1 reducing delinquency and default prevention mark c. walsh default prevention team u.s. department...

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Reducing Delinquency and Default Prevention

Mark C. WalshDefault Prevention TeamU.S. Department of EducationFederal Student Aid

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Incorrect Data Challenges ED’s Default Prevention Plan Characteristics of Defaulted Borrowers Three Quick Prevention Tips Late Stage Delinquency Assistance

Topics

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$400 billion in outstanding federal student loans Nearly 30 million borrowers 50% + in FFEL and DL consolidation Average outstanding consolidation balance is $18,240

Defaults in the Stafford Loan Program

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Demands our attention Equally important as the CDR Dollars in default continue to grow even

Beyond the CDR – Dollars in Default

as the national cohort default rate has decreased over a period of years

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Beyond the CDR – Dollars in Default

What is your school’s contribution?

You can estimate the approximate dollars in default at your school.

$1,000,000 (origination volume)

x 5% (estimated school CDR) ___________

$50,000 (approx dollars in default)

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Definition of CDR For schools having 30 or more borrowers

entering repayment in a fiscal year, the CDR is the percentage of borrowers entering repayment on certain FFEL and/or DL Program loans during that fiscal year and default within the CDR period.

For schools with 29 or fewer borrowers entering repayment in a fiscal year, the CDR data includes borrowers entering repayment over a three-year period.

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CDR – Included Loans Federal Family Education Loan Program

Subsidized Stafford Loan Unsubsidized Stafford Loan Supplemental Loans for Students Loan

William D. Ford Federal Direct Loan Program Subsidized Stafford Loan Unsubsidized Stafford Loan

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Cohort Default Rate Periods

CDR Guide – Page 2.1-6

10/1/03 – 9/30/0510/1/03 – 9/30/04

FY 2004(N)

(D)

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CDR Review

Loan data for CDR calculation stored in NSLDS

Formula For FY 2004 N Default during 2 year period 10/1/2003 – 9/30/2005 D Enter repayment during 1 year period 10/1/2003 – 9/30/2004

NX 100% = CDR

D

FFEL & DL

Guide—page 2.1-6

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CDR – Denominator in the Formula

Determine Date Entered Repayment (DER) Date of graduation, withdrawal, or less

than half-time status plus 181 days (6 months + 1 day) = DER

Using the DER, determine the correct cohort year in which the student will be counted

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CDR – Numerator in the Formula

Loan must be included in denominator

Determine default date (361 day of delinquency or Claim Paid Date [CPD])

Determine if default date falls within cohort period

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Quick CDR Review

Calculated 2 times/year

Draft CDRFebruary

(FY 04 = 1/7/06, 2/13/06)Calculated/released

Official CDRSeptember

(FY 04 = 7/29/06, 9/11/06)Calculated/released • Public

• Sanctions• Benefits

• Not public• No sanctions• No benefits

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CDR – Applying the Formula

Non-Average Rate 30 or more borrowers in

repayment Average Rate

less than 30 borrowers in repayment

3 years of data

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Example: Using the Non-Average Rate Formula

Calculation: For a school with 30 or more borrowers entering repayment in a fiscal year

100X225

= 2.2%5

(D)

(N)

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Example: Using the Average Rate Formula

Calculation: For a school with less than 30 borrowers entering repayment in a fiscal year

3 + 1 + 1 5

4710.6%

FY04 FY03 FY02

100X ==20 + 17 + 10

The sum of the three most recent cohort periods

(D)

(N)

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Sanctions Associated with High CDR

3 most recent official CDRs 25.0% or greater (e.g. FY 2004, 2003, 2002) Loss of eligibility to participate in FFEL,

Direct Loan, and Pell Grant Programs Current year official CDR is greater

than 40.0% Loss of eligibility to participate in FFEL

and Direct Loan programs

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Incorrect Data Challenge

An incorrect data challenge is the process by which a school challenges any errors contained in its draft cohort default rate data.

