1. MCC Default Management Marianne GrenDevenny Dean of Enrollment Services Leana Davis Director of Financial Aid

2. What we will present What is a default rate? What is meant by cohort default rate? The history of MCC’s default rate and default management How the Department of Education has changed the default rate calculation MCC’s default management plan

3. What is a default rate? Percentage of school’s borrowers who enter repayment during a fiscal year and those borrowers that default (over three fiscal years) Number of students in default_________ Number of students who are in repayment If a student is in repayment, the student can have their student loan deferred for multiple reasons, including at least half time attendance at a post secondary institution, medical, and financial issues.

4. Default Rate Calculation = 16.5% Example: • In 2005, there were 200 individuals who were in repayment, 33 had defaulted. _33_ 200

5. When can sanctions be imposed? If a school’s three most recent official 3 year default rates are 30% or greater Except in the even of a successful adjustment or appeal, a school will lose Direct Loan and Federal Pell Grant program eligibility for the remainder of the FY of the sanction notification and the following 2 FY’s Higher Education Opportunity Act requires schools with a 3 year default rate of 30% to establish a prevention task force

6. History of MCC’s Default Rate

7. The Inception of the Default Management Plan • In 2003, the 2001 rate had increased from 10.6% to22.3% • Illinois Student Assistance Commission provided MCC with a list of students who were late on repayment • Financial Aid contacted students to give them options and explain the consequences of going into default • Researched students who were in default

8. Students in default, 2003 research • Majority of these students did not meet Financial Aid Satisfactory Academic Progress (SAP) policy • Required by the Department of Education. MCC’s 2003 policy required students to: • Complete 67% of their classes satisfactorily • Earn a minimum semester GPA of 1.5 • Financial Aid notified current students who did not meet the SAP policy • These students were reminded of their loan obligations • The steps above defined MCC’s Default Management Plan from 2003-2012

9. Important points to remember • A student’s default rate is determined after a person is no longer a student • Reasons for defaulting: • Moving and not giving a lender a forwarding address • Employment • Medical issues • Education completed • Background

10. MCC’s Default Rate Percentages, 1994 -2002

11. MCC’s Default Rate Percentages, 2003 -2011

12. 2009 Cohort Default Rate Rankings

13. 2010 Cohort Default Rate Rankings

14. How the Department of Education has changed the Default Rate calculation In 2011, the calculation changed from a two year to a three year calculation An increased number of students is used in the calculation More students will not be eligible for deferments in the calculation The change raised the default rate for most schools Currently the Department of Education does not impose sanctions against a school until there is a higher default rate

15. 2013-2014 Default Management Plan • Pre – Loan Disbursement • Students not eligible for grants packaged with a loan award • Students packaged with grants required to see the Loan Specialist before being awarded a loan • MCC Suggested amounts • Student completes Entrance Counseling

16. 2013-2014 Default Management Plan Cont. • Post – Loan Disbursement • Exit Counseling • Review Delinquency Report from National Student Loan Data System (NSLDS) • Letters Sent during early and late stage of delinquency • Students contacted via phone to provide counseling and servicer information • Students in Default receive information on recovering via mail

17. Proposed Reforms • Protect Student Borrowers Act of 2013 • Schools with at least a quarter of students take out loans • Loan Default Rate reaches 15% in a single year would pay a penalty of 5% of the value of the outstanding defaulted debt • As the default rate increases the penalty would increase up to 20% • COMMUNITY COLLEGES ARE EXEMPT

18. 2014-2015 Default Management Plan • Pre – Loan Disbursement • Students not eligible for grants will receive a letter explaining their payment options • Payment Plan • Scholarships • Loans • Student packaged with grants will receive loan information in their award letter

19. 2014-2015 Default Management Plan • Financial Literacy Counseling • Entrance Counseling • Budget Worksheet • Income vs. Expenses • Visit the Financial Aid Office • Discuss Loan Amounts • Discuss Repayment Options • No changes to the Post - Loan Disbursement Plan