Fall Conference| Nov. 2012 David Hammond and Cynthia Battle U.S. Department of Education Angela K. Johnson Cuyahoga Community College Developing Effective.

Fall Conference| Nov. 2012

David Hammond and Cynthia Battle

U.S. Department of Education

Angela K. JohnsonCuyahoga Community College

Developing Effective Mandatory and Voluntary Default Management Plans

Session 12

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In This SessionPart 1: Developing a Default Prevention Team

Part 2: Identifying Default Risk

Part 3: Default Prevention Plans

Part 4: Resources – FSA and Federal Servicers

Part 5: A Case Study Cuyahoga Community College

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The Changing Landscape

• Loan default increasing for most schools• Educational costs continue to rise• More students borrowing more money • The combination of Stafford and private loans

equal greater debt • Changes to CDR calculation accompanied by new

sanctions and an enhanced benefit

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The 3-Year CDR Calculation

• Expands the default tracking window from 2 years to 3 years

• Creates a transition period (FY09/10/11)

• Raises penalty threshold from 25% to 30%• New set of requirements for FY09, FY10...• Possible compliance issue beginning in September 2014 (FY 2011 CDR)

• Increases availability of “disbursement relief” from 10% to 15% (effective 10/01/11)

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Mandatory Plans - 34 CFR 668.217

New cohort default rate regulation requires that schools which achieve a cohort default

rate equal to or greater than 30% must develop a default prevention plan.

Requires identifying at-risk borrowers

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3-Year CDR Corrective Actions• First year at 30% or more

• Default prevention plan and task force• Submit plan to FSA for review

• Second consecutive year at 30% or more– Review/revise default prevention plan

– Submit revised plan to FSA

– FSA may require additional steps to promote student loan repayment

• Third consecutive year at 30% or more• Loss of eligibility: Pell, ACG/SMART, FFEL/DL• School has appeal rights

Default Management

Organize a Default Prevention Task Force

Assess resources for teamIdentify members Set Purpose Detail Responsibility

Organize a Default Prevention Task Force

Assess resources for teamIdentify members Set Purpose Detail Responsibility

Set Objectives:Establish ObjectivesIdentify steps needed to achieve goal

Define and Identify Risk Determine who is defaulting and why Analyze data

Define and Identify Risk Determine who is defaulting and why Analyze data

Outline Actions Specify actions needed to achieve your goalEnsure actions are measureable

Submit Plan FSA’s Default Prevention Team to assist schools with:

Establishing their default prevention goals

Developing, refining and reviewing your default prevention plan.

Submit Plan FSA’s Default Prevention Team to assist schools with:

Establishing their default prevention goals

Developing, refining and reviewing your default prevention plan.

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Organize a Default Prevention Task Force

The Default Prevention Task Force will drive your default prevention process:

Assess the resources you have available

Team participants SHOULD be across campus

Identify the purpose of the task force

Detail responsibilities of determining risk

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Default Prevention Task Force A group of specialists who will ultimately conduct data

analysis to determine the reasons for default at your school and formulate a set of intervention strategies

Select a leader for the group (Best if not FAD); Separate Default Coordinator is recommended

Use your current resources to create effective, customized default prevention programs that compliment existing efforts

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Activities for the Team

Study your student population. Identify any common characteristics of your defaulters and non-defaults, and borrowers and non-borrowers

Build on Early Intervention strategies already in existence

Discuss your current strategies and determine what works and what may need some improvement

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Activities for the Team (cont.) Work closely with your servicers and lenders

Find out what type of services are available from your servicers/lenders

Fine-tune your Loan Servicing procedures for the period while the borrower is at your school

Have clear and precise procedures with a timeline of dates to take appropriate actions

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Activities for the Team (cont.)

Fine-tune your servicing efforts during the grace period and repayment

Have clear and precise procedures with a timeline of dates to take appropriate actions

Review all of your borrower education materials

Make sure all of your materials are current and up-to-date. Look for new materials to incorporate into your training

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Activities for the Team (cont.)

Review your results and make the necessary enhancements

Always look for ways to improve whatever you are doing. Use evaluations or surveys to get input from the students and staff

Create a default prevention plan!