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Incorrect Data Challenge Eligibility

All schools are eligible to challenge Time frames

The challenge must be postmarked within 45 calendar days of receiving the most recent draft CDR. (For FY 04, challenge timeframe ends on 4/7/06.)

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Incorrect Data Challenge Borrower incorrectly reported

Borrower incorrectly included

Borrower incorrectly excluded

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Complete Incorrect Data Challenge

Send to each data manager Letter Spreadsheet Page(s) of LRDR Supporting documentation

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Sample Letter

There are specific requirements for the letter format and content.

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Sample Spreadsheet

FY 2004 Incorrect Data Challenge

1. Borrower’s SSN

2. Borrower’s

Name

3. Number and type of

loans

4. Earlier of LTH or LDA

5. Date entered

repayment

6. CPD, DD or N/A

7. FY(s) appl.

8. Effect

on CDR calc.

9. Comments

222-22-2222 David Smith 1 SF and 1 SU 11/12/2000 5/12/2001 4/10/2003 FY 2002FY 2001

-B+D

Borrower was incorrectly included and should be removed from the B of the FY 2002 calculation and added to the D of the FY 2001 calculation.

Electrical Training Institute OPE ID# 11111 Guarantor/servicer code: 111 Number of borrowers: 1 Number of loans: 2

Loan Record Detail Report (LRDR)

1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004 NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 1 COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)0 Attention: ALEXANDER PEACHUM Organization ID Number: 99999900 Name: GRAPHIC TECHNOLOGY Address: 9765 ARTS LANE City: CORAL CITY State: IOWA Sort Selection: SSN Country: Postal Code: 12345-6543 Program Type: FFEL/DL Years: 1---------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic SSN Last name First/M.I. D.O.B School Begin Date End Date Level ----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2 ----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----0001-01-0001 CHARM JIM K 06/07/1949 99999900 01/18/2000 05/11/2000 1 8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 2,000 666 04/24/2000 G 12/13/2001 D FD0001-01-0001 CHARM JIM K 06/07/1949 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 783 666 10/12/2000 G 12/13/2001 E E0001-01-0002 NOON SUN M 06/07/1949 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 2,834 666 10/12/2000 G 12/13/2001 B FB0001-01-0002 NOON SUN M 06/07/1949 99999900 08/20/2001 12/13/2001 2 8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 1,471 666 08/24/2001 G 12/13/2001 E E0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/23/1999 05/11/2000 1 8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 2,625 666 02/08/2000 G 12/13/2001 D FD0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 3,500 666 01/30/2001 G 12/13/2001 E E0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1 8888888888 9999999999 SF DA 00/00/0000 02/17/2002 $ 1,313 666 02/05/2001 W 12/12/2002 D FD0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1 8888888888 9999999999 SU DA 00/00/0000 02/17/2002 $ 1,021 666 02/05/2001 W 12/12/2002 E E-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator, IC = ICR (Negative Amortization Only), N = Not Used, E = Eligible but not counted INFORMATION PROTECTED BY THE PRIVACY ACT OF 1974 AS AMENDED

