default management plans: everything you’ve always wanted to know, but were afraid to ask! scott...

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 ? ? ?