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Loan Servicing & Loan Default

Loan Servicing & Loan DefaultPresented by Dan WeigleManager, School Support ServicesFedLoan Servicingdweigle@pheaa.org1AgendaRole of the servicerCommunication milestonesServicer support activitiesDefault statisticsSchool involvement2Federal Loan Servicers33 TIVASTitle IV Additional Servicers

4TIVAS An acronym used by FSA which stands for the Title IV Additional Servicers. In communications with schools, borrowers, and the financial aid community, FSA uses the term federal loan servicers.4Federal Loan Servicers - TIVAS

COD LDE OriginationDisbursement Loan AllocationServicer Assignment Customer Service

CODSERVICINGLDE : Loan Distribution Engine: interface to assign loans to the federal loan servicers.

Booked Loan: occurs when the COD system accepts an origination record; links p-note to the record and accepts actual disbursement.

The federal loan servicer is assigned upon booking of loan. 5

5 Not-For-Profit Servicers6Not-For-Profit awarded federal loan servicing contracts under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation.6Federal loan servicing contracts awarded under the HCERA/SAFRA Not-For-Profit (NFP) Servicer Program solicitation

Federal loan servicer team will continue to expand as the loan portfolio grows

Whether individual or team award, borrowers will know and face one servicer

Not-For-Profit Servicers77Not-For-Profit ServicersNFP Servicer NSLDS Name NSLDS Code Aspire Resources Inc.DEPT OF ED/ASPIRE RESOURCES INC.-ISL 503 COSTEPDEPT OF ED/COSTEP510CornerStoneDEPT OF ED/CORNERSTONE-UHEAA 502 EDGEucation LoansDEPT OF ED/EDGEUCATION LOANS509EdManageDEPT OF ED/EDMANAGE 505 ESA/EdfinancialDEPT OF ED/ESA-EDFINANCIAL 501 Granite State GSMRDEPT OF ED/GRANITE STATE-GSMR-NH 504 KSA Servicing (Kentucky) DEPT OF ED/KSA SERVICING 508MOHELADEPT OF ED/MOHELA 500 OSLA ServicingDEPT OF ED/OSLA SERVICING 506 VSAC Federal LoansDEPT OF ED/VSAC SERVICING5118Measuring Performance 9#9Allocation Methodology10Allocations are based on rankings Survey results Default statisticsMost points for first placeOne point for last placePercent of new loans = percent of points #Due Diligence Requirements11StageFedLoan Servicing ActionRequired ActionEarly 1-120Up to 8 calls5 letters5 emails1 Communication AttemptMid121-240Up to 8 calls2 reference callsUp to 3 letters4 emails1 Communication AttemptLate241-360Up to 6 calls2 letters5 emails1 Communication Attempt12Servicer Role - Loan LifecycleEstablish CustomerRelationshipContact informationOnline acct set-upTools availableWere here to helpMaintain ContactObligation remindersFinancial LiteracyNSLDS Update/exchangeAnswer questionsWere here to help

Prepare for SuccessfulTransition to RepaymentEarly interventionRepayment optionsRepay plan modelingReminder to set up acctWere here to helpEnsure SuccessfulTransition to RepaymentEarly intervention assistanceRepayment optionsPromote auto-debitRepayment tools availableBilling remindersTransaction updatesOutreach to at risk borrowersRepayment counselingSelf-service optionsWere here to help

Focus on Healthy RepaymentPredictive modeling/segmentationReminders of repayment solutionsProactive skip-tracingIncreasing intensity of contactWere here to helpCommunication ChannelsUSPSEmailPhoneWebSocial mediaText

Tools AvailableFinancial LiteracySelf service optionsNumerous payment optionsRepayment plan modelingCall center agentsServices OfferedSchool default management assistanceSchool access to borrower acct infoSchool call centerSchool webinars/relevant servicing infoCommunication Milestones13FedLoan Servicing In School to In Grace CommunicationsNote: This is the FedLoan Servicing communication timeline. While other timelines may vary, most servicers will have similar milestones. Communication Milestones14FedLoan Servicing In Grace to In Repayment CommunicationsServicer Support ActivitiesFederal Loan Servicers: Provide outbound targeted calling campaigns along with inbound call center representatives to help borrowers become current Utilize electronic communication methods, such as e-mail, to keep borrowers informed about account statusWork with schools to obtain current available contact information - Utilize a variety of tools to get the most current data to contact borrowers (skip tracing on delinquent accounts)Work in partnership with the school community to assist borrowers in the later states of delinquency

15Servicer Support ActivitiesCure RatesOver 95% of delinquent contacts result in a cure within 30 days of contact1/3 of borrowers that hit 30 days delinquent cure before 60 days delinquent87% of borrowers that hit 270 Days delinquent continue to fall delinquent

