date entered repayment• Death, disability, bankruptcy• Possible military deferment missed• Repayment began before expiration of grace period• Rehabilitation achieved

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Basic Best Practices

The Inherent Approach

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Inherent Approach

• The “Inherent Approach” primarily involves financial aid based initiatives • Entrance and Exit Counseling• Contact Information• Understanding loan repayment• Updating enrollment status changes

• Focus on all phases of the borrower experience• During Enrollment• During Grace• During Repayment

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Inherent Approach – Contact Information

Some institutions have reported great success by creating a separate form to collect additional borrower contact information for all borrowers.

• Goal is to supplement what is obtained via the MPN• Collect info during admissions process and any other time students

come into contact with school offices - share this information institution-wide between offices

• Inform borrowers that you may verify this info (to improve accuracy) and spot check if time permits

Although you may collect this information, you may not make a borrower’s receipt of aid contingent upon providing it.Note

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Inherent Approach - Counseling

Entry and Exit Counseling – A Regulatory Requirement

•What method works best for your students?• Online• Group Sessions• Videos• Combination of these methods

•At-risk borrowers – consider early/extra exit loan counseling

Schools are responsible for ensuring their counseling meets all regulatory requirements

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Inherent Approach – Loan Repayment

• Make sure borrowers understand the various repayment plans and other options• Deferments• Forbearances• Discharges• Forgiveness Programs• Loan Consolidation

• Ensure that your borrowers know that they must repay their loan, regardless of whether they complete their education

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Inherent Approach – Enrollment Reporting & Grace

• Grace is crucial to successful repayment as it is when servicers establish a relationship with borrowers and prepare them for repayment.

• Most defaulted borrowers did not receive their full 6-month grace period due to late or inaccurate enrollment notification by the institution• Delays in submitting timely and accurate NSLDS enrollment changes

increases default risk. Servicers may be less able to identify, contact and prepare these borrowers for repayment

• A sound Default Prevention Strategy - Send enrollment changes to NSLDS immediately - Don't delay!

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Inherent Approach - In Grace

Institutions

• Validate contact information• Re-enrollment assistance• Transfer assistance• Prepare borrower for repayment• Provide employment counseling and search preparation• Job placement assistance

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Inherent Approach - In Grace

Federal Loan Servicers

•Establishes a relationship with the borrower•Ensures the correct repayment status•Discusses the appropriate repayment plan•Promotes self-service through the web •Updates and enhances borrower contact information•Discusses consolidation options

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Inherent Approach - In Repayment

• As needed, facilitate the critical contact with the loan servicer to prevent default

• Reach out to delinquent borrowers and determine how they can be assisted• The earlier the better because today’s delinquent payers are to

tomorrow’s defaulters• Facilitate contact with servicers. You are not trying to collect, you are

trying to assist borrowers in communicating with the representatives at the servicers trained to assist delinquent borrowers so they do not default

• Early in repayment: Target borrowers who did not complete and assist them as needed

• Late in repayment: Target borrowers who are 240+ days delinquent

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Borrower Communication

The Key to Less Defaults!

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Borrower Communication - Institutions

Borrower communication and engagement is a key factor in successful default prevention!

While the borrower: In School•Educate about repayment •Leverage financial literacy resources and tools•Update contact information •Update enrollment status changes •Reiterate the importance of communicating with the loan servicer(s)

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Borrower Communication - Institutions

Borrower communication and engagement is a key factor in successful default prevention!

When the borrower: In Grace •Validate contact information•Re-enrollment and transfer assistance•Prepare borrower for repayment•Update enrollment status changes •Reiterate the importance of communicating with the loan servicer(s)•Confirm the students servicer contact information

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Some institutions have reported great success by creating a separate form to collect additional borrower contact information, for all borrowers.• Goal is to supplement what is obtained via the MPN• Collect info during admissions process and any other time students come

into contact with school offices• Share this information institution-wide between offices• Inform borrowers that you may verify this info (to improve accuracy) and

spot check if time permits

Contact Information

Note

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Although an institution may collect additional information, you may not make a borrower’s receipt of aid contingent upon providing it.

Borrower Communication – Former Students

• Start early - during grace period is best!• School is trusted adviser for borrower.• Communicate during delinquency - early and late!• Use tools available from guarantors/partners and

servicers.• Default rehabilitation - how to target to reduce defaults.

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Focus on Retention and Student Success!

• Strategies for developing successful retention and default prevention practices

• Assess what is working• View all students as success stories• Personalize orientation programs• Develop a seamless process• Extend the orientation experience• Develop comprehensive early alert systems

• Student success workshops

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Repayment Plan E-mail Campaign

Overview and Summary of Results

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Overview

Late 2013, Federal Student Aid contacted borrowers•Who had fallen behind on their student loan payments•Undergraduate borrowers with higher-than-average debts•Borrowers in deferment or forbearance because of financial hardship or unemployment

Campaign target outcomes•Ensure borrowers had the information they needed to consider and apply for the right repayment plan for them•Reduce borrower delinquency and default

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Campaign Description3.15M unique borrowers organized into 6 cohorts

CohortDistinct Count*

Call to Action

90 -180 days delinquent 781K Contact Servicer. Apply for an IDR plans.

181- 270 days delinquent 338K Contact Servicer. Apply for an IDR plans.

Owe more than $50K and entered repayment in the last year

483K Visit the repayment estimator tool to understand which alternate repayment plans are available

In deferment or forbearance for reasons of financial hardship or unemployment

619K Visit the repayment estimator tool to understand which alternate repayment plans are available

In grace period and owe more than $25K 758K Visit the repayment estimator tool to understand which alternate repayment plans are available

Defaulted loan status or greater than 270 days delinquent

172K Contact their servicer to apply for an IDR plan

*Excludes split borrowers undergoing transfer and bounce-back e-mails

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Campaign Execution Summary Results

Success Metrics* Total Overall

E-mails successfully sent 3.15M

E-mails viewed 958K 30.4%

Total URL Clicks 194K 6.1%

StudentLoans.gov Logins 534K 16.9%

Access Repayment Calculator or IDR 310K 9.8%

IDR Applications Sent to Servicers 204K 6.5%

*Data as of 5/12/14. Results exceed industry benchmarks.

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Takeaways

Question and Answer

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The 8 Takeaways

1. Communicate with borrowers at key decision points.

2. Maintain contact with former students.

3. Maintain communication across campus.

4. Focus on retention and student success.

5. Identify and counsel at-risk students.

6. Timely and Accurate Enrollment Reporting!

7. Review NSLDS and repayment information to ensure accuracy.

8. Challenging the Draft CDR.

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Need Assistance?

If schools need assistance in developing or reviewing their default prevention plan, please send a request to the following e-mail address: 

defaultpreventionassistance@ed.gov

Contact Us!

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Contact Information

We appreciate your feedback and comments. We can be reached at:

Larry Eadie404-974-9309

Larry.Eadie@ed.gov  

David Hammond404-974-9429

David.Hammond@ed.gov

ET Winzer202-377-4797

Etienna.Winzer@ed.gov

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QUESTIONS?

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