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An Overview
Building Student Success
An Overview
Dana Kelly, National TrainerNelnet Loan Servicing
Agenda
1. Its all about Loan Repayment
2. The importance of loan repayment
3. Results from FSA survey of borrowers in grace
4. Resources for repayment
5. A Focus on the Data
3
Context: Student Loan Repayment
• 37 million federal student loan borrowers
• The median amount owed by new borrowers is $10,000 and the average is $20,000
• Debt levels for graduate borrowers are significantly higher: a median of $31,000 and an average of $51,000
• The majority of new borrowers will choose the standard ten-year repayment plan
4
Cohort Default Rates are Increasing
SOURCE: NCES, Condition of Education 2013, Table 400, Number of postsecondary students who entered the student loan repayment phase, number of students who defaulted, and 2-year student loan cohort default rates, by level and control of institution: Fiscal years 2007 through 2010; IFAP, September 30, 2013, National Default Rate Briefings for FY 2011 2-Year Rates and FY 2010 3-Year Rates.
2011
2010
2009
2008
2007
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0
10.0
9.2
8.8
7.1
6.7
14.7
13.4
Two and Three Year Cohort Default Rates
Three-year CDRTwo-year CDR
5
Characteristics of Defaulters
• Older (median age of 38 years old)
• Pell recipient/low-income
• Undergraduate loans only
• Median loan balance: $5,800
• Poor financial literacy
• Did not complete degree
SOURCES: NSLDS, as of June 30, 2013; The Student Loan Default Trap: Why Borrowers Default and What Can Be Done About It, National Consumer Law Center, July 2012; What Matters in Student Loan Default: A Review of the Research Literature, Jacob P. K. Gross, Osman Cekic, Don Hossler, and Nick Hillman; Journal of Student Financial Aid, 2009; Calculating the Contribution of Demographic Differences to Default Rates, Mark Kantrowitz, May 2010.
6
7
What do we know about
new borrowers
who are just about to begin
repaying their loans?
Characteristics of Borrowers in Grace
8
SOURCE: NSLDS, as of June 30, 2013.
First-generation
Pell recipient
Undergraduate loans only
Borrowers with at least one loan in grace
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000
1.2m (44%)
1.8m (69%)
1.9m (73%)
Total: 2.6m
Number of borrowers in grace
Characteristics of Borrowers in Grace
Median loan balance for graduate students in grace
9
$0 $50K$25K
$6,000Median loan balance for undergraduate students in grace
$0 $50K$25K
$14,500
SOURCE: NSLDS, as of June 30, 2013.
Typical Borrower in Grace
• 26 years old
• Graduated with a Bachelor’s degree
• Family income: $25,000
• Pell recipient
• Five loans in grace
• Undergraduate loans only
• Has not consulted any resources about loan repayment
10
NOTE: Loan balance is the median for both undergraduates and graduates combined SOURCE: NSLDS, as of June 30, 2013; CFI, Customer satisfaction survey of borrowers in grace, June 2013.
Most Choose Standard Repayment
• Nearly half of borrowers in grace plan to choose standard repayment.• A large number do not know enough or are undecided.
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
Standard
repaym
ent
Gra
duated re
payment
Extended re
payment
Inco
me-c
ontingent r
epayment
Inco
me-b
ased re
payment
Inco
me-s
ensitive
repaym
ent
Don´t kn
ow/not e
nough info
rmatio
n
Undecided
0%5%
10%15%20%25%30%35%40%45%50% 46%
5%1% 0%
9%4%
18% 17%
11
Reason for Choosing Plan
Plan I w
as put in
to automati
cally
Monthly pay
ment I
can aff
ord
Allows m
e to pay
off my l
oans a
s fast
as possi
ble
Paymen
ts in plan
qualify
me for p
ublic loan
forgi
veness
Recommen
ded by s
ervice
r
Recommen
ded by f
amily
or frie
ndsOther
0%
10%
20%
30%
40%
50%
60%
46%
53%
37%
6% 7% 8%4%
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
12
Consideration of IBR
16%
54%
13%
16%
Chart TitleYes, considered in-come-based re-payment, but chose another plan
No, not enough in-formation
No, not interested
No, I do not qualify
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
• The majority (54%) did not consider income-based repayment (IBR) because they did not have enough information
13
Understanding of Borrower in Grace• New borrowers
who completed their degree program rated their understanding of student loan options higher than borrowers who did not complete their degree
• There is a 14-point difference in confidence in their ability to manage their loans
Understan
ding Studen
t Loan
Options
Repay
ment
Deferm
ent
Forb
earan
ce
Consolid
ation
Understan
ding Rep
aymen
t Options
Standard
repay
ment
Graduate
d repay
ment
Exten
ded re
paymen
t
Income-c
ontingent r
epay
ment
Income-b
ased re
paymen
t
Pay As Y
ou Earn
repay
ment
Confidence
in Ability t
o Man
age S
tudent L
oans
40
45
50
55
60
65
70
Graduated within the last 6 months with a degree
Qua
lity
attrib
ute
ratin
g
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
14
Borrower in Grace – by Balance• Borrowers with a
high balance (+$50K) were more likely to consolidate their loans and begin repayment than those who owed less
• They were also more likely to choose income-based repayment
Plan to begin re
payment
Plan to co
nsolid
ate student lo
ans and begin re
payment
Chose st
andard re
payment
Chose in
come-base
d repaym
ent0%
10%
20%
30%
40%
50%
60%
70%
Owe less than $25,000Owe $25,000 - $50,000Owe $50,000 or more
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013; Questions 21: “At the end of your grace period, what action will you take related to your student loan(s)? and 29: “What repayment plan have you chosen, or do you plan to choose at the end of your grace period?”
