Successful Repayment Support Strategies
and new CCCCO CDR Goal
“Things to Consider”
2017 CCCSFAAA CONFERENCE
PRESENTER: JOHN PIERSON
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Agenda
• New Chancellor’s Office CDR goal‘Sub-20%’ CDRs in FY 2017 and Beyond
• The New Normal
• The Chancellor’s Office agreement:
• ECMC
• EdFinancial
• I3
• StudentConnections
• Effective use of: Repayment support services
• Helpful Considerations
• Case Studies
• Tips for managing repayment assistance relationships
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New CDR Goal
• Objective: All CCC CDRs below 20% for FY 2017 cohort and beyond
•
Initial focus : all schools with history of CDRs (FY 13/14/15) in excess of 20%
•
CCCCO is aiming for national CDR “average”
• FY 2017 is open for business
•
Borrowers entering repayment between 10/1/16 and 9/30/2017
•
Cohort closes on September 30, 2019
•
October 2016 – March 2017: You may already have some delinquent borrowers
• First things first
•
Now is the time to talk with your TPS about the CCCCO’s new objective
•
The sooner your TPS begins to work with FY2017 borrowers, the sooner your TPS will achieve a sub-20% CDR
•
When Sub-20% CDR is achieved, you can elect to cease work on FY2017, moving focus to future cohorts
•
Sub-20% CDR is well within capacity of your TPS to achieve: You’re paying them ‘to do the possible’
• If you want to lend a hand:
•
Conduct analysis: which student borrowers are most likely to be a problem later?
•
Intervene with potential at-risk student borrowers while still enrolled
•
Academic Support
•
Establish in-school relationship with Federal servicer
•
Periodically collect/refresh contact information
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Third Party Servicers
• The CCCCO agreement with third party servicers, what it says:
• The terms of the agreement
• Copy of (unprecedented) Agreement - handout
• How these terms benefit you
• Choosing a vendor: up to the college
• Is the college free to use another vendor?
• Yes, schools have negotiated and/or renegotiated contracts with other vendors to match
the Chancellor’s Office provisions
• Taking maximum advantage of these new provisions
• Changes benefit not only you but also other schools outside California
• Creates a new paradigm for school-TPS relationships
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Repayment Support Services strategies
• Rule Number One: Follow the data
• Per CCCCO arrangements, SDW provides NSLDS repayment data 3x per year in
November, February and June. SDW makes available the following information
for all open cohorts:
• Numerator
• Denominator
• Current CDR
• Projected CDR
• Cure rates necessary to reach particular CDR targets
• Keeping in mind that each SDW set of repayment data will:
• Be at a different place in the cohort life-cycle, i.e., third, second and first year of maturity
• Have its own unique risk profile
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Repayment Support Services strategies
• Rule Number Two: Intentionally establish institutional goals
• For FY2015 and FY2016
• Individual institutional objectives
• Finishing below 30%
• Avoiding loss of eligibility
• What are your interim CDR objectives?
• For FY2017 and Beyond: New CDR Goal
• A ‘sub-20%’ CDR
• All schools
• You’re the customer: clearly state your CDR objectives so your TPS can formulate a
‘success strategy’ unique to your school’s needs
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Repayment Support Services strategies
• Projections vs Goals:
• The SDW and your TPS will give you CDR projections, which will evolve over
time as borrowers enter repayment, and default or not
• If your projections and goals align:
• you have no additional work to do
• If there is a significant gap:
• Need to bring projections into alignment with goals
• The larger the gap, the more time, effort and expense will be required to reach
alignment
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Repayment Support Services strategies
• Available repayment support tools include:
• Reliance on Federal servicers
• School based outreach:
• Letters, emails, phone calls
• School managing necessary data
• Cost: staff time, materials and supplies
• School based outreach with data manager partner:
• Letters, emails, phone calls
• Outside partner managing necessary data
• Cost: fee for outside partner, plus staff time, materials and supplies
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Repayment Support Services strategies
• Available repayment support tools continued:
• School-managed outreach with partner:
• Outside partner that will, based upon school direction, generate letters, emails and
arrange for phone calls, depending upon perceived need
• Changing the ‘mix’ of activities to achieve goal
• Cost depends upon mix of school directed activities
• Outside partner outreach:
• Conducts all outreach – ‘full service’
• Cost calculation may vary for ‘full services’
• Fix fee per delinquent borrower per month
• Flat fee for all services per month
• Annualized up-front payment
• “Success only” payment
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Repayment Support Services strategies
• What can I expect from these tools?
