May 10, 2013

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Nov 10, 2013 (3 years and 7 months ago)

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KASRO

May 10, 2013

TOPICS



STATISTICS


WHAT IS DEFAULT


COHORT DEFAULT


DEVELOPING A DEFAULT MANAGEMENT
PROGRAM


Student debt topped $1 trillion for the first time last
year


The average loan debt is around $26,500


Orange Book


June 30, 2012 cohort rates


U.S.


1844 schools


avg 11.08%


KY



31 schools


avg 10.38%


OH



77 schools


avg 14.53%








STATISTICS


What is default?




The borrower is considered to be in default on
the 271st day of delinquency.

COHORT DEFAULT

For any award year in which
30 or more
borrowers enter repayment
, the cohort default
rate is the percentage of those current and
former students who enter repayment
in that
award year
on loans received for attendance at
that school and
who default before the end of the
following award
year.


From 2012
-
13 Student Financial Aid Handbook

For any award year in which
fewer than 30
current and former students at the school enter
repayment
on a loan received at the school, the
cohort default rate is the percentage of those
current and former students who entered
repayment on loans received for attendance at
that school in any of the
three most recent award
years
and who defaulted on those loans before
the end of the award year immediately following
the year in which
they entered repayment.


From 2012
-
13 Student Financial Aid Handbook


Numerator



Borrowers who entered payment in one





year, and default in that year or the next.



Denominator


Borrowers who entered repayment during





the one
-

year cohort period.






8




Cohort Default rate is
10
.66%



75




COLLECTING COHORT ACCOUNTS







Work the accounts several times a month



Work next year’s cohorts right now



Increase phone calls and letters



If you have in
-
house staff, provide incentives



Notify your collection agencies

Default Reduction Assistance
Program (DRAP)



A school or a school’s third
-
party servicer can
request that the Department send a borrower a
letter designed to warn the student of the
seriousness of default.








WORKING COHORT ACCOUNTS

ROADBLOCKS



Tough economy


Slow job market


Budget cuts


Fewer resources


Non
-
responsive borrowers

FY 2010 3
-
Year Draft Cohort Default Rates

Distributed March 25, 2013





If a school’s FY 2010 official 3
-
year CDR is equal to or
greater than 30 percent when the official CDR is
published in September 2013, the school will be
required to establish a Default Prevention Task Force and
develop a default prevention plan. The plan must be
submitted to the Department. In developing the plan, a
school will be required to:












Identify the factors causing the default rate to exceed the


threshold;



Establish measurable objectives and the steps the school will


take to improve its cohort default rate; and



Specify the actions the school will take to improve student


loan repayment, including counseling students on repayment


options.





Potential sanctions due to higher default rates



Potential provisional certification to participate in the Title IV
programs if any one of the three most recent cohort default rates
are 25.0%
or greater


Possible loss of lender participation, loss of FFEL, DL and/or Pell
Grant program eligibility if the three most recent official cohort
default rates are 25% or
greater


Loss of FFEL and DL program eligibility if the most recent official
rate is greater than 40%



DEVELOPING A DEFAULT
MANAGEMENT PROGRAM







IFAP.ED.GOV


Default Prevention and Management




Entrance counseling


Financial Literacy


Communications


Exit counseling


Timely and Accurate Enrollment Reporting


NSLDS Date Entered Repayment Report


Student Financial Aid Guidelines

Fiscal Management

Collections

HHS Fiscal Management



Health professions, Nursing and Primary Care
Loans
governed
by same
regulations



Default management is not a
Bursar or Student Accounts
issue. It is an institution
-
wide
issue.


Concerns:









Borrowers:



negative credit report



seizure of federal/state tax refunds



difficulty in obtain mortgages/car loans



unable to rent an apartment



addition collection costs



possible litigation


Schools:



a higher CDR is a reflection of the school



provisional certification



loss of Title IV eligibility



access to private loan funds


Default Prevention





Establish a default management team



representatives from various departments




Develop a plan and have a goal




Work to reduce the number of dropouts




Incorporate student success strategies

Entrance Interview





One on one, group or on
-
line



Orientation



Test to borrower comprehends loan borrowing



Stress that repayment is required


Exit Interview





Review terms & conditions of the loan



Inform as to the average monthly repayment



Emphasize the seriousness of the repayment obligation



Explain loan consolidation and repayment options


NSLDS for Students



Centralized, integrated view of

Title IV loans and grants

Personal Financial Management






Borrow responsibly




Budgeting of living expenses




Use of personal credit cards


Communications







Contact during grace period



Send letters with “Forwarding and Address Correction”



Maintain records of borrowers’ address and phone numbers



Obtain and contact reference information



Secure permission to dial borrowers’ cell phone number



Provide information on various school websites


Telephone outreach





Do you have the resources to make out
-
going calls


and accept incoming calls?



Determine which accounts to call



Have scripts ready



Document the call




Financial Literacy







Increased financial literacy, decreases defaults



Make it part of your first year curriculum



Provide information at orientation



Create a webpage



Establish a position/office



Direct students to various on
-
line resources



Resources






There are many free resources




Lenders, Guarantors, Department of Education




Look at other schools’ website

School websites






Borrower Rights and Responsibilities



Exit Loan Counseling



Repaying your loan



Tips for struggling borrowers



Money Management



Defaulted student loan resolution



FAQs



Videos



Resources


Resources





IFAP.ED.GOV



FedLoan Servicing


PHEAA



Department of Education



2012
-
13 SFA Handbook



National Association of Student Financial Aid



Administrators (NASFAA)



Various presentations by collection


agencies and billing services

QUESTIONS?????



Deb Jones

University of Cincinnati

Director, Collections

jodk@ucmail.uc.edu

513
-
556
-
1620