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Part 2

Identifying Default Risk

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Understand Who is Defaulting… and Why

After establishing a default prevention team:

Step 1 - Conduct analysis to identify the sources of default risk

Step 2 - Create measureable interventions/steps

Step 3 - Describe consequent actions to be taken to reduce default (the written plan)

Step 4 - Review and revise as necessary

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Steps to Identify Default Risk

The job of your Default Prevention team:

determine the source of your default risk; determine what steps your school will take to

reduce default risk; represent all parts of the institution (including

management), which will contribute to risk reduction activities;

allocate school resources to default reduction activities;

assess the effectiveness of default reduction activities over time: are they working?

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Steps to Identify Default Risk Conduct Risk Analysis First!

Understanding who is defaulting, and why Increase effectiveness of DP efforts Reduce wasted time/resources Aiming at the right targets You will need data Similar to studies necessary to understand/improve

retention/graduation Review combines NSLDS, servicer (default and

delinquency) data, and school data about defaulters and non-defaulters

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Steps to Identify Default Risk

Conduct Risk Analysis First

Use data to create a picture of borrowers at-risk of default

‘Who’ is not enough

‘Why’ will require input of academic, student affairs, and other professionals

Knowing ‘why’ is necessary to create targeted, useful and measureable interventions

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Reducing Default RiskInterventions

Risk Analysis Results for

Average School

Poor… Educational Outcomes

Employment Outcomes

Repayment Outcomes

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Examples: “Who”

• Never Contacted • Developmental Studies• Late Admits• Early Withdrawal• Gradated/Not Pass

License Exam• No Exit Counseling

• Excessive Debt• Academic Preparedness• Academic Probation• No Job in Profession• Certain Majors• Attendance Issues• Student Employment• Late Majors

Your ‘who’ will be unique

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Examples: “Why”

• Finances/Need • Relationship Issues• Physical & mental

health challenges• Dependent-care• Transportation • Housing

• Poor study habits• Basic skill deficits• Language barriers• Feel unwelcome, no “campus connection”• First generation: No role

models or family support• Transition difficulties

Understanding ‘why’ is necessary

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Part 3

Developing a Default Prevention Plan

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Developing the Plan

Things to Consider When Creating Your Plan

Analyzing Default Loan Data to Identify Default Characteristics

Early Stages of Enrollment

Entrance Counseling

Financial Literacy for Borrowers

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Developing the Plan (cont.)

Things to Consider When Creating Your Plan

Early Identification and Counseling for Students at Risk

Communication across the Campus

Default Prevention and Retention Staff

Late Stages of Enrollment

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Developing the Plan (cont.)

Things to Consider When Creating Your Plan

Exit Counseling

Withdrawals from School

Timely and Accurate Enrollment Reporting

After Student Leaves School

Developing the Plan (cont.)

Things to Consider When Creating Your Plan

Early Stage Delinquency Intervention

Late Stage Delinquency Intervention

Enhanced Entrance and Exit Counseling

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Reducing Default RiskInterventions

Default Prevention Team translates ‘who’ and ‘why’ into core strategies to reduce default risk

Improve Repayment Outcomes

Improve Educational and Employment Outcomes

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Reducing Default RiskInterventions

Improve Repayment Outcomes

Examples of tactics:• Enhanced Entrance and Exit Counseling• Financial Literacy Education• Collect More Useful Contact Information• Early Stage (Repayment) Assistance• Late Stage (Repayment) Assistance

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Reducing Default RiskDP Plans

Plans we have reviewed recently

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Reducing Default RiskInterventions

Improve educational/employment outcomes

Examples of tactics:• Increase student success

‘Crisis’ response, program completion

• Reduce Program Completion Time

• Strengthen Relationship with Potential Employers

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Reducing Default Risk Developing a DP Plan

• Core efforts should be targeted at ‘who’ and ‘why’

• Your efforts may or may not utilize ‘best practices’. They may be unique to your particular problems

• Add general best practices only after you have established targeted activities

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Reducing Default Risk Targeted Efforts: When?

In school, In grace, In repayment

When: How to Intervene Driven by Data

Key to effectiveness of your plan -

Understanding how to utilize these opportunities

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Reducing Default RiskTargeted Efforts: When

Use ‘leverage points’ to gain active borrower participation:

• Admissions• Entrance and Exit Counseling• Probation/SAP• Registration

What ‘leverage points’ do you have?