• Federal servicers
• Will yield, on average, a 35% cure rate
• Depends upon the amount of default risk in your loan portfolio
• School outreach
• With or without an external partner to manage data, with diligent and consistent effort over a period
of time, can add an additional 10% to cure rate
• Outside assistance/mixed service
• With outside partner conducting targeted, school-directed outreach will yield 50-60% cure rate
depending upon mix of strategies
• Outside assistance/full service
• Full-service assistance can generate 50%+ cure rates over time, with duration being the critical factor
• Key: Beginning efforts early in cohort period will always yield better results
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Repayment Support Services strategies
• Available Institutional Resources: Like projected CDRs and institutional goals,
institutional resources will partly dictate which tools should be under
consideration at any point in time:
• Time
• How much time do I have to reach my goals?
• Staff
• Do I have staff both available and capable of devoting disciplined, consistent effort to
borrower outreach efforts over a long period of time?
• Budget
• Do I have the budget to support whatever outreach efforts I might be considering?
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Repayment Support Services strategies
• The activities discussed on prior slides focus on default prevention in the
repayment stage
• Additional consideration should be given to activities which schools can take
while borrowers are enrolled:
• Augmenting Financial Education: See CCCCO Financial Education Plan
• Improving Educational Outcomes: This will necessarily involve others outside of
financial aid: student success, student support services, academic affairs, enrollment
management, and will be driven by source(s) of default risk
• Collecting fresh contact information: May be done by FA office, but time and place
may vary depending upon how specifically you are able to identify sources of default
risk
• Establishing borrower relationship with Federal servicer while enrolled
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Case studies
Case One:
• A school is just entering the third year of the FY2016 cohort cycle
• They will need a delinquency cure rate of 57% to achieve a ‘sub-30% CDR for the
cohort in question
• The options for this school are limited:
• A school would need to ‘over-achieve’
• Particularly because they are within the final 12 month window, the time remaining
becomes a factor
• This school will need a ‘tool’ which can deliver at least a 57% cure rate
• The only available tool which can be counted on to deliver such a high cure rate would be
a full-service servicer
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Case studies
Case Two:
• A school is just entering the third year of the FY 2017 cohort cycle
• In conformance with CCCCO Tier Two objective, the school has adopted a ‘sub 20%’
CDR as its goal for the 2017 cohort period. The school will:
• Need a 45% cure rate to achieve the goal
• Will need sufficient additional resources to augment expected results from Federal
servicers
• However…this financial aid office has only three FT staff, insufficient for a robust
‘internal’ outreach effort.
• What are their options?
• What factors will the school need to consider in determining the ‘terms of
engagement’ with an outside servicer?
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Case studies
Case Three:
• A District has contracted with a vendor to manage repayment data as part of a
district-level borrower outreach effort starting in FY2015, with a District’s objective of
“sub-30% CDR. However, consideration is now being given to FY2017 with the
newly adopted “sub-20%” CDR goal. The District’s four colleges will need the
following cure rates to finish below 20%:
• 2 colleges will need cure rates of 35%
• 1 college will need a cure rate of 40%
• 1 college will need a cure rate of 55%
• The District-based outreach solution should be sufficient for 3 out of the 4 colleges
• The District-based outreach solution should be sufficient for how many colleges?
• How many colleges may need additional help, e.g., full service?
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Tips for Managing Repayment Assistance
Relationships
1.
Know your projected CDRs for all open cohort years (SDW and/or TPS)
2.
Establish institutional or CCCCO goals cohort year in question
3.
Based upon the interplay between projected CDRs, institutional goals and
available internal resources, choose realistic repayment support options
4.
Don’t buy services that you don’t need. If you only need assistance for one or
two of the open cohorts, stipulate in the contract which cohorts will be the
focus of the vendor’s assistance
5.
Make sure that the vendor will give you reports and conduct conference calls
at least monthly to discuss progress. Use these calls to train staff to ‘project
manage’ the vendor relationship
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Tips for Managing Repayment Assistance
Relationships
6.
Pay for success: Focus on necessary cure rates and on at-risk borrowers
7.
Only agree to a contract which allows you to void the agreement on 30-days
notice for ANY reason
8.
Only agree to a contract that allows you to change the focus of the vendor’s
efforts without having to renegotiate, e.g., ‘stop working on FY 14 and start
working on FY 15 as of today’, or, ‘stop working on my FY XX borrowers,
period, at the end of this month’ or ’stop doing ALL work as of the end of this
month’
9.
You’re a customer, not a captive. If someone won’t sell you what you want, go
elsewhere. There is a TPS that wants your business on your terms
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Consulting:
• John Pierson
• Pierson and Associates
• 404-395-9991
Contact Information
• [email protected]
Questions?
Data:
• Ron Parker
• Student Data Warehouse
• 512-569-6100
•
[email protected]