Default Prevention and NSLDS

Default Prevention and NSLDS
Managing Cohort Default Rates

Overview Why are Cohort Default Rates growing higher? 3 year Cohort Default Rate calculation Do you feel like you are you up a creek without a paddle? Oars to paddle your way to safety Early Intervention Default Prevention Activities NSLDS Reports Default Prevention Task Force/Plan

Cohort Default Rate

Cohort Default Rate Released twice a year (Draft and Official) Draft – February Not Public, No Sanctions, No benefits Opportunity to Challenge Within 45 days of issuance of the draft rates Official – September Public, Sanctions and Benefits apply Opportunity for Adjustments/Appeal Various timeframes dependent on the type of appeal Up a creek without a paddle?

Cohort Default Rate The default tracking window has changed from 2 to 3 years The 3-Year Numerator is the numberof a school's borrowers who enter repayment on certain FFEL Program or Direct Loan Program loans during a particular federal fiscal year (FY), which is from October 1 to September 30, and default prior to the end of the nexttwofiscal years. 3-Year Cohort Default Rate The 3-Year Denominator is the number of a school's borrowers who enter repayment on certain FFEL Program or Direct Loan Program loans during a particular federal fiscal year (FY), which is from October 1 to September 30

Benefits of a Low CDR based on the 3-year rate Three most recent official CDRs are less than 15.0 percent May disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period. May choose not to delay the first disbursement of a loan for 30 days for first-time, first-year undergraduate borrowers.

Sanctions Associated with a High CDRbased on the 3-year rate Three most recent official cohort default rates are 30.0 percent or greater Lose Direct Loan and Federal Pell Grant eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. A school’s current official cohort default rate is greater than 40.0 percent Lose Direct Loan eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. * Except in the event of a successful adjustment or appeal

Sanctions Associated with a High CDRbased on the 3-year rate First Year: Establish Default Prevention Task Force Second Year: Revise Default Prevention plan and submit to ED for review. ED may revise the plan and include specific actions the school must take to improve the CDR. Third Year: School will lose Direct Loan and Pell eligibility for the fiscal year in which the school is notified of its sanction and for the following TWO fiscal years.

Reasons for CDR increases Educational costs continue to rise Students borrowing more money Economy and Unemployment One-in-five household hold student loan debt Increasing loan delinquency rates The combination of Stafford and private loans equal greater debt

What Should Schools Do
The Oars to Paddle to Safety!

What Schools Should Do Perform Early Intervention Conduct Default Prevention Activities Develop a Default Prevention Task Force and Plan Review NSLDS Reports on a regular basis

Early Intervention Provide students with specific time-released information designed to: Support transition into higher education Navigate college life Encourage persistence and completion Promote financial literacy Educate students on entering the workforce Promote successful management of student debt

Early Intervention Increased financial literacy decreases defaults Make it a part of your curriculum Utilize free resources Federal, non-profits, lenders, guarantors Utilize Facebook and Twitter Provide information regarding: Credit Card Debt, Budgeting, Banking Successful Student Loan Repayment

Early Intervention Offer job-placement services Contact recently non-enrolled students to determine their future educational plans and encourage re-enrollment Advise of repayment beginning in six months Counsel on repayment plans, deferments and forbearances Ensure they have lender/servicer contact info

Early Intervention Conduct Entrance/Exit Counseling Collect borrower contact information Identify your “at risk” population Working with this population can equate to more students completing their educational programs, which equates to higher retention rates and lower defaults. Update enrollment to NSLDS or Clearinghouse frequently There is a direct correlation between late or inaccurate enrollment reporting and loan defaults.

Default Prevention Contact delinquent borrowers and encourage payment Utilize Servicer and NSLDS reports to identify borrowers Contact at various stages of delinquency Counsel on various Repayment Plans available Pay as You Earn Income-Based Repayment Income-Contingent Income-Sensitive Extended Graduated Standard

Default Prevention Determine reason for delinquency Counsel on Deferment and Forbearance options In-school Deferment Unemployment Deferment Economic Hardship Deferment Discretionary Forbearance Mandatory Forbearance Verify borrower demographics Skip-Trace Promote contact with lenders/servicers

Default Prevention
Developing a Task Force and Plan

Default Prevention Task Force/Plan 3-Year Cohort Default Rate of 30 percent or greater for any one federal fiscal year Default Prevention Task Force Objective: to reduce defaults and prevent the loss of institutional eligibility. Preparing a Default Prevention Plan Task Force should create a default prevention program Submit a written Default Prevention Plan to the Department of Education

Default Prevention Task Force/Plan A school’s Default Prevention Plan must: Identify factors causing the default rate to exceed the threshold Requires identifying at-risk borrowers Establish measureable objectives and steps the institution will take to improve its cohort default rate Specify actions the institution will take to improve student loan repayment Sample Default Prevention Plan at http://ifap.ed.gov/DefaultManagement/DefaultManagement.html

Identifying At Risk Students Never Contacted Late Admits Early Withdrawal No Exit Counseling Academic Preparedness Academic Probation Certain Majors Attendance Issues No Job in Profession Finances/Need Relationship Issues Physical/health challenges Transportation Housing First generation Transition difficulties

NSLDS Reports

NSLDS Reports Click on the blue number Complete the report parameters Select Extract or Report (where applicable) File layouts are on IFAP/NSLDS Reference Materials-NSLDS Record Layouts Delivered to SAIG mailbox

NSLDS Reports School Portfolio Report Provides information about all Direct and/or FFEL loans Date Entered Repayment Report List of student borrowers scheduled to enter repayment during a specified date range Delinquent Borrower Report Contains federal loan servicers data only Includes borrower contact information as reported to NSLDS

NSLDS Reports Borrower Default Summary Report List of loans that have already defaulted Loan Record Detail Report Contains loans used to calculate the school’s CDR Use this report for researching accounts for challenges to the Draft CDR and Adjustments/Appeals to the Official CDR

Conclusion Engage in Early Intervention and Default Prevention Activities Focus on retention and completion Make direct personal contact with students Provide the information necessary to successfully transition through the education process Monitor the students follow-up payment closely Encourage payment to bring accounts current Use NSLDS Reports to research data to ensure the CDR is calculated correctly

Default Prevention and NSLDS

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