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Tuesday, October 21, 2003.doc

  1. 1. Default Aversion Conference Boston, MA October 21 – 22, 2003 Tuesday, October 21, 2003 Opening Remarks – Paul Combe • Welcome • Default Prevention/Debt Management most important thing ASA does • Access doesn’t end until repayment ends • As colleagues, we can share good ideas on default prevention/debt management Ann Maria Fusco, Director, Eastern Region • Introduction of Roberta/regional structure • Sharing of information began in ‘01 • Piloted in NY – hosted by HESC • Had last year in December hosted by USAF – found held better in October • Thank you of sponsors for breaks and mixer held tonight • Planning committee – thanks to them • Official introductions round the table Roberta Russo, Director, Northern Region • Thanks to all for attending; thanks to the committee and sponsors Gene Greene, Boston Office • Third conference • Information sharing has been successful in the past • Off shoot of the 422(h) provisions o Create and share ideas • Open discussions encouraged • Use the time to find “new ways” of doing things • ED takes default prevention seriously • As enablers and providers, we have a responsibility to the student • Feel free to interact with the speakers F. Duane Quinn, ASA • Overview of agenda for the next two days
  2. 2. • Instead of reading the agenda, would like to review the theme of the agenda for the next two days • Theme seems to be early communication with parents and students • Provided story as example of the importance of communication • We spend a lot of time discussing finance of education but it doesn’t seem to “penetrate” the audience • Audience is always new and first time in hearing about financial aid • Spend today talking about communication with students Introduction of first speaker Financial Aid Early Awareness – Dara Duguay, Director, Jump$tart Coalition • Jump$tart is a personal finance coalition • Used to confuse “financial” literacy with “reading” literacy • From 1997, increased interest has prompted greater awareness of “financial” literacy • Student “financial” literacy profile (before vs. after) Review of overheads – • Statistics 61% of 24-64 have not retirement savings • 21% of undergrads owe between 3k and 7k on credit cards • Mortgage delinquencies have surged to highest level since ‘92 • Teens are projected to spend $175 billions in ‘03 Statistics • College students borrower more in 1990 than ‘60-‘80 combined • Graduate students owe 20, 402 on average loan and credit card debt • Bankruptcies filed under 25 year olds were 150k in 2000, a ten-fold increase in 5 years • 2002 personal savings rate was 2.4% - should be 10% Personal Finance Survey Results • First survey in 1997, 31 question test (on website at www.jumpstart.org, downloadable) • Review one question from the test • Average score was 57% in 1997, in 2000 was 52% • Score dropped to 50.2% in 2002 o 65% feels “very sure” or “somewhat sure” about ability to manage finances • Question about where do students learn about finances? Top answer was home which might not be the best place depending upon parental experience in handling money.
  3. 3. The Good News • As little as ten hours instruction helped teens to better handle money More Good News • Adults age 30-49 had one year greater net worth when having a course in personal finance in high school Room polled regarding personal finance education – Who learned in high school, college – definitely not the majority in either case. College credit cards – didn’t used to have in college. Students today are faced with very few requirements to obtain credit. Major Jump$tart Activities – not a program but an “umbrella” organization directing resources • Standards and Benchmarks • Clearinghouse • Assessment • Best Practices • State Coalitions • Monitoring Legislation • Standards and Benchmarks – what students need to know and be able to do: • Income (gross vs. net) • Money Management • Spending and Credit • Saving and Investing Clearinghouse – www.jumpstartclearinghouse.org • Personal finance materials o Teaching guides, videos, CD’s o Textbooks, websites… • Many free and low-cost sources Assessment • Bank of Test Questions o Not tested then it’s not taught • Task Force of Experts • Linked to the Standards • Partnership with CTB McGraw-Hill
  4. 4. Best Practices • Task force of experts • For developers of education materials/curricula • Guidelines for what works State Coalitions – very important in integrating personal finance and integration into the curricula Monitoring Legislation – not a lobbying firm, as they are non-profit but they can educate • Utah mandating personal finance • Louisiana, Kansas, and South Carolina imbedding personal finance into classes • Mississippi mandated “offering” of personal finance classes • Teacher training a huge component ---No Child Left Behind Act – Title V, Sec 5131 – local innovative education programs, #11 is personal finance but is within a number of other programs and not getting priority over other issues (i.e., additional teachers, CPR classes, etc.) What Can You Do? • Become a personal finance cheerleader • Encourage educators to incorporate into existing classes • Spread information about wealth of curricula, guest speaker, and teacher training programs. May have financial literacy hearings in Congress next week – very encouraged by interest by Congress and our organizations in preventative efforts Outreach and Continued Care for At Risk Populations – Ann Coles, Senior Vice President, College Access Services, The Education Resources Institute (TERI) • Began working with financial aid in 1963 • No federal aid, only institutional aid • Thanks to many guaranty agencies for establishment of education resources Prevention • What does this mean? To keep from happening; to avert happenings • Effective outreach campaigns – many you can see in the public health arena o Designated Drivers o Truth campaign (paid by tobacco settlement money) Have not seen related types of campaigns related to college financing.