School Information OPEID Number

Line 1

Line 2

Line 2Line 1

Abbreviations


1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004 NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 1 COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)0 Attention: ALEXANDER PEACHUM Organization ID Number: 99999900 Name: GRAPHIC TECHNOLOGY Address: 9765 ARTS LANE City: CORAL CITY State: IOWA Sort Selection: SSN Country: Postal Code: 12345-6543 Program Type: FFEL/DL Years: 1---------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic SSN Last name First/M.I. D.O.B School Begin Date End Date Level ----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2 ----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----0001-01-0001 CHARM JIM K 06/07/1949 99999900 01/18/2000 05/11/2000 1 8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 2,000 666 04/24/2000 G 12/13/2001 D FD0001-01-0001 CHARM JIM K 06/07/1949 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SU RP 00/00/0000 06/12/2002 $ 783 666 10/12/2000 G 12/13/2001 B FB0001-01-0002 NOON SUN M 06/07/1949 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 2,834 666 10/12/2000 G 12/13/2001 E E0001-01-0002 NOON SUN M 06/07/1949 99999900 08/20/2001 12/13/2001 2 8888888888 9999999999 SF DF DF 11/22/2002 06/12/2002 $ 1,471 666 08/24/2001 G 12/13/2001 E E0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/23/1999 05/11/2000 1 8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 2,625 666 02/08/2000 G 12/13/2001 D FD0002-00-0003 TREAT DENZEL A 06/19/1981 99999900 08/21/2000 05/10/2001 2 8888888888 9999999999 SF FB 00/00/0000 11/07/2001 $ 3,500 666 01/30/2001 G 12/13/2001 E E0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1 8888888888 9999999999 SF DA 00/00/0000 02/17/2002 $ 1,313 666 02/05/2001 W 12/12/2002 D FD0003-00-0004 XU MARK R 02/28/1969 99999900 01/16/2001 05/10/2001 1 8888888888 9999999999 SU DA 00/00/0000 02/17/2002 $ 1,021 666 02/05/2001 W 12/12/2002 E E-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator, IC = ICR (Negative Amortization Only), N = Not Used, E = Eligible but not counted INFORMATION PROTECTED BY THE PRIVACY ACT OF 1974 AS AMENDED

E FAC

BD

G H

CDR Guide – Chapter 2.3


LI

KJ

S T

1 U.S. DEPARTMENT OF EDUCATION CALCULATION DATE: 07/31/2004 NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) PAGE NO: 35 OPEID: 99999900 COHORT YEAR 2002 OFFICIAL LOAN RECORD DETAIL REPORT (SCHOOL)----------------------------------------- STUDENT ----------------------------------------- Original -------- CLASS ------ Academic SSN Last name First/M.I. D.O.B School Begin Date End Date Level ----------- ----------------------------------- ------------- ---------- -------- ---------- --------- --------0 - LENDER/SVCR/HOLDER - -- Loan - Claim Rsn/ DEFAULT/ Guarantor/ Guaranty Enrollment Stat/ Usage Originating Current Type Stat Code NegAm Date Repay Date Amount Servicer Loan/Date Code Date 1 2 ----------- --------- ---- ---- ---------- ----------- ---------- ------ --------- ---------- ---------------- -----0003-00-0005 YOUTH JAZZ D 11/28/1975 9999900 08/21/1995 05/10/1996 2 0101 0101 D2 DA 00/00/0000 12/17/2001 $ 2,172 0101 12/21/1995 G 05/31/1996 E E0003-00-0006 WISHING STAR B 11/17/1980 99999900 08/23/1999 05/11/2000 1 8888888888 9999999999 SF DF DF 08/31/2003 02/21/2002 $ 1,330 666 02/02/2000 W 05/10/2001 B FB0003-00-0006 WISHING STAR B 11/17/1980 99999900 08/21/2000 05/10/2001 1 8888888888 9999999999 SF RP 00/00/0000 02/21/2002 $ 1,514 666 09/21/2000 W 05/10/2001 E E FFEL DIRECT DUAL ------------- ------------- ------------- TOTAL DOLLARS IN DEFAULT : 20,360 14,895 35,255 (Based on Outstanding Principle Balance) TOTAL DOLLARS IN REPAYMENT : 345,943 52,014 397,957 (Based on Outstanding Principle Balance) TOTAL INSURANCE CLAIM PAYMENTS: 0 ************* = Not Available-Actual Numerator Count : 20 Report Count : 20(B Usage 1 Codes only) Actual Denominator Count: 147 Actual Default Rate: 13.6 Report Count : 147(D & B Usage 1 Codes) INDIVIDUAL PROGRAM TALLY: FFEL: 15/135 DIRECT: 5/19 Appealed Rate flag: N (D=Direct, I=Indirect, N=No Appeal, U=Unknown) IC: 0 (Negative Amortization Only)0 End of Loan Record Detail Report Report Generation Date: 09/30/04-Default Rate Usage 1: D = Denominator, B = Numerator/Denominator, N = Not Used, E = Eligible but not counted Default Rate Usage 2: FD = FFEL Denominator, FB=FFEL Numerator/Denominator, DD = Direct Denominator,DB=Direct Numerator/Denominator, N = Not Used, E = Eligible but not counted

