Creating a Successful Student Loan Repayment Experience

1. Session 36 Creating a Successful Student Loan Repayment Experience Larry Eadie, David Hammond, ET Winzer | Dec. 2014 U.S. Department of Education 2014 FSA Training Conference for Financial Aid Professionals

2. Session Topics • Lessons Learned about CDR • Basic Best Practice/The Inherent Approach • Borrowers Communication • Repayment Plan Promotions E-mail Campaign • Takeaways / Question & Answer

3. What Have We Learned About a Successful Repayment Experience

4. Communication with Stakeholders 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. • 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

5. ChallengeFocus • 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

6. ChallengeFocus • 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

7. Basic Best Practices The Inherent Approach

8. 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

9. 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

10. 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

11. 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

12. 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!

13. 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

14. 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

15. 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

16. Borrower Communication The Key to Less Defaults!

17. 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)

18. 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

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

20. 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.

21. 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

22. Repayment Plan E-mail Campaign Overview and Summary of Results

23. 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

24. Campaign Description 3.15M unique borrowers organized into 6 cohorts *Excludes split borrowers undergoing transfer and bounce-back e-mails

25. Campaign Execution Summary Results *Data as of 5/12/14. Results exceed industry benchmarks.

26. Takeaways Question and Answer

27. The 8 Takeaways • Communicate with borrowers at key decision points. • Maintain contact with former students. • Maintain communication across campus. • Focus on retention and student success. • Identify and counsel at-risk students. • Timely and Accurate Enrollment Reporting! • Review NSLDS and repayment information to ensure accuracy. • Challenging the Draft CDR.

28. 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!

29. Contact Information We appreciate your feedback and comments. We can be reached at: Larry Eadie 404-974-9309 Larry.Eadie@ed.gov David Hammond 404-974-9429 David.Hammond@ed.gov ET Winzer 202-377-4797 Etienna.Winzer@ed.gov

30. QUESTIONS?