Default Prevention.com (DPI), 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 participants.
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 DPI infrastructure supported by institutional resources. In addition, DefaultPrevention.com 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 DPI plan, included at the end of this document, provides an example of a successful
default prevention program.
Our mission is to provide default aversion services to the higher education community, focused on contacting and creating positive repayment results for borrowers; thereby, benefiting the borrower, the title iv community and ultimately our country’s educational integrity.
FORMULA FOR SUCCESS
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 demographic information is paramount to a successful default prevention program.
Some high risk students may be prone to providing false reference data; hence, any reference form should have the disclaimer, “References May be Verified”. Students made aware that their references may be verified become motivated to taking those extra few minutes by 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 BORROWERS?
Analyze the student 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:
- 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
Track the performance of each servicer and lender.
- Use DPI’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
- DPI’s reports (www.defaultprevention.com) and
- The Department of Education web site (www.ed.gov).
- 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):
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 DPI’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 www.defaultprevention.com/
ADDRESS YOUR HIGH RISK BORROWERS
Reallocate a portion of state and institutional grants to award potential defaulters.
Reallocate a portion of work-study funds to award potential defaulters.
Promote conservative borrowing.
Offer comprehensive advisement 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
- 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.
HIRE AN OWNER
(An internal staff member 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 procedures;
- 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
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.
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.
- 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 http://www.mapping-your-future.org/services/oslchow.htm .
- 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
Educate defaulted borrowers on repayment options:
- Regaining eligibility for Title IV aid,
- Loan rehabilitation, and
Advise excessive borrowers
(to be defined by the individual institution) on a one-on-one basis about:
- Responsible borrowing
- Debt management plans
- Repayment options, and
- Salary expectations
- 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.
How important is your institutional borrower repayment rate? That is up to you to decide. (Hint: IT IS VERY IMPORTANT!)
Staff training on updating and obtaining critical data can be the difference during skip tracing efforts. New information should be maintained and updated at www.defaultprevention.com
Example would be any changes or new data in borrower’s email, mobile device, physical address, employment, etc….
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. 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.
Close the Gap with Other Campus Departments to Promote Default Prevention
- Emphasize to the registrar’s office the importance of cooperating in a timely manner
and skip tracing requests, address changes, etc…
- Ensure that every department utilizes www.defaultprevention.com for updates of student addresses, phone numbers, personal references, etc….
- Make default prevention a priority for the entire financial aid office by educating all departments.
- Invite placement office counselors to present at exit sessions.
Partner Up with Outside Agencies to Promote and ASSIST in your Default Prevention
Take advantage of services offered by lenders, servicers, and guaranty agencies such as:
- Online account access
- Electronic delinquent borrower reports
- Online entrance and exit counseling
- Assist with contact management activities.
- Develop a relationship with guaranty agency representatives to communicate any special needs in dealing with delinquent or defaulted borrowers.
- Assign a “Hot Line” person to process and expedite special situations that students about ready to default.
BE A TECHIE
Effective use of technology simplifies processes, which in turn saves time and labor.
- Use the online reports offered by www.defaultprevention.com.
- Log on to the National Student Loan Database (www.nsldsfap.ed.gov) for student information.
- Learn and use instant messenger services; i.e., ICQ.
You may decide to use these services for inter-office messages.
- Consider placing “live help” on your website for student inquiries
- Gain user id’s and passwords to each lender and servicer web access site.
Cyber Connections Get Them or Bust
- Create a financial aid web page for students to view and use as a reference, with forms on line.Or go to www.defaultprevention.com for appropriate links.
- Provide links for students to other financial aid and scholarship sites.
- View and print loan summaries from Adventures in Education (www.AdventuresInEducation.org)to distribute to students at exit counseling sessions.
- Download default reports offered by lenders and servicers.
- View and print account information from servicers who offer this information over the Internet.
Download and print deferment and forbearance forms, or go to www.defaultprevention.com on line .
- View and use Estimated Cohort Default Reports to identify delinquent and defaulted borrowers to begin default prevention efforts.
- Provide computers for students to use, either in the lobby of the financial aid office or in a lab setting, to access their account information online.
Administrative email addresses (give them and keep them)
- Ensure that all financial aid personnel have and use institutional email addresses.
- Disallow institutional staff to use of second tier email addresses; i.e, aol, msn, yahoo, hotmail.
- Upon termination ensure that all emails are forwarded to the administrator. This ensures that future emails are opened and read by a supervisor.
- Use e-mail to communicate with borrowers and/or parents in the form of newsletters on a semester basis.
- Ask the school’s administration to allow students to use their school e-mail addresses for up to two years after leaving school to keep in contact with borrowers,
- Encourage students to use e-mail as a way to communicate with financial aid office staff.
- Instant messaging, get it, learn it, because it’s coming to your school soon.
Default Prevention.com provides you with two service options.
Full Service: We do everything. (Recommended for schools with an official cohort rate above 17.9%). We provide the plan, labor, resources, contact management efforts, correspondence resources, etc.)
Platform Service: We provide you with web access and electronically download your delinquent borrower reports. You provide the labor and resources necessary to carryout default prevention activities. (Ideal for schools with a designated institutional default prevention person combined with three consecutive official cohorts under 15%). .
- Site access, up to 20 users.
- Database access.
- Training and support, (see support schedule).
- Electronic monthly delinquency data import.
- Daily delinquency reports.
- Daily cohort reports.
- Daily loan status reports.
- Full web site and data access.
The Resource Factor is determined to be an approximation of the anticipated amount of labor and resources utilized to perform full default prevention services as outlined in the default prevention plan. Resource Factor is currently (3.0). For example, resources and labor relating to the following:
- Data entry.