  5. 5. Student Loan Default Prevention • Start with what we know o Do research on student populations o Look at values, interests and goals • How can we provide support to at-risk populations that will help them avoid default? Start with Parents/Families • Parents more influential in shaping lives of students o Ideas of what they want to do formed before entering high school o Study in TX – students with no interest in college more likely to say that college not important in their families • 11 and 12th grade students – parents less important th Students Need Tangible Parent Support • Tangible means saving for college, visiting campuses, and attending financial aid workshops Parents/Families Lack Information • Cultural Capital – having the knowledge passing through the generations about what it takes to do something (i.e., college) • Social Capital – networks and people you know who have done these things o Not always found in lower income students • High student/counselor ratios – external sources are limited o Counselor ratios in NY, Chicago or CA can be 500-700 to 1 • Limited Access to the Web – limiting factor The Sallie Mae Fund Harris Poll Findings • 45% of low-income parents have “no idea” how to pay for college • Minority families express greater need for information • Latino parents received aid info two years later than others • 62% of parents did not name grants as a source of aid Other Research Findings: ACE Reports • Parents don’t consider loans financial aid • Working more than 15 hrs/week decreases degree completion Pre 11th Grade – What Parents Want • College – Labor market connection o Access to good jobs for their children o Need to communicate value of education to meet these goals • Simple information regarding college costs and financial aid o Need information about borrowing o Importance of academic preparedness
  6. 6. • Role/benefits of borrowing Limitations of Existing Outreach Efforts • Not based on market research • Insufficient audience identification • Lack clear, compelling, repeated messages • No message delivery in popular culture o TV, radio and other media o Lack of information availability • Lack of good info about the “product” - a college education o What it is, what is involved, benefits. • Materials for parents not a high priority o Info targeted to students, not parents Effective Outreach Strategies • Long-term investments – at least 3 years o OK “Gear-Up” plan using commercial marketing techniques • On-going activities more effective than one-time event o Get more return on investment with continuing events • Use commercial marketing techniques o Issue materials in other languages • Pay attention to families’ cultural backgrounds • Encourage parents, other adults to actively support • Information on how to prepare financially • Promote easy savings options for low-income families • Provide information in parents’ native languages • Organize/Support campus trips • Support parents talking to parents o Training parents to discuss financial aid with other parents • Provide financial incentives Examples of Effective Outreach Campaigns • College for Texans • Project Access, The Sallie Mae Fund • Community Foundation of North Carolina College for Texans --- www.collegefortexans.com • Aid campaign: “Education. Go Get It.” o TV campaigns in English and Spanish o Purchased radio spots – underutilized and most affordable o Logo campaign o Local grass-roots efforts
  7. 7.  Offered community/faith based organization $500 to have activities within their communities • Paying for college workshops • Go Theatre: motivational performances o Small vignettes on college/role models • Business community involvement Project Access – www.thesalliemaefund.org • Public awareness campaigns o In both English and Spanish • Paying for College workshop • College scholarships: o First in Family o American Dream o Unmet Need • Targets specific populations Community Foundation of North Carolina – www.cfnc.org • Partnership: College Foundation Inc., NC State Education Assistance Authority, Pathways of North Carolina • Helps students prepare for college and find best financial aid: Website, career center, student planner, online applications, Paying for College • Toll-free telephone information • Ad campaign – billboards, radio, TV o Public service announcements Resources: • NASFAA, ABC’s of Early Awareness o www.nasfaa.org • www.pathwaystocollege.net • www.collegefortexans.org • www.salliemaefund.com/project_access Question: How do you deal with debt management when you are trying to provide access data – a person has to have financial literacy to understand debt management? Had very little research on that. First hurdle is that people are reluctant to borrow. An understanding of the benefit and value of a loan in relation to education – is worth studying. Communications: Providing Access to the Information – Hazel Mingo, ED, FSA, Office of Student Aid Awareness
