Jesse Marquez: Default Prevention

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Jesse Marquez: Default Prevention

  1. 1. DEFAULT PREVENTION<br />The Essentials To Lowering Your CDRs<br />
  2. 2. AGENDA<br />Default Defined<br />Cohort Default Rates (CDRs)<br />Changes to Tracking<br />FY08 3-year CDRs<br />Implementing a Plan<br />Default Prevention Activities<br />Lowering CDRs<br />DEFAULT PREVENTION<br />
  3. 3. DEFAULT DEFINED<br />Students enter into repayment on Federal Stafford Loans 6 months after separation (graduation/withdraw) from school <br />Default process begins on a loan after a delinquency has persisted for 270 consecutive days (9 months/payments) <br />The loan holder files a claim with the guarantee agency/Debt Collection Services<br />The claim is reviewed for due diligence and then paid as a default by the Dept of Ed (ED) approximately 90 days later (360 total days)<br />
  4. 4. DEFAULT DEFINED<br />DEFAULT TIMELINE<br />DEFAULT (360 DAYS)<br /> 4.01.10 <br />9.30.10<br />9.20.11<br />6.30.11<br />GRACE PERIOD (6 MONTHS)<br />DELINQUENCY PERIOD (9 MONTHS)<br />CLAIM REVIEWED <br />CLAIM FILED <br />
  5. 5. COHORT DEFAULT RATES<br />Cohort Default Rates (CDRs) are the percentage of borrowers who enter into repayment (denominator) on Federal Stafford loans in a given federal fiscal year and then default (numerator) by the end of the cohort default period<br />The fiscal year begins October 1 of one year and ends September 30 of the next year<br />The cohort default periodbegins October 1 of the fiscal year and ends September 30 of the next 2 fiscal years (3-years)<br />
  6. 6. COHORT DEFAULT RATES<br />FY09 3-YEAR CDR SAMPLE<br />550 (DEFAULTS)<br />100 x= 23%<br />2390 (COHORT)<br />NUMBER OF BORROWERS WHO DEFAULTED <br />10.01.08—9.30.11 (NUMERATOR)<br />NUMBER OF BORROWERS WHO ENTERED <br />REPAYMENT 10.01.08—9.30.09 (DENOMINATOR)<br />
  7. 7. COHORT DEFAULT RATES<br />Official CDRs are used to determine a school's participation in Title IV programs (federal student loans & federal grants)<br />Participation can be limited, suspended or terminated when a school’s official CDR is at or above 30% for three consecutive years (all Title IV programs), or if the rate for one year is greater than 40% (federal student loans)<br />A majority of students attending for-profit colleges finance their education with Title IV funds<br />
  8. 8. COHORT DEFAULT RATES<br />
  9. 9. CHANGES TO TRACKING<br />Default Period<br />Was previously measured for two years<br />FY09 & beyond will now be measured for three years<br />Draft CDRs<br />Previously released for the 2-year default period only<br />FY09 – 2011 will receive a 2-year and 3-year rate<br />School loss of eligibility<br />Current threshold is 25%<br />New threshold will be 30% <br />
  10. 10. CHANGES TO TRACKING<br />
  11. 11. The Department of Ed (ED) has released FY08 3-year Trial CDRs<br />The 3-year rate more than doubled vs. the 2-year rate at for-profits<br />Rates increased from 11.6% on average to 25%<br />FY08 3-YEAR CDRs<br />
  12. 12. IMPLEMENTING A PLAN<br />Identify all borrowers in a given cohort through the Date Entered Repayment (DER) Report available on NSLDS per OPEID and branch campus code <br />Identify delinquent borrowers through the Delinquent Borrower (DLQ) Report available on NSLDS<br />Delinquent borrower reports can also be requested directly through the repayment servicers<br />
  13. 13. DEFAULT PREVENTION ACTIVITIES<br />Prior to Enrollment<br />Introduction of Default Prevention Services to prospective students<br />During Enrollment<br />Provide in class-room financial literacy workshops<br />Before Separation<br />Provide exit counseling & collect updated contact info<br />During Grace Period<br />Send out grace letters<br />During Delinquency<br />Make phone calls, send letters and emails to assist borrowers<br />After Default<br />Work with borrowers to rehabilitate defaulted loans<br />
  14. 14. LOWERING CDRs<br />
  15. 15. CDR History<br />* CDR w/out default prevention plan<br />** CDR with default prevention plan<br />
  16. 16. 2007 2008 2009<br />CDR Analysis 2007-2009<br />
  17. 17. 2007 2008 2009<br />CDR Analysis 2007-2009<br />
  18. 18. 2007 2008 2009<br />CDR Analysis 2007-2009<br />
  19. 19. 2007 2008 2009<br />CDR Analysis 2007-2009<br />
  20. 20. 2007 2008 2009<br />CDR Analysis 2007-2009<br />

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