Default (, was formed in 1998 to develop an efficient, economical ,
secure internet based default prevention program that integrates all Title IV participants into a single source
for default prevention; additionally to promote awareness and planning among schools, borrowers, and Title IV particpants.
Schools should see default prevention not only as a means to remain eligible to participate in Title IV programs, but also to serve
their student loan borrowers.

Even though this internet based program was created on the principle that students come first, the value of lowering the
default rate to schools should not be downplayed. The loss of federal aid affects both institutions and students.

This program is designed to work as a complete full service default prevention entity or to allow institutions to
utilize the infrastructure supported by institutional resources. In addition, provides training to help
schools implement the plan, or parts of the plan. Schools should also remember that once a default rate is under control, maintenance is
required to keep it that way. The plan, included at the end of this document, provides an example of a successful
default prevention program.



Mission Statement

It is the mission of (, to provide *Front-End Driven ,
**Back-End Supported, web based default prevention systems and services to the higher education community and
qualified Title IV participants, in order to positively impact the repayment of student loans.

*Front End Driven- Front end processes are driven by institutional staff and currently attending students. In
addition to entrance interviews, all incoming students are required to provide 5 personal references which are verified;
additionally, financial aid personnel will use a national default prevention historical database to log phone numbers, addresses,
references, and related notes which then become available to other qualified Title IV participants.

** Back End Supported- Back end support provides the necessary resources to carry out a successful default aversion
plan by utilizing the data provided during the front end process. Including all communications with students, lenders,
guarantors, servicers, and institutional departments.

Data is Everything

Getting to know individual students is a must. Ensuring that accurate data is collected, most importantly obtaining a minimum
of 5 valid references,
see“Reference Sheet”
. Collection and maintenance of current and historical student demograhpic information is paramount to
a successfull default prevetion program. Many schools wait until it is too late to determine their student information is
inadequate. The time to validate and verify student information is during the student’s attendance. References should all be verified
via a verification letter sent via U.S. Postal service. Students must be made aware of this procedure up front. On many occasions references
will contact the school in regards to the reference letter and indicate their support for the student.

NOTE: “You get what you inspect, not what you expect.”

High risk students are likely to provide references that are invalid. Students must be made aware that their references will be verified;
therefore, students should be encouraged to take extra time in completing the reference sheet accurately.

“Emergency Contacts”
, Students first day of attendance is filled with excitement and anticipation. Schools should
use this as an opportunity to complete additional references via an “Emergency Contacts” form. Amazingly, these references are many
times unique from those provided on the“Reference Sheet”

Additionally, it is important for financial aid officers to know the student population in general, as well as the institutional
and demographic variables of student loan defaulters.

Who Are Your Student

Analyze the studea is Everythingnt population.
  • Enlist the aid of professional statisticians on the faculty or at a guaranty agency.
  • Request student data from the school’s computer center or from a guaranty agency.

Identify any common characteristics between:
  • Defaulters and non-defaulters, and
  • Borrowers and non-borrowers.

Examine institutional variables including:
  • GPA
  • Income,
  • Year in college,
  • Class, and
  • College entrance scores.

Examine demographic variables, such as:
  • Student population by county,
  • County employment and unemployment rates, and
  • Per capita income by county.
Look at your student data on regular basis
Title IV Participants-Lenders and Servicers
Track the performance of each servicer and lender.
  • Use’s lender and servicer cohort default rate estimates to:
  • Benchmark servicers on their default rate, and
  • Benchmark lenders on their default rate.
Compare the performance between servicers based upon:
  • The number of claims filed per month, and
  • The number of claims paid per month
Identify problem areas.
Identify “best practices” among servicers.
Compare apples to apples and apples to oranges
Track the performance of the university, college, or proprietary school’s default management plan.
  • Benchmark the institution’s default rate with similar institutions. Gather data from
  •’s reports ( and
  • The Department of Education web site (
  • Identify how differences between the institutions related to differences in the default ratios.
  • Track the present cohort default rate using the following calculation (for schools with more than 30 students entering repayment):


_________________x 100


Numerator = Number of students who entered repayment during the
fiscal year and defaulted within that fiscal year or the subsequent fiscal

Denominator = Number of students who entered repayment during
the fiscal year.

Project future rates using’s Estimated Cohort Report (ECR) to take action to minimize the default rate.
A ECR lists all borrowers at a school who entered repayment during a specified fiscal year and provides3.
repayment status for each borrower. Quarterly ECR’s are available in the reports section online at

Address High Risk Students
Reallocate a portion of state and institutional grants to award potential defaulters.
Reallocate a portion of work-study funds to award potential defaulters.
Promote scholarships.
Promote conservative borrowing.
Offer comprehensive counseling services:
  • Meet one-on-one with potential defaulters who are requesting loans in order to limit debt by determining the student’s
    eligibility for other gift aid such as:
  • AFDC exemptions
  • State or institutional grants
  • Scholarships
  • Work-study, and/or
  • Educational aid exemptions
Identify the “real costs” of a higher education.
Prepare a realistic budget with the student.
Discuss expenses and money-saving strategies.
Analyze salary surveys.
Hire an “Owner”
(Someone who will take ownership in your default rate)

Every financial aid office should hire/assign a full/part time professional to function as a default prevention officer. Ownership of the default rate should be discussed
and this person is responsible for researching and forecasting default rates. Ownership is nothing more than accountability.