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Reducing Default RiskActive vs. Passive Interventions• Passive: No action required…

• Loan Counseling• Financial Literacy Video

• Active: Borrower must do something which addresses identified risk:• Test re: R&R - results show ‘mastery’• Periodic update of contact information• Establish online account w/servicer

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• Analysis of Default Risk• Tracking and Projections• Additional Loan Counseling • Existing Student

Success Efforts for At-Risk Borrowers • Collect/Refresh Detailed Contact Information• Establish Online Servicer Accounts

Examples: DP Best Practices

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• Early Stage Delinquency Assistance• Late Stage Delinquency Assistance• Promoting Loan Rehab for Defaulters• Financial Literacy Training• Leveraging Loan Servicer Products and

Services • Review Policies/Procedures • Working with Employers

Examples: DP Best Practices

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Analyzing for default risk is THE

best practice!

Do the leg-work first! Let your data lead the way. That’s the surest way to end up with an effective

default prevention plan. Failing to take the time to understand who is defaulting, and

why, may be fatal.

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Part 4

Resources – FSA and Federal Servicers

We are here to HELP!

Goals of our Default Prevention Team Our Default Prevention Team was established to

assist schools with: Establishing their default prevention goals

Assessing the resources schools have available in order to establish their Default Prevention team

Understanding default risk through the use of servicer and NSLDS available reports and tools

Developing/refining your default prevention plan

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Need Assistance?

If schools need assistance in developing or reviewing their default prevention plan, please

send a request to the following e-mail address: 

[email protected] 

Contact Us!

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Provide outbound targeted calling campaigns along with inbound call center representatives to help borrowers become current

Utilize electronic communication methods, such as e-mail, to keep borrowers informed about account status

Work with schools to obtain current available contact information - Utilize a variety of tools to get the most current data to contact borrowers (skip tracing on delinquent accounts)

Work in partnership with the school community to assist borrowers in the later states of delinquency

Federal Loan Servicers

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Partnering with Schools:

All servicers work to gather feedback and findways to partner with schools on defaultPrevention

• Face to face meeting on school campuses• Financial aid conference attendance • Presentations at conferences• Proactive phone calls• E-mail communication

Partner with the servicers!

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Reminder: Protect the Grace Period

- Schools must learn when a borrower leaves campus to promptly report to NSLDS

Of the borrowers who defaulted, most did

not receive their full 6-month grace period

due to late or inaccurate enrollment

notification by the school.

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Reporting Resources:

Centralized Loan Information

NSLDS:

Includes Guaranty Agency (GA) or Lender held FFEL, PUT (ED-held FFEL), Direct Loans, and servicer assignments

Leverage NSLDS Reports for Default/Delinquency Prevention: School Portfolio Report

Delinquent Borrower Report

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Reporting Resources:

Individual Servicer Reports

Provide greater level of detail

Offer customization options

Include only loans serviced by that organization

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Part 5Cuyahoga Community CollegeA Case Study…

…illustrating the importance of understanding who is defaulting, and why, and how to apply this knowledge to reduce default risk.

Cuyahoga Community College

Cleveland, Ohio

Angela K. JohnsonExecutive DirectorEnrollment Operations

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Cuyahoga Community College Facts

• Largest community college in the state of Ohio• Serves more than 55,000 credit and non-credit

students annually• 32,000 plus credit students (district-wide)

• Multi-campus institution in Cleveland and surrounding suburbs

• Four campuses, one Corporate College location, one District Office and growing

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Who are our students?

• 60% students place into developmental English• 82% students place into developmental Math• 25% students received GED or passed ATB • 70% first generation college students• 55% receive financial aid

• 80% of Pell recipients have Zero EFC

• 62% are women• 60% are part-time students• 67% retention Spring to Fall/ 50% retention Fall to Fall

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• Rising education costs

• Decreasing state funding

• Struggling economy (state-wide and national)

• Lack of financial literacy education

• Reduced state funding

– Elimination of state grants for low cost institutions (all community colleges)

– State share of instruction (SSI) formula change

• Increased unemployment rate

Ohio’s Climate Concerns

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Overview of Defaulter Analysis

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• Identifying common characteristics of student loan defaulters to determine who’s defaulting and why

Defaulter Analysis – A Look at Yesterday’s Defaults

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Benefits of Defaulter Analysis

