Creating Effective Default Prevention Strategies
Identifying students who are at risk of student loan default and establishing ongoing communication with those students are two key strategies for minimizing borrower default. Financial aid administrators should include these strategies and more in their default prevention programs, so borrowers are aware of their repayment options and less likely to default. This web seminar, originally broadcast on January 28, 2014, featured administrators from two institutions. They described the tools and strategies they have employed to curb loan defaults.
Vice President of Administration
Spartan College of Aeronautics and Technology (Tulsa, Okla.)
Spartan College of Aeronautics and Technology is a four-year proprietary institution, where students learn about professional piloting, aviation maintenance, and quality control. Our goal is to get our cohort default rate (CDR) below 15 percent in the next two to three years. To reach this goal, we have used different third-party software systems, including USA Funds Borrower Connect™, which we began using in April 2013. It has proven to be very beneficial, as we have already managed to lower our CDR in a short amount of time. Our CDR had been at 27 percent, and we have decreased the rate to 22.6 percent this year.
Director of Financial Aid and Student Success
Truckee Meadows Community College (Reno, Nev.)
Truckee Meadows is a two-year public institution in Reno, Nevada with a strong transfer pipeline to the University of Nevada, Reno. We are known as the “jobs college,” in that we produce graduates who can immediately meet the needs of local employers. We have been using USA Funds Borrower Connect since its inception in fall 2011. We started using an add-on, USA Funds Borrower Connect InTouch, in August 2013. USA Funds Borrower Connect InTouch allows USA Funds staff to use our data to contact students within the grace period and those who are delinquent but not yet in default. With the help of these services, we were able to have a CDR of 15.7 percent last year. Our goal is to make sure our CDR is below the national average, and we are on our way to doing so.
USA Funds Borrower Connect Product Manager
What are some of the default prevention strategies you are employing at your institutions?
Riling: At Spartan, we utilize the Call Campaign module in USA Funds Borrower Connect, which has automated the process for our staff. Every morning, the module generates a call list and allows for a generation of follow-up calls as well. We also use the USA Funds Borrower Connect Email module, which works the same as the Call Campaign, except the contact is done through email. We do this on a daily, weekly, or monthly basis depending on the follow-up that is needed with our borrowers. Prior to using USA Funds Borrower Connect, Spartan staff spent hours reviewing reports manually, and setting up Excel call and email lists. Now we spend more time helping students. My best advice is to use the different reports to create your student contact campaigns, as well as use the Follow-Up option to remind your staff to make the necessary phone calls and email campaigns.
Wurm: We download a file once a month that contains the information of our students who are delinquent but not yet in default. USA Funds Borrower Connect divides the borrowers into “buckets” by how delinquent they are; based on which bucket a student is in, we send them relevant emails and letters. We send letters because we find it is more personal, and some borrowers frequently change their email addresses. Our postage cost has gone up, but we consider it a worthwhile expense because we really need to connect with our borrowers. But, emails are also sent because some people simply do not read their mail. We do this monthly. When students call in because of an email or letter, they speak with our student loan coordinator, who can look up their information in USA Funds Borrower Connect to assist them. We do not have sufficient staff to do a calling campaign at the level of quality we want, so we have turned this over to USA Funds. For a calling campaign to be worth it, you want to ensure that you can help that student when you contact him or her. USA Funds is the expert at this, because they have been doing it for years. They do a much better job than we could.
Shiflette: Which reports do you use in USA Funds Borrower Connect, and why do you use them?
Riling: We use the Borrower Detail Report to make sure we are contacting all the necessary students. Sometimes we find students on this report who are not appearing in the campaigns because their contact information is not in the USA Funds system. This report allows us to find these students in our systems, and reach out to them. We also use the Delinquency Aging Report to determine how we are doing and if there are any cohorts we need to focus on more on a monthly basis. We also use this report to look at the different delinquency statuses and run them against the campaign numbers to make sure we are reaching all of the students who are delinquent.
Wurm: We also use the Delinquency Aging Report to give us information on the effectiveness of our processes. We are constantly looking at our best- and worst-case scenarios for our CDR and seeing if they move on a monthly basis. We also identify who our high risk defaulters are through this report.
Shiflette: Are there any lessons you each would like to share regarding USA Funds Borrower Connect and default prevention strategies?
Riling: USA Funds Borrower Connect allows us to analyze the next three cohorts. Currently, we are working on 2012, 2013 and 2014. Being able to have this information in USA Funds Borrower Connect helps us contact the students early in the delinquency stage. Having the dashboard allows us to see where we stand at any given time. Both phone calls and emails have helped us in lowering our CDR percentages.
Shiflette: I think what is key here is that it is crucial to reach borrowers in those first 30 to 90 days after delinquency, and maintain active contact with them.
Wurm: We can only do so much in the financial aid department. This needs to be a campuswide effort, as everyone is concerned about student success and completion, which affect our default rate. Ninety-nine percent of our defaulters do not graduate. In addition to emails and letters, the outreach that has been most effective has been the USA Funds Borrower Connect InTouch service. The call service is invaluable. Other strategies that have been effective include listing our servicer information in our communications. We teach our students when they initially borrow to log into the borrower website, but we list that information in all communications just in case they forget where to look. We also use USA Funds Life Skills® online financial literacy curriculum for students to help them understand how to manage their loans, create a budget, and be successful in school. We have partnered with USA Funds for 20 years at Truckee Meadows. From the time they were our designated guarantor, they have been wonderful to work with. The leaders at USA Funds truly care about schools and students. They have the perfect blend of professionalism and personal touch.
To watch this web seminar in its entirety, please go to: www.universitybusiness.com/ws012814