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UASFAA Fall Conference April 18, 2013 YesAnother Presentation on Default Prevention Slide 2 Bio Rose Amador, Call Center Supervisor 7 Years Experience in Loan Servicing, Default Prevention and Default Collections Joined UHEAA in 2006 to establish in-house servicing Direct Experience Collector to Supervisor Primary Experience: Default Prevention Part of UHEAAs Default Prevention Team that helped UHEAA reach the #1 cohort default rate in the nation Part of UHEAAs Default Prevention Team that helped UHEAA reach a 1.9% cohort default rate Slide 3 U.S. Department of Education Fact Sheet, September 2011 HBCUs have deployed innovative approaches towards default management and reduction. Such strategies include implementation of a default management plan that engages stakeholders, identifies approaches to reducing default rates, and tracks measureable goals. These schools have increased borrower awareness of obligations through incorporating borrower topics at orientation sessions and providing enhanced entrance and exit counseling. Other best practices include borrower tracking, increased contact with delinquent borrowersand partnering with other stakeholders to optimize default prevention, resolution, and reduction. [Fact Sheet September 12, 2011.] Slide 4 NY Times Editorial Columnist, Gail Collins Dont you think there should be someone in charge of calling [students] once a week and yelling: $800 a month until youre 51 years old? [New York Times, The Lows of Higher Ed, September 14, 2012 ] Slide 5 Presentation Objective #1 Make the case that we have a motivation problem, not an information problem. Presentation Objective #2 Present our recommended strategy for preventing delinquent students from becoming defaulted students. Slide 6 Keep in mind CDR calculations based on # not $ Compare: 1 st -year student with $2,500 in debt vs. a graduating senior with $25,000. Who is most likely to default? Who is most difficult to help? Slide 7 Keep in mind Highest risk of default: Dropouts Most Critical Risk Indicator: Completion Most Important Success Indicator: Completion Average debt of 1 st year dropouts -- $4,500 Monthly payment over 10 years: $52 Slide 8 Keep in mind Average debt of college seniors: $25,250* Monthly payment over 10 years: $291 *The Project on Student Debt, www.projectonstudentdebt.org Slide 9 Keep in mind The desired action is contact with the servicer Why? Only the servicer can solve the problem. Slide 10 Consider this A successful default prevention program must be strong enough to influence the behavior of the most difficult students. The students most likely to default are the most difficult students to influence. We have a motivation problem, not an information problem. Slide 11 Debtor Psychology Two Obstacles Avoidance: I dont want to deal with this Ignorance: I dont know what to do about this First Obstacle is much harder to overcome than the second Slide 12 Debtor Psychology Three Causes of Avoidance: Fear Confrontation Negative treatment Personal embarrassment Slide 13 Debtor Psychology Second Cause of Avoidance: Procrastination Its only a student loan Its a government loan it will take someone a long time to come after me. What are they going to do, repossess my brain? Slide 14 Debtor Psychology Third Cause of Avoidance: Feelings of Being Overwhelmed or Helpless I cannot afford the past due amount I have so many other problems There is nothing I can do right now Slide 15 Debtor Psychology How do we overcome avoidance? Borrower Communication that is: Persistent Relentless Sustained Slide 16 Debtor Psychology Second Obstacle: Ignorance Lack of Information about options & resources. Confusion about who to call. Slide 17 Debtor Psychology How do we overcome ignorance? Information vs. Recommendations Recommendations are more important than information Giving information is not enough. We must tell them what to do and how to do it. Contact your servicer Ask About Here are links, resources, contact points Slide 18 Debtor Psychology Our Objective: Motivate the borrower to contact the servicer Slide 19 Our Recommendations Communication Strategy: Call Center Emails Text Messages Web Resources Skip Tracing Targeted Mailings Persistent, relentless and sustained communication of options, resources, and suggestions. Slide 20 Our Recommendations Implement the Departments Plan Engage Campus-Wide Stakeholders Identify Your Unique Borrower Profiles Set & Track Goals Implement Borrower Awareness Programs Strengthen & Enhance Orientations Strengthen Entrance & Exit Counseling Track Riskiest Borrowers Partnerships Slide 21 Our Recommendations Collaborate with Federal Servicers Servicers School Representatives Servicer Website Servicer Ombudsman Office Slide 22 Our Recommendations Sponsor or Link to Online Resources In-House Resources U.S. Department of Education Resources Commercial Resources Slide 23 Our Recommendations Use NSLDS Reports Portfolio Reports Delinquency Reports Other Databases Slide 24 Our Recommendations Timing of Borrower Communication Begin 90-Days Delinquent - Why? 90-Days Delinquent = 4 Payments Due Average 1 st Year Student Owes: $200 Average Senior Owes: $1,000 Avoidance in full swing Slide 25 Communication Schedule Slide 26 Slide 27 Results How Do You Know? Follow delinquency This months 90-day delinquency is next months 120-day delinquency. You want the month-to-month historical trend lines to aim downward. Slide 28 Results Dont stop Questions?