Loan Repayment General Session

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 Agenda

¾Life Cycle of a Loan

¾Delinquency Management
GA Perspective
School Perspective
¾Default Management
¾Summary

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Life Cycle of a Loan
Kristie Hansen

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 Everyone Has a Role
c y
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A g
Tax
pay tee
er an
uar
G
Students
Schools Media
Parents

tion Loa
uca nH
d old
o fE er &
e nt Ser
r tm vic
e pa er
D

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 Title IV Loan Life

In School – from origination and booking until

graduation or drop below half time.
In Grace – from end of school for 6 months
Repayment – from point of leaving grace
through successful repayment or discharge.
Default – from 270 days of delinquency or until
the loan is cured

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 Tools for Borrowers

ƒ Entrance, Exit Counselors

ƒ Repayment Plan Options
ƒ Payment Due Date Flexibility
ƒ Entitlements
– Deferments
– Forbearances
– Forgiveness
ƒ Loan Consolidation
ƒ Electronic Payments (ACH/EDA, Bill Pay Services)

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 Loan Life Cycle

In Grace In In Default

COHORT RATE
School Repayment Delinquency Claim Filed Claim Paid

6 mo. 31 - 269 270

Grace days

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 Cohort Default Rates

National Student Loan Default Rates

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 Common Characteristics of
Delinquent and Defaulted Population
1. Have withdrawn from school and did not
complete their studies
2. Do not get the benefit of their full 6 month grace
period as the result of late enrollment
notification
3. Have incorrect telephone numbers

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Risk Management: Reducing
Delinquency & Default
Tim Fitzgibbon, Iowa College
Student Aid Commission
 Default Aversion

ƒ Required by Regulation
ƒ Pre-claims Assistance
ƒ Supplemental Pre-claims Assistance
ƒ Default Aversion

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 Student Loan Outfitters

ƒ Referral service for “high-risk”

borrowers
ƒ Early awareness and delinquency
prevention
ƒ Available to all Iowa colleges and
universities
ƒ Interactive web site

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 Disaster Relief Grants

ƒ Funds available to students and

families affected by natural disasters –
later expanded
ƒ Matching funds from colleges and
universities
ƒ Recipients agree to limit borrowing
ƒ 2,100 recipients – Grants average
$1,400

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 Foster Grants
ƒ Funds available to students formerly in
foster care
ƒ Recipients agree to limit borrowing
ƒ Support from colleges and universities,
and Iowa Dept. of Human Services
ƒ 60% completion rate
ƒ $3,000 average award

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 Default Reduction Grants

ƒ Funds available to promote innovative

default prevention programs at the
campus level
ƒ Competitive application process
ƒ Tiered award levels
ƒ Guest speakers, academic
courses, community programs

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 Student Assistant Grants
ƒ Funds provided to hire “peer advisors”
ƒ SAs trained in financial aid, student
loan, and debt management basics
ƒ Increase awareness, communication on
campuses
ƒ Refer students to FAOs, ED, lenders,
or the Commission

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 Agency Servicing Center

ƒ Iowa-based default prevention call

center
ƒ Based on Commission theme of
Iowans-helping-Iowans
ƒ Expanding Iowa work force

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 Delinquency Management
From a Schools Perspective
Jo-Ann Craig
Rutgers University
 Rutgers, The State
University of New Jersey
ƒ Chartered in 1766; eighth-oldest college
in the nation
ƒ Located on three regional campuses in
New Brunswick/Piscataway, Camden,
Newark
ƒ Enrolls a total of 51,480 students

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 Rutgers, The State
University of New Jersey

ƒ 2002-03 Loan Volume

– $9.0 million Federal Perkins Loan Program
– $126.6 million Federal Direct Stafford Loan
Program
ƒ 2001 Official Cohort Default Rate of 3%