  8. 8. • SAA established in March 2001 • New office within ED/FSA • First time ED proactive program in outreach • Past position has not been proactive in getting information out to the public o Believed information best came from schools, counselors, or guaranty agencies • Simple message: College is possible and affordable. Federal government has money. Here is how you apply for it. • Three approaches: o Printed Materials – list of materials outside room  Student Guide • Publication renewed and updated annual • Available in English/Spanish • Also in Braille or in audio format • Updated in November and mailed automatically to schools, high school counselors, libraries • Contains all state higher education agencies • Has 1-800-4FEDAID number  High School Counselor Handbook • Updated in the Fall • Mailed to High-School Counselors • Discusses TRIO, “Gear-UP” • Consequences of default • College/career choices • Like feedback • Has “one-pagers” that can be reproduced and provided to students  Repaying Your Student Loans • Discusses default consequences • Limited printing o Mailed to schools with high default rates • Would like feedback for clarity, etc. • Available in Spanish  Brochure for Teachers • Discussed loan cancellations for teachers  One poster targets Native Americans • Simple message directing to website or telephone number • Targeted mailings to all Native American schools • Share ordering information  “Bee” Poster • Scholarship scam prevention • Can be ordered on-line o Internet  FSA information on www.fsa.ed.gov
  9. 9. • Site converts to Spanish • Guiding toolbar on left side of home page • Survey onsite – would like feedback • Two EAC conferences • Icon “My FSA” to personalize information • Can track colleges/grade progression o Outreach  Staff limited to three persons  Partner with other organizations who deal with the target populations  Do college fairs  Work with churches and other faith-based organizations  Write news articles for church newsletters  ESPN Radio, “Tom Joiner” web cast ads  HUD technology centers in public housing communities  National conference presentations Portfolio Risk Management – Sybil Phillips, Director, Portfolio Management (ED, FSA) Title IV this year is approximately $315 billion What is Risk Management? • Risk management is the continuous management of reducing exposure of loss from non-performing loans. • Includes a balanced review of business results and how to maximize opportunities. • Provides the foundation that supports the quality, composition and profitability of loan portfolio. Why is Risk Management important? • ED owns or guarantees approximately $290 billion in outstanding student loans. • In 2002 $56.5 billion was delivered in total new federal aid. • There are approximately 22 million borrowers with student loans • As a taxpayer you are a share/stakeholder in the federally insured student loan portfolio Advantages of Risk Management • Manage through life of the loan • Identifies borrower attributes throughout the life cycle of the loan that impact performing and non-performing loans. • Prevents a “scatter gun” approach to managing the portfolio, which leads to managing on demand • A focused vision and concentrated effort to managing default prevention and reducing the cost to the taxpayer.
  10. 10. o Proactive versus reactive Tools for Risk Management • Tools for default prevention o Increased focus on default prevention rather than “default collector” o Transform data in knowledge o Know the borrower through the life of the loan o Identify significant patterns and trends of a delinquent borrower Transform data into information • Data mining is defined as an extraction activity whose goal is to discover hidden facts contained in databases. • Predictability analysis is knowing your borrower Know the borrower through the life of the loan • Implement services that may reduce delinquency, such as: electronic debit, EBPP • Increase communication with the delinquent borrower earlier in the delinquency period • Educate the borrower on the consequences – help borrower to understand Identify significant patterns or trends • Look for patterns, trends, or changes • Identify 20 percent of the risks with an 80% impact on delinquency • Focus due diligence to include large dollars, # of days delinquent, risk factors of the borrower Slides of comparisons for the following issues: • Composition of the portfolio – Direct Loans • Composition of the Portfolio – FFEL Loans • Defaulted Loans – FY 02 to FY 03 Direct Loans o What state are they in – does this affect repayment? o Look at loan type o Unemployment rate high in that state? o What type of repayment plans are they using? o Age of the borrower when default occurs – • Defaulted loans FY02-03 – Eastern Regional states Common characteristics of delinquent and defaulted population • Withdrawn from school and did not complete their studies • Do not get the advantage of “aging through” their full 6 month grace as the result of late enrollment notification • Incorrect telephone numbers • What about email addresses?