16Default Statistics17FedLoan Servicing 3 year 2010 Cohort DefaultsSCHOOL TYPEPROGRAM LENGTH# BRWR DEFAULT# DEFAULT BRWR WITHDREW%PRIVATE SCHOOL 2 YEAR 51820540%PRIVATE SCHOOL 4 YEAR 10,3185,10449%PROPRIETARY SCHOOL 2 YEAR 68622,14331%PROPRIETARY SCHOOL 4 YEAR 21,69813,56463%PUBLIC SCHOOL 2 YEAR 21,85910,31047%PUBLIC SCHOOL 4 YEAR 16,5748,30650%FedLoan Servicing 3 year 2011 Cohort DefaultsSCHOOL TYPEPROGRAM LENGTH# BRWR DEFAULT# DEFAULT BRWR WITHDREW%PRIVATE SCHOOL 2 YEAR 52833263%PRIVATE SCHOOL 4 YEAR 10,8998,09274%PROPRIETARY SCHOOL 2 YEAR 13,0509,00469%PROPRIETARY SCHOOL 4 YEAR 29,32125,45687%PUBLIC SCHOOL 2 YEAR 30,90623,48876%PUBLIC SCHOOL 4 YEAR 19,91115,39377%Strategies for Targeting At-Risk Borrowers18Target GroupsFinancial Aid Awareness CounselingUnderstand Income Driven Repayment PlansSign-up for Account AccessNSLDS Reports19Use the NSLDS Delinquent Borrower Report to produce letters to delinquent borrowers who have loans serviced by any federal servicer.#19Engaging At-Risk Borrowers In SchoolTarget at-risk borrowers with early/extra exit loan counseling, financial literacy training, and collect additional contact Information.

Which at-risk borrowers?Students on academic probationStudents who express intention to withdrawStudents currently enrolled in programs producing a disproportionate number of defaulters

2020Engaging At-Risk BorrowersIn GraceSteps to take:Validate contact informationRe-enrollment assistanceTransfer assistancePrepare borrower for repaymentProvide employment counseling and search preparationJob placement assistanceAssist in establishing a relationship with servicer

2121Engaging At-Risk BorrowersIn RepaymentReach out to at-risk borrowers and facilitate the critical contact with the loan servicer to prevent default.

Early Stage Delinquency: Target borrowers 30-60 days delinquentMid Stage Delinquency: Target borrowers 60-270 days delinquentLate Stage Delinquency : Target borrowers 270+ days delinquent

2222Categorize your efforts, track your success, and make adjustments. Establish an action plan and follow the students targeted to determine their success.

23Are You Making an Impact?Late-Stage Delinquency Students - Total Students (100)Sample SizeEffortTarget Responders/ ContactsResponded to effortResolved delinquency thru paymentResolved delinquency thru other means50Email13 (25%)15 (30%)7 (47%)8 (53%)50Phone Call25 (50%)30 (60%)10 (33%)20 (67%)High-Risk Program of Study - Total Students (90)Sample SizeTarget AttendanceEffortMade in-school paymentEnrolled in auto- paymentsNon-delinquent5023 (45%)Explained Income Driven Repayment Plans5 (10%)15 (30%)45 (90%)4030 (75%)Completed FACT w/ Exit Counseling2 (5%)15 (38%)30 (75%)Track Your Efforts23How to Help DefaultersWhen federal student loans default, borrowers are provided with opportunities to clear their credit history. Borrowers with defaulted student loans can regain eligibility for federal student aid and return to good standing with their loan servicer.What needs to happen: To regain Title IV eligibility a student must make at least six voluntary on-time payments for six consecutive months. To rehabilitate a defaulted loan a student must make at least nine full voluntary payments within 20 days of their monthly due date over a 10 month period.Consolidation is an option to bring the account current, but does not remove the default record from a student's credit report.Pay the loan in full.24How to Help DefaultersBenefits of rehabilitating defaulted loans: Students will regain all benefits such as deferments, forbearance, loan forgiveness, and repayment options.Regain eligibility for federal student aid.Default status will be removed from credit report.Wage garnishment and withholding of income tax return will cease.

Who to contact: Debt Management Collection Services (DMCS) 1-800-621-3115

The U.S. Department of Education's Federal Student Aid Ombudsman 1-877-557-2575fsaombudsmanoffice@ed.gov 25Resources26Cohort Default Rate The Cohort Default Rate Guide http://www.ifap.ed.gov/DefaultManagement/guide/CDRGuideMasterVersion.html

Delinquency and Default Management Electronic Announcement Delinquency Prevention Activities and Webinars -- Monitor IFAP for updates http://www.ifap.ed.gov/eannouncements/071411DefaultPreventionResourceInfoSite.html

AssessmentsFSA Assessments http://www.ifap.ed.gov/qahome/qaassessments/defaultmanagement.html

PresentationsFederal Loan Servicer Panel Discussion http://ifap.ed.gov/presentations/2012FSAConference.html

#26Questions27Dan WeigleManager, School Support ServicesFedLoan Servicing717.720.2955dweigle@pheaa.org

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