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 Makeup of Cohort Rate

Cohort Default Contribution by

School Type

100%

75% 4 Year Private

4 Year Public
50%
2 Year Private
25% 2 Year Public
Proprietary
0%
1997 1998 1999 2000 2001

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 Borrower Delinquency Pattern
Stafford Borrower Delinquency Pattern
12 Month Average

35%

30%
Pe rcentage of Total Delinquency

25%

20%

15%

10%

5%

0%
31-60 61-90 91-120 121-150 151-180 181-210 211-240 241-270 271-300 301-330 331-360
Days Past Due

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 Late Stage Delinquency
Assistance (LSDA)

ƒ CDR of 3% - So Why?
ƒ Began in February 2003
ƒ Our Strategy
ƒ Our Results

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 QA Default Aversion Project

ƒ 22 QA schools elected to participate; 9

will report
ƒ Examine two default prevention
strategies for Stafford AND Perkins
– LSDA
– Investigate Defaulters’ Characteristics
• Develop Profiles
• Design Intervention

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 Default Prevention Listserv

ƒ Host: Rutgers University

ƒ Meeting place to discuss default
prevention
ƒ Entire Title IV community welcome

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 Default Prevention Listserv

To subscribe:
Send e-mail to:
listserv@email.rutgers.edu
In body of message enter command:
Subscribe default_prevention your name

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ED-Collections Default Management
Gary Hopkins

U.S. Department of Education FSA - Students Channel - Collections

 Consequences of Default
ƒ Eligibility for future Title IV Aid
ƒ Entitlement opportunities
ƒ Credit Rating
ƒ Opportunity to buy a house
ƒ To be a federal employee
ƒ Wage Garnishment
ƒ Treasury Offset
ƒ Litigation
ƒ Collection fees added to outstanding balance
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 Administrative Resolutions

ƒ Death
ƒ Total and permanent disability
ƒ Bankruptcy prior to October 8, 1998

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 Discharges

ƒ School Closure
ƒ Unauthorized Signature
ƒ Ability to benefit
ƒ False certification

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 Paying A Defaulted Loan
ƒ Payment in Full:
– Borrowers can always pay their balance in
full and many do as soon as circumstances
allow or demand.
ƒ Compromise:
– On most accounts, ED or its collection
agency will settle the account for an
amount less than payment in full-
sometimes with a single call

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 Paying A Defaulted Loan
ƒ Rehabilitation of Debt
– Making 12 consecutive on-time payments will remove the
default status, eliminate the default from credit reporting and
and avoid any additional capitalization of interest during the
rehabilitation process.
ƒ Consolidation
– Borrowers can consolidate their defaulted loan without first
making payments, but borrowers are encouraged to first
establish a pattern of satisfactory repayments.
– Interest, and sometimes collection fees, are capitalized
when the consolidation loan is made, so the new loan may
accrue interest on a higher principal balance.

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 Paying A Defaulted Loan

ƒGrant Overpayments
–The borrower can restore his/her eligibility for
Title IV aid immediately by agreeing to make
reasonable and affordable payments on the debt.

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 Referring Borrowers

Website: www.1800iwillpay.com
Phone Number: 800-621-3115
Email (general inquiries): dcshelp@pearson.com
Correspondence Address:
PO Box 4222
Iowa City, IA 52244-4222

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 In Summary…

1. Tools are available for your students

through the life cycle
2. You can help your students understand
what lies ahead in repayment on their
loan
3. One of the most critical elements of
successful repayment is communication

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Contact Information
Jo-Ann Craig
Rutgers University
jacraig@rci.rutgers.edu
732-932-7057, ext. 611

Tim Fitzgibbon
Iowa College, Student Aid Commission
timothy.fitzgibbon@csac.state.ia.us

Gary Hopkins, Borrower Services

US Department of Education
gary.hopkins@ed.gov

Kristie Hansen, General Manager

Financial Partner Channel
kristie.hansen@ed.gov
(202) 377-3301

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