  11. 11. What is FSA doing to mitigate risk? • Created a Portfolio/Risk management group to focus on the risk associated with Title IV programs o Responsible for supporting the management and performance evaluation of federally guaranteed loan programs and Pell grants o Identify and analyze risk exposure o Develop and manage portfolio strategies o Forecasts default levels o Reviews treatment of recovery dollars and rate by ED to ensure reporting reflects complete loss exposure to the taxpayer • Created an inventory of all default management initiatives within FSA • Created a enterprise-side Default Management Group focused on: o Communication o Technical Assistance for borrowers and institutions o Performance measures o Program integrity o Tools for Aversion o Default Collection Slide for FSA-wide Risk Management Strategy Chart Slide for National Student Loan Cohort Default Rate Chart • Shows focusing and collaboration efforts have been successful Why is Risk Management Important? • Cautions – we have been through good employment periods and a good economy • Prepared for “The Perfect Storm” • Be prepared to manage risk ***LUNCH School Panel: Debt Management Tools and Needs for the Future Betsy Groves, Associate Director, UMass. Medical Michelle Tufau, Associate Director, Student Financing, Wellesley College Rachele Jackman, Director, Financial Aid, Lincoln Technical College Moderator: Paul Garrard, Vice President, NCHELP Introduction: Continual reference to borrower “life cycles” and “timelines.” Speaker reviewed varying lifecycles of a sample student. At some point, the student enters repayment. During the period to time before repayment, there are a number of opportunities to educate the student.
  12. 12. Introduction of panel members: Betsy Groves: Overview of school structure/programs. • Start with open house for admitted students. • First time debt is discussed. • “If they live through medical school like a doctor, they’ll live like a student while a doctor.” • Review of Stafford loan programs with concentration on default ramifications • Do one-on-one with Perkins loans while reviewing Stafford • Do two workshops: fall and spring • Fall – underclassman focused on budgeting, how not to use a credit card and ramifications of non-payment of credit card • Spring – upperclassman focused and managing student loan debt, credit and credit scores, “real world” information • Spend more time on exits with individual or small groups. o School outlines total debt picture and works with students to defer loans. • When student graduates, gets deferment forms and total loan picture. • Stresses availability of forbearance to prevent delinquency and/or default • Try to pay down debt but use forbearance, too. Question: Do you have medical residents that call with questions or assistance? Yes, you don’t have to have gone to UMass to receive counseling. Lots of students don’t know who their lenders are… Follow up --- Wish list. Would like to have access to DL information to get status of Direct Loans. Rachele Jackman: • Corporate offices in NJ – operates 23 computer and technical training • School level include entrance and exit counseling • Default prevention at corporate level will be overview o Has staff of 7 multi-cultural individuals o Assigned full campuses o Responsible for notifications received from lender/guaranty agency • Has one person that controls grace period notifications for all campus sites • Uses this to contact student and/or begin skip tracing if needed. • Skip tracing tools: o Directory assistance o Servicer information o On-line search engines  Ultimate web pages (prison and military search) o Experian information for relatives o Reference sheet information
  13. 13. o Target nights and Saturday calls o Uses at on-set, will start process again if all have failed • Default rate down to 5.7% for the entire company Michelle Tufau: • Fifty percent of student body having financial aid • Efforts to start financing start at the sophomore year in high school • If you decide to apply to school, look at credit report and start now to plan payments. • Once accepted, speak to families in the spring before enrollment. • Speak to parents and students o What can school expect from family o Try to do entrance counseling before arriving • Questions in office encouraged • Eliminated all credit card advertising on campus • Stay on top of unknown student addresses • Keep website updated o Has credit card counseling o Debt counseling o Uses email as primary source of communication • Workshops all year round o Seniors receive financial planning 101 counseling  Student loan debt is discussed  “True” cost of money is discussed  Very well attended o Freshman workshop discussed budgeting, peer pressure, and finance  School concerned with socio-economic imbalance causing peer pressure and spending to keep up with “the Jones.” o Offer safe place to talk about credit problems • Wish List?? o Consolidation Workshop with pitfalls and rewards o Looking for more information on budgeting o Lenders/servicers to conduct exit counseling o Many students do not stay in the US which causes payment difficulties o Be in touch with students before they graduate • Cohort at 1.6% for the recent year; Perkins is at 4% Questions: News has been good about default rates – referred to Sybil’s presentation and that “The Perfect Storm” is coming. What are your needs in the future? And, whose responsibility is it to partner with the students? Answers: UMass keeps contact due to “learning contract” and has a different relationship because they students are easy to track due to population. Lincoln’s time is spent tracking and skip tracing students – would also like to have access to on-line systems.
