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Default Management Default Management Plans: Plans: Everything you’ve Everything you’ve always wanted to know, but always wanted to know, but
were afraid to ask!were afraid to ask!
Scott D. Lewis
Debt Management Consultant
USA Funds Services
MASFAA Conference
November 19, 2003
Today’s Agenda
Are we making a difference? The ED’s take. Basic requirements. Other considerations. Campus-wide effort. A tool kit.
Making a difference
The State PIRG’s Higher Education Project
42%
59%64%
0%10%20%30%40%50%60%70%
1992-93 1995-96 1999-00
Percentage of Students Who Borrow Federal Student Loans
Making a difference
The State PIRG’s Higher Education Project
$9,188
$13,327
$16,928
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
Dollars
1992-93 1995-96 1999-00
Average Cumulative Federal Student Loan Debt
The State PIRG’s Higher Education Project
Making a difference
Estimated 39 percent of all students graduate with unmanageable debt
55 percent of African-American students 58 percent of Hispanic students
Making a differenceCohort Default Rate by Institution Type
18.2
15.4
11.9
9.3 9.4 9
5.6 5.9 5.33.8 4 3.5
8.36.9
8.5
7
4.76.1
02468
101214161820
1996 1997 1998 1999 2000 2001
Year
Rat
e
ProprietaryPublicPrivate
U.S. Department of Education
Making a difference
National Cohort Default Rates
http://www.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html
Making a difference
2001 national cohort default rate
– Number of schools: 6,240
– Borrowers in default: 130,036
– Borrowers in repayment: 2,380,741
– Borrower default rate: 5.4%
http://www.ed.gov/offices/OSFAP/defaultmanagement/2000instrates.html
Making a difference
2001 MASFAA cohort default rate
– Number of schools: 196
– Borrowers in default: 2,588
– Borrowers in repayment: 67,119
– Borrower default rate: 3.8%
http://www.ed.gov/offices/OSFAP/defaultmanagement/2000instrates.html
Making a difference
Efforts of post-secondary institutions
– Counseling
– Education
– Creative packaging
– “Front-line defense”
Pulling it all together
A document that outlines the default prevention efforts of a post-secondary institution
– A Default Management Plan
The ED’s Take Sample Default Management Plan
– DCL ID: GEN-01-08
Provides guidance on the development of a Default Management Plan if a school is required to use a plan, under 34 CFR668.14(b)(15), because it is participating in the FFEL or Direct Loan Program for the first time or has undergone a change of ownership.
Implementation of the sample plan satisfies those requirements.
The ED’s Take
Recommends that other schools consider implementing some or all of the measures described in their sample plan.
Additional ideas on default prevention can be found by visiting lender and guarantor web sites as well as referencing the DOE’s publication, “Ensuring Student Loan Repayment: A National Handbook of Best Practices”.
Basic Requirements
A school that successfully implements a Default Management Plan does the following:– Uses its resources efficiently.
– Provides enhanced initial and exit counseling.
– Works to reduce the number of dropouts and walk away students.
– Works to ensure that its borrowers can repay their student loans.
– Keeps in touch with its borrowers.
Other Considerations A comprehensive Default Management Plan should try to
encompass some or all of the following areas:– Analysis of your student population.– Hiring and training of campus staff.– Evaluation of current default management plan.– Aid packaging policy.– Education of borrowers.– Networking and development of external relationships.– Effective utilization of reports.– Development of a resource library.
A Campus-Wide Concern
The program must begin in the office of the President or Chancellor and include relevant senior executive officials, faculty, staff and students.
A Tool Kit Institutional Pros & Cons Worksheet Checklist for Developing a Default Management
Plan Ensuring Student Loan Repayment: A National
Handbook of Best Practices Sample Default Management Plan Guide to Developing a Default Management Plan
http://www.usafunds.org/debt_management/def_mgt_plan.htm
Questions ? ? ?