CDR Guide – Chapter 2.3

M

N

PQ

O

R

U V

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Supporting Documentation

Certified by School

Status Status First Started

Term Begin

Term End Anticipated Graduation Date

School Code

School Name

01/15/2001 W 11/12/2000 09/04/2000 12/19/2000 111111-00

Electrical Training Institute

David Smith SSN: 222-22-2222

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Incorrect Data ChallengeReceive draft LRDR

Review and analyze the data shown on the LRDR against the school’s records

Identify inaccurate data and provide supporting documentation and relevant LRDR

Prepare a spreadsheet and cover letter for each data manager where inaccuracies occur

• Send the incorrect data challenge(s) to each data manager where inaccuracies occur

• Send within 45 calendar days of receiving the draft CDR data

Data manager responds within 30 calendar

days

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Defaulter Characteristics

84% did not receive the full 6 month grace period due to late enrollment notification

71% withdrew without completing studies

56% had bad telephone numbers

83% were not successfully contacted by telephone during the 360 day collection effortRepresents Direct Loan Portfolio Only

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84% did not receive the full 6 month grace period

This statistic is directly related to untimely and/or inaccurate enrollment reporting

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Withdrawals

These students are at extremely high risk for default

Early identification is a key Retention effort

71% withdrew withoutcompleting their studies

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56% had bad telephone numbers

83% were not successfully contacted by telephone during the 360 day collection effort

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Default Prevention and Management Plan

The new sample plan includes activities that:

Promote student, school, and loan program success

Are easy to implement and do not require much in the way of resources

DCL GEN-05-14

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Section I. Overview Increase retention Reduce borrower defaults Promote school success

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Section II. Early Stages of Enrollment Entrance Counseling Financial Literacy for Borrowers Early Identification of At-Risk Borrowers Communication Across Campus Default Prevention/Retention Staff

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Section III. Late Stages of Enrollment Exit counseling Withdrawals Timely and accurate enrollment

reporting

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Section IV. After students leave school Early Stage Delinquency Assistance (ESDA) Late Stage Delinquency Assistance (LSDA) Maintain Contact with Former Students Analyze Defaulted Loan Data to Identify


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Section V. Enhanced Entrance/Exit

Counseling Requests for borrower information Information about repaying the loan Reminders about personal financial

management and Title IV loans

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Section VI. Tools and activities for schools Assessments for default prevention

and management General connections/publications

Loan counseling Enrollment reporting and data

accuracy Default prevention

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Three Quick Prevention Tools

Loan Record Detail Report NSLDS Reports Late Stage Delinquency

Assistance

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Date Entered Repayment Report School Repayment Info Loan Detail School Cohort Default Rate History Enrollment Reporting Summary

NSLDS Reports

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Late Stage Delinquency Assistance (LSDA) Identify borrowers who did not

respond to Lender, GA or DL Servicer loan counseling

Contact and support student to take constructive action: they will listen to you.

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Borrower Delinquency Pattern

0%

5%

10%

15%

20%

25%

30%

35%

31-60 61-90 91-120 121-150 151-180 181-210 211-240 241-270 271-300 301-330 331-360

Days Past Due

Per

cen

tage

of

Tot

al

Del

inq

uen

cy

Stafford Borrower Delinquency Pattern

12 month average

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Schools feel it is the right thing to do It is achievable Students typically respond well to schools It doesn't take a lot of resources The results are dramatic!

Why does LSDA Work?

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Contact Information

Default Prevention and Management

Main: 202-377-4258Hotline: 202-377-4259Email: [email protected]: ifap.ed.gov/DefaultManagement/DefaultManagement.html

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Federal Student Aid’s Default Prevention Team

Mark Walsh Eileen Marcy

816-268-0412 [email protected] [email protected]

Craig Rorie John Pierson215-656-5916 [email protected] [email protected]

Let us know how we can help you!

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Questions?

Thank you!

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