- Grace period servicing.
- Delinquency servicing, written and verbal.
- contact management services, written and verbal.
- Forbearance/deferment processing written and verbal.
The costs of implementing a sound default prevention program vary depending on which default prevention tools the institution chooses to
implement. Costs fall into two categories:
Resource expenses associated with developing the default prevention program:
- Workstations equipped for internet access
- High speed data connections, internet access
Resources associated with the day-to-day operation of the default prevention program:
- Personnel costs such as wages
- Postage, and
- Overhead costs
- Telephone service
- Long distance
- Training and Support
Training and Fees
Default Prevention.com provides you with training and support according to the following schedule. The system is simple to use and most schools are up and running well within the first month.
||4 hours free($50.00/hr thereafter)
||2 hour free ($50.00/hr thereafter)
Challenges and Appeals are available on case by case basis. Email email@example.com for consultation and quote.
- Case Study-Cohort Problem. A nationwide mulit-campus Financial Aid Office is in crisis due to the Cohort Default Rate of 17.3%.
- Case Study -Current Program Analysis
- No designated default prevention specialist existed.
- Default prevention plan existed with minimum requirements.
- Partnerships with Lenders and servicers was non existent.
- Electronic communications of default related reports were unavailable.
- Internet access from financial aid office was insufficient.
- Reference gathering and techniques were not being used.
III. Case Study-Solution
- Default Management Plan
- Internet based default prevention application
- New reference sheet with 5 personal references.
- Assign a default prevention person to OWN THE DEFAULT RATE
- Build partnership with lender and servicer
The College employed the services of DPI to implement
a proactive approach to default prevention at their campus to include emphasis in the following main areas:
- Change packaging philosophy:
- Offer a grant in lieu of a loan for entering freshman first-time borrowers, since the statistical analysis proved freshmen were responsible percentage of defaults.
- Do not award students Perkins loans and Stafford loans in the same award package (unless documented professional judgment is included).
- Personnel were assigned as :
- Create new position: Namely appoint a default prevention officer, (10 hours per week) to take OWNERSHIP in the default rate. The responsibilities of the default prevention officer were to give attention and resources to:
- Comprehensive counseling services for borrowers
- Advice against excessive borrowing
- Promote grants, part-time jobs, and scholarships.
- Use DPI’s monthly Default Prevention Estimated Cohort Reports.
DPI provided the generation and printing of delinquent borrower letters. The students who appeared on these lists are called and offered assistance in dealing with their delinquent loans .
Generation and printing of monthly delinquent letters. Letters included a listing of the consequences of default, as well as the name and phone number of the servicer the student needs to contact, were sent to delinquent students.
- Phone calls to delinquent borrowers.
- Calls were made to students who are 150-days and above delinquent to offer them assistance and guidance related to their delinquent loan.
- Calls were also made to references.
|Download Electronic Delinquent Borrower Reports
|Send out delinquent borrower letters.
||Generate monthly estimated cohort reports.
||Skip trace students:
Improvements in the process for Deferments/Enrollment Verification requests. The financial aid office assumed the processing of deferments and forbearances that previously were filed by the admissions office to ensure completion in a timely manner.
Processing change-of-address requests from lenders, including re-sending returned mail.
- Alliances built with guaranty agency, lenders, and servicers:
- Obtain lenders that will cooperate with electronic and customer service issues.
- Eliminate lenders that will not accommodate student forbearance deferment requests online.
- Seek to obtain guarantors and servicers that provide a monthly delinquent borrower report, cumulative.
- Electronic linkages/Internet access:
Gain user ids and passwords to all Title IV participants that assist with default aversion duties including DPI.
- Borrower information is available at DefaultPrevention.com.
- Access to borrower data from lenders/services.
- Delinquent borrower reports on line at DefaultPrevention.com.
- Enhanced entrance and exit loan counseling
Lenders and servicers are involved in loan counseling sessions.
Pre-loan counseling sessions provide more information on the Stafford Loan Program and emphasis is placed on the responsibility of the borrower.
Certification of first-time borrower loan applications is delayed until a student successfully completes a pre-loan counseling session, and 5 references obtained on a new reference sheet reference completed at the time of admission.
The pre-loan test reviewed for enhancements to test a student’s knowledge of a borrower’s rights and responsibilities, and student must pass the test to receive credit for attending the pre-loan counseling session.
Improve exit counseling sessions to provide more information on a student’s rights and responsibilities upon entering repayment.
At the beginning of the exit loan counseling session, a student is given a summary of his or her loans printed from DefaultPrevention.com’s web site.
At the end of the exit counseling session, students take a test that helps to identify those who may need additional counseling.
- Case Study -Results.
Default prevention intervention techniques generally take two full cohort reporting periods to see results. As in the above case study, procedures and policies that were implemented in year #1 and year #2 impacted the default rates in year #3 and year #4. Schools should not look for immediate cohort improvements. Immediate results can be viewed in the number of delinquent borrowers showing up on reports and how those delinquent borrowers are progressing towards claims status.
- Default management plan was implemented, there was a 93 percent decrease in the default rate the last four years and a net decrease of 16.2 percentage points.
- This is a dramatic improvement and each school will experience different results. Past performance is no guarantee for future performance
- Delinquency Progression
- Good Trend: Illustrates students entering delinquency status in the early stages and then falling off as they progress towards default.
- Bad Trend: Illustrates students entering delinquency status at the same pace; however, they are all progressing towards default at an equal pace.
- What’s Ahead
- DPI evaluates and analyzes its default prevention area to improve its success in addressing the issue of default prevention
- Creating online debt management seminars for DPI students.
- Providing instant messaging capabilities for all members.
- Continuing to build alliances with other agencies in the student loan industry.