General Job Description
The designated default prevention officer should take ownership in your School’s default rate.
This can be a part/full time person depending upon the size of your School. The duties of the this person may include.
  • Administer the institution’s default prevention program;
  • Serve as a financial aid advisor for an assigned caseload of student aid recipients;
  • Serve as a liaison between the office of student financial aid and other campus departments, parents,
    and outside agencies such as student loan lenders, servicers, guaranty agencies, and the Department of Education (ED);
  • Render decisions and oversee processes requiring initiative and judgment in responding to the individual needs of students;
  • Develop the information needed to prepare reports required by financial aid programs;
  • Counsel and advise students regarding their financial options and responsibilities;
  • Supervise employees in administration of the school’s default prevention program;
  • Manage pre-claims assistance efforts such as telephone and letter campaigns;
  • Handle pre-loan and exit-loan counseling and implement enhancements to the prcedures;
  • Supervise and perform statistical analysis for internal and external reporting;
  • Track the school’s cohort default rate;
  • Interpret and implement regulations set forth by ED and state guaranty agencies; and
  • Oversee the timely completion of deferments and enrollment history requests by working
    closely with the registrar’s office or assuming the responsibility in the financial aid office.
The position recommends the following education:
  • A bachelor’s degree in a field related to the default prevention program, such as
    business, communications, or social work. Or substantial financial aid experience.
Position experience should include:
  • Two to three years experience in the appropriate field of the program with two years of responsible administrative experience.
  • Preferred two to three years experience in student financial aid loan programs and related outside agencies such as lenders, servicers,
    guaranty agencies, and ED.
  • Working knowledge of internet, email, instant messaging, internet browser, database, spreadsheet, and presentation software as well as
    computer hardware.
The Default Prevention Officer must possess the following skills:
  • Excellent writing skills,
  • Communication skills,
  • Interpersonal skills, and
  • Organizational skills.
The Default Prevention Officer must be able to:
  • Analyze data,
  • Forecast and plan,
  • Work under pressure,
  • Solve problems, and
  • Accept and implement change.
Educate your Borrowers

Providing comprehensive entrance and exit counseling sessions is an excellent way to educate students on the rights and responsibilities of borrowing a student loan. This type of interactive session creates an environment in which the borrower can ask questions and voice concerns. Requiring students to
attend yearly review sessions will reinforce the information covered during the entrance counseling session.

Spruce up your Entrance Interviews
  • Invite loan specialists, lenders, and servicers to present at the sessions.
  • Distribute materials containing loan information to the borrowers for future reference.
  • Delay certification of loan applications until first time borrowers have attended a session.
  • Offer sessions intermittently throughout the semester to promote attendance.
  • Offer one-on-one entrance counseling to students who cannot attend group sessions.
  • Use entrance counseling features on .
  • Test borrowers at the end of the session to identify students who may need additional counseling.
  • Use test results as an indicator that all relevant information is being covered during the session.
  • Discourage multiple lenders and guarantors.
  • Provide students with disclosure statements that contain the following information:
  • Cumulative amount borrowed,
  • Estimated interest, and
  • Estimated monthly payment.
  • Provide students with loan summaries.
  • Update students on changes in financial aid office procedures.
  • Remind students of their rights and responsibilities.
Gather updated information from students, including:
  • New addresses and telephone numbers,
  • Changes in their permanent addresses,
  • Reference information, and
  • Employment information.
Cover the consequences of default.

Delinquent Borrowers- Talk to Them

  • Counsel and assist delinquent and/or defaulted borrowers either in person or over the phone.
  • Act as a liaison between the student and the lender, servicer, and/or guaranty agency.
  • Facilitate the completion of documents such as deferments and forbearances.
Educate delinquent borrowers on repayment options:
  • Standard repayment plan,
  • Graduated repayment plan,
  • Income sensitive repayment plan,
  • Repayment incentives offered by servicers, and
  • Consolidation.
Educate defaulted borrowers on repayment options:
  • Regaining eligibility for Title IV aid,
  • Loan rehabilitation, and
  • Consolidation.

Counsel excessive borrowers

(to be defined by the individual institution) on a one-on-one basis about:
  • Responsible borrowing
  • Budgeting
  • Debt management plans
  • Repayment options, and
  • Salary expectations
Exit Counseling
  • Invite lenders and servicers to present at sessions.
  • Include and emphasize the correct procedures transfer students should follow when notifying their lenders that they have transferred
    and in filing deferments.
  • Provide students with a loan summary that includes the names and phone numbers of lenders, servicers, and guaranty agencies.
  • Offer one-on-one exit counseling to students who cannot attend group sessions.
  • Let students know they can call the school for assistance; provide them with the name and phone number of a contact person.
  • Verify that all exit interview forms are completed in full.
  • Administer an exam at the end of the session to identify students who may require additional counseling.
  • Send borrowers a letter or brochure during their grace period reminding them of their rights and responsibilities and listing phone
    numbers to call for assistance.
Frequent Updates

Title IV Partnerships Your Key to Success

For an institution to combat a default rate problem, it must have the support of its own campus in addition to lenders, servicers, and guaranty agencies. 3
Forging alliances facilitates efficiency, learning and promotes progress.

  • Include and emphasize the correct procedures transfer students should follow when notifying their lenders that they have transferred and in filing deferments.