Default Prevention
On Campus
Default Management Plan
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Develop your plan via a default management team
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Representative from each office involved in delivery of
aid
Senior administration & middle management
Faculty & student representative
Establish goals & objectives
Identify & allocate resources for plan
Define default management evaluation methods
Establish data collection
Impact of Student Retention
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A study compiled by Texas A&M found:
Out of 13,000 students
- 2% (260) of students that graduated,
defaulted
- 14% (1,820) of students that did not graduate,
defaulted
Found that background variables are not very
important:
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Preparedness
Demographic
Financial situation
Student Retention
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Concluded that student’s retention rates are a good
indicator of their likelihood to default on loans meaning
success in college is the most important indicator of
default risk
Students make the decision to leave school within
three to four weeks
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Subconscious or conscious decision
Need institutional “velcro” to touch and hold the students
immediately (create affiliation)
Compare what your institution spends to recruit
students with the amount spent to retain them
Student Retention
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Most Common Complaints from Students:
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Availability of financial aid
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Course registration
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Campus run-around
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Concern for students as individuals
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Helpfulness of financial aid counselors
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Top Strengths of Institutions
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Knowledgeable faculty
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Clear and reasonable program requirements
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Approachable academic advisors
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Well-maintained campus
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Students experience intellectual growth
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Safe and secure campus
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Enjoyable student experience
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Availability of faculty
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Quality of instruction
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Students feel welcome
Noel Levitz, The 2005 National Satisfaction and Priorities Report
Student Retention
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Assess the drivers influencing retention rates:
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Available Financial Aid
Support Services
Early-Alert System of withdrawals
Classes and class schedules that set students up
for failure
Low-income student persistence is directly &
positively related to:
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financial aid counseling,
career counseling,
academic counseling, &
personal counseling
Academic Counseling
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Advising
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Tutoring
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Study & time-management counseling
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Supplemental course instruction
Personal Counseling
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Goal setting
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Stress reduction
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Problem solving
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Community resource information
Student Misconceptions
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Know how much they need to borrow
Will borrow only what they need
Have a good idea of what they will earn after
graduating
Know how much they borrowed
Will keep track of their loans after they leave
school
Borrower’s Perspective
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Too much information during the admissions process
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Can’t fully absorb entrance counseling
Need to repeat counseling several
times
Financial aid counselors “lecturing” does not have much
impact
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Recent graduate
Defaulted alumnus (credit ruined, wages garnished)
Default Prevention Staff from Guarantor
Lender
The Players
Let the borrower know who is involved:
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Financial aid office
Lender
Servicer/secondary market
Student Loan Counseling Services
Guarantor
Registration
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Collect references each fall & spring
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Registration isn’t complete until student gives
references
References may be different each semester
Financial aid staff should be available to
answer financial aid questions
Orientation/Freshman Seminar
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Include money management
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Credit card use
Checking account management
Upromise benefits (www.upromise.com)
Distribute brief “fact sheet” about the financial aid
office
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Allied Medical College “Lifetime Financial Aid Counseling”
“Known point of contact”
Parents
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Present materials during orientation, parent’s
weekend & sporting events
General information regarding general types of
student debt, typical payments required for student
loans & the consequences of default
Remember the Privacy Act with relations to specific
student borrowing information!
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Webster University: “Release of Information
Authorization”
Career Placement
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Other than relevant work experience, participation in
internships or cooperative education programs is the
best way for college graduates to increase their
employability
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Offer career placement services to current and
former students
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Facilitate internships
Ranken Technical College offers Lifetime Job Placement
Unemployment is a main reason reported to cause
loan repayment delinquency
Career Placement
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College students want more help from campus
personnel in choosing careers and finding jobs after
graduation
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Job placement
Resume writing
Interview skills
Employment tips
Networking
JobGusher (www.jobgusher.com)
Noel Levitz, National Student Satisfactory Report, 2003
Campus Media Outreach
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Announcement or letter in student newspaper
regarding availability of financial aid staff
Article regarding debt management in student
newspaper
Besides unemployment, another main reason to
cause delinquency - not aware of options
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Income sensitive repayment
Graduated repayment
Deferment
Forbearance
Consolidation
Graduation
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Graduation announcements
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Provide several free announcements for references listed
Send announcements on behalf of students
Distribute direct-debit authorization forms from the
borrower’s loan holder with graduation information
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Demonstrate savings by using direct debit if the lender
offers interest rate reduction
Alumni Approach
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Keep up-to-date demographic information for former
students
Mail a half-page flyer regarding availability of options
if having problems repaying loans
Offer a financial management seminar to alumni &
spouses
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Risk management
Insurance
Saving & investing (short & long term)
Tax effects
Other Smart Habits
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Allow students to keep school e-mail for up to two
years in order to maintain contact
Monitor attendance to prevent unofficial withdraws &
counsel students
Train school personnel to ask for current address &
phone number if a former student calls or visits
Don’t package student loans on initial award letter
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If interested in loans, check here
Must request loans in person
Other Smart Habits
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Get permission to discuss student loans with
parents/spouse (collect signature on award letter)
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Go where students are
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Set up table during career fairs & placement events
Collect references while students are waiting in line
Offer money management counseling during lunch in the
student union
Set up booths in high traffic areas (including outside)
Questions?