• Enables you to develop specific strategies to help students avoid default

• Allows you to correct ineffective practices throughout your institution

• Enables you to identify high risk students• Helps you to identify the relationship between loan

default and student success

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Loan Default Correlation to Student Success

• Hypothesis – Students who are more successful are more likely to complete their program and graduate.  Thus, successful students have greater ability (economically) to repay student loan debt

Student success

Successful repayment

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• College preparedness• Success rates (passed courses)• Retention rates (term to term)• Matriculation rates (year to year)• Graduation rates (average)• Employment market for non-graduates• Knowledge about student loan borrowing

Student Success Assumptions

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• Project overview– In 2006, reviewed and analyzed shared data

sets and demographic information about student loan defaulters for three cohort years (2002, 2003, and 2004)

– Obtained data points either locally (institution) and from the Ohio Board of Regents

Default Aversion Project

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Non-Traditional Default Aversion Approach

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• Campus committee– Develop student success categories

• Retention, Intervention, and Student Success– Stakeholders

• Enrollment Management• Student Affairs • Student Success• Financial Aid• Academic Advising• Articulation & Transfer

Student Success Strategies

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Philosophical Focus

• Understand institutional factors that impede student success (social, environmental, etc.)• Address student access and success barriers

• Implement strategies that maintain success in support services for effective matriculation and completion

• Expand default aversion initiatives beyond the Student Financial Aid Office

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Common Data Points

• First time student (Y/N)• Transferred in (Y/N)• Average GPA • Hours completed• Graduated (Y/N)• Number of terms

completed• Program of study• Major course of study

• High school attended• Developmental

education course (Y/N)• HS diploma/GED/ATB

(Y/N)• First generation (Y/N)• Academic Progress

(Y/N)• EFC (by range)

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Defaulters (over 3 CDR periods – FY 02, FY03, FY04)

– 30% students placed in developmental education– 30% students received GED or passed ATB– 60% students had earned zero hours

• Average credits earned = 33.8 – 82% students had below 2.0 GPA

• Average cumulative GPA = 1.96– 38% students had not maintained SAP

• Disqualified or Warning

Cuyahoga Community College Data Findings

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Defaulters (over 3 CDR periods – FY 02, FY03, FY04)

– 60% are in 20-29 age group • 36% - age 20-24; 24% - age 24-29

– 69% - African-American / 29% - White– 53% students are male– 67% students are first generation college students– 50% students had an EFC = O– 5% graduated from Cuyahoga

Cuyahoga Community College Data Findings

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Default Aversion = Student Success  

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• Mentoring Program– Developmental Math and English courses

• Students testing into Dev Ed Math 0950 and English 0990 mentoring program with On Course delivery and focus

• Learned from Achieving the Dream data• Gatekeeper courses where students struggle most;

Repeat courses more than once

• Satisfactory Academic Progress (SAP)– Terminate financial aid for all graduates

• Appeal for additional aid, proof of new degree sought regardless of credits completed

Student Success

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• Return to Title IV Withdrawals – Exit information and deferment

• Promote re-enrollment, personalized letter of next term info, and provide support services info

• Transfer Students– Add additional entrance counseling and

consultation session for new transfer borrowers– Mandatory academic advising and degree

completion planning for transfer students– Offer career counseling with degree planning– Transfer student orientation

Retention

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• Financial responsibility– Incorporated financial literacy in financial advising– Added financial literacy into First-Year Experience

courses• Implemented model for early/late stage delinquency

– Loan advising for students who have exited and reconnect them with college, enrollment, and loan repayment options

• Combined academic and financial aid planning– Developed individual student success plans based on

academic program to help students plan student loan borrowing

Intervention

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Cuyahoga Project Status• Successes

– Mentoring data• Increased retention up to 24% with students in cohort• Increased course pass rate 10%-12% with focused intervention

• Challenges– Continuity

• Keep the conversation visible within executive leadership

• Find the right marriage (with other projects/initiatives) • Opportunities

– Accelerate time to degree completion– Impact the system (academic/service) for all students,

not just financial aid students

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Student Success

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Contact Information

Angela K. JohnsonCuyahoga Community College

Phone: 216-987-4213E-mail: [email protected]

Questions

Thank You!Please let us know feedback or

further questions

Cindy Battle [email protected]

David Hammond  David. [email protected]

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