15
Borrower in Grace - Repayment
44% report not being contacted at all about their loans going into repayment
34% report not being aware of their repayment options
26% are undecided about what action they will take on their loans at the end of their grace period
35% of those planning to go into repayment at the end of their grace period, either don’t know or are undecided about their repayment plan
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013.
16
Borrower in Grace - ResourcesGone to find out information from… % of
RespondentsOnline loan servicer account management 40%Studentloans.gov website 25%Talking with friends or family 21%NSLDS website 18%Exit counseling at my school 18%Not used any of these sources of information 17%Studentaid.gov website 15%Phone number for loan servicer 14%Talking with staff at my school 12%Other online government resources 4%Online non-government resources 4%Other 4%Mobile phone apps 1%Social media resources 1%
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013, Question 12: Where have you gone to find out information about your repayment options, your grace period, or how to manage your student loan(s)? – check all that apply.
17
18
Resources
for Repayment
StudentLoans.gov
19
FACT Tool
20
Loan Repayment Estimator
21
Available at Studentloans.gov.
Loan Repayment Estimator
22
Repayment plans and loan payment calculators are available at: http://studentaid.ed.gov/repay-loans/understand/plans#estimator
23
Your Data is Your Key To
Building Successful Students
DID YOU KNOW???
Borrowers who did not receive their full
6-month grace period due to late or inaccurate
enrollment notification by the school are at a higher
risk of default.
DID YOU KNOW?
Borrowers who withdrew without completing their
academic programs are also at a much higher risk of
default.
DID YOU KNOW???
There is a strong correlation between increased financial literacy and decreased default!
Nelnet Trends in Borrower Repayment
• Borrowers who get into good early repayment habit less likely to default. For these borrowers, delinquency more likely due to life event change, if delinquency occurs at all.
• Intervention efforts more successful within the first 90 days of delinquency. From then on, there is a higher likelihood of eventual default.
• Setting up auto-pay good determinant of repayment success, as well as signing up for services like Manage My Account.
Nelnet Trends in Borrower Repayment
• Good contact information on borrowers critical. Students in skip-trace status much more likely to default. Schools who collect updated contact information after entrance or exit encouraged to share with servicers.
• Much of default or late delinquency group is made up of borrowers with small balances.
• Late Stage Delinquency – Borrowers in this category very difficult for servicers to reach since they have avoided contact from us for so long.
Nelnet: Trends in Borrower Repayment
Many borrowers have a knowledge gap when they go into repayment. They are unaware of:
– What a servicer does– Who Nelnet is– That they have options in addition to standard ten-year payment, – What deferments/forbearances are– That servicers can assist them if they run into repayment
difficulties
Please help servicers convey these messages.
Importance of School-based data
Benefits of School-based 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 identify the relationship between loan default
and student success.
What Prevents Student Success?o Finances/need
o Relationship issues
o Physical & mental health challenges
o Dependent-care
o Transportation
o Housing
o Transition difficulties
o Poor study habits
o Under-prepared, basic skill needs
o Language barriers
o Feel unwelcome, no “campus connection”
o First generation, no role models or family support
• Does your school have an “early warning” system?– Take attendance?– Issue mid-term grades which provide clues as to whether or not
student will persist?– Alerts from faculty members, student support staff: who has missed
classes? failed tests? had adjustment challenges?
• Don’t allow academic or social problems to become default risk
Identifying Students in Trouble
• Reach out immediately• Help them remain in school• If they’ve already left, help them to return
– May involve help to overcome obstacles • If they will not return, help them to understand their repayment
obligations as some think they don’t owe anything because they left• Learn what you can about their experiences and use this information
to help other students stay in school
Helping Students in Trouble
Engaging At-Risk BorrowersSchool engagement can help reduce risk at any stage of the borrowing cycle.
Questions:• Who are my at-risk borrowers?
– Learning to identify risk factors
• When should I intervene, and how?– The right time and the right strategy
Engaging At-Risk Borrowers
Identifying at-risk borrowers• Determine, using available data, which students have defaulted in the past• At what point are you most likely to be able to contact and influence these
particular borrowers?In school?In grace?In repayment?
Engaging At-Risk BorrowersExample: While In School
Target at-risk borrowers with early/extra exit loan counseling, financial literacy training, and collect additional contact information.
Which at-risk borrowers?• Students on academic probation• Students who express intention to withdraw• Students currently enrolled in programs producing a disproportionate
number of defaulters
Engaging At-Risk BorrowersExample: While In Grace
Steps to take:• Validate contact information• Re-enrollment assistance• Transfer assistance• Prepare borrower for repayment• Provide employment counseling and search preparation• Job placement assistance
Engaging At-Risk BorrowersExample: While In Repayment
Reach out to at-risk borrowers and facilitate the critical contact with the loan servicer to prevent default.
• Early in repayment: Target borrowers who did not complete• Late in repayment: Target borrowers who are 240+ days delinquent
Evaluating your default prevention readiness
1. Do I have the right team in place to develop and execute my default prevention strategies?
2. What was my FY 10 CDR? Draft 11? Am I likely to hit 30% in September 2014?
3. What is the source of my default risk?4. What default prevention strategies are in my plan
that address the source of my default risk? How will they work? Are they measureable?
5. What ‘traditional’ strategies are included in my plan?6. What ‘student success-focused’ strategies are
included in my plan?
Exercise: Getting To Where You Are…
• Global default risk isn’t going away…it will only get worse over the next several years
• While outside servicers can help, reducing specific borrower risk is an ‘inside job’
• School leadership must be prepared to devote internal resources to solve this problem
Leadership Buy-in
Thank You!
Dana KellyNational TrainerNelnet Loan Servicingdana.kelly@nelnet.net336-848-6441
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