  14. 14. Reports are helpful, too. Delinquency reports highlight that everybody is on the same page. Question: Does Lincoln track impact on borrowers on the calls made during grace period? Answer: Yes, they definitely note an impact and improved customer relations with requesting forbearance/deferments. Question: With skip tracing on private loans, finding increased usage of cell phones instead of land phones. Having more difficult time skip-tracing calls. Has school done anything to track cell phone numbers? UMass asks for cell phone number and provides in-house pager. Wellesley feels that it is a problem in defaults – did amnesty program in Perkins. Follow-up on cell phone question in that the loan is not secured so you couldn’t contact them for collection efforts due to breach of privacy issues. Equifax sells utility database with information on cell, heat, telephone, etc. Question: Is there any other corporate incentive that Lincoln has other than default rate improvement? Answer: No. Some campuses used to be a fifty percent default rate. Need to maintain their default rate. Question: (directed to Rachele) Do you primarily work with students in their grace period and do you work with them at other periods. Answer: Work with students primarily in grace through mailing, calling, skip tracing (if needed). Question: Does than include dropouts? Answer: Yes. They are much harder to locate. Question: Other topics that students need more information on? Answer: One thing is: “How does their student loan debt impact their abilities to buy a home.” Consolidation is huge. They get mailings and they are ineligible. Question for panel: How aggressive is the school for students that are not defaulted but delinquent? Answer: It’s not about the default rate. People who default don’t give. Question: Has the panel seen any spike in default rate? Answer: No, seen steady decline. Question: Discussion of parental involvement
  15. 15. Answer: Wellesley believes that it is a family affair Question: Does school do more than just call attempt if delinquent? Answer: Send email, flag follow-up, makes call, send letter. Question: If it continues to show up as unresolved? Answer: Activities performed every month. Question: At point of first contact, on a scale of 1 to 10, 10 being the highest, what is the financial literacy of your incoming population? Answer: Most answered 1 or 2, finding that it is socio-economic, people of color, etc. Those people who received financial aid are better equipped to handle financial issues versus a student who had their education paid by parents. BREAK OUT SESSION: Topic Two: Providing Debt Management Services to Schools Facilitator: Paul Garrard What can we be doing better for schools? Debt management is not just entrance and exit counseling— What did you hear today that makes you think we need to accelerate or need to do to help? • Missed hearing impact of alternative and private loans o Seeing parents shy away from PLUS loans o Fighting battle to get parents to take PLUS o Wondering if others see the same thing o Undergraduates with huge private loan debt o Believe correct and will get worse  Going to be lender to fill that niche o Pre-conference surveys – alternative loans keep popping up o Impact of alternative loan programs on student AND federal loan programs o Study discussed at NCHELP fall conference • Schools focused on low cohort default rates – not focused on students defaulting outside cohort period. o May look like a good job being done but loans will still continue to default.
  16. 16. o Most default occurs 7 years into the loan (in repayment?). This is outside the cohort rate. ▲Items provided to schools include: • Wrappers o Documentation written by school (i.e., default consequences document, etc.) with logo of sponsor • Exit conferences • Workshops • CD’s Need somebody accountable (Default Prevention Manager) at the school. It’s hard to find support for commitment unless the cohort default rate is high. School Resources slim. Guaranty agencies have reports that they can provide but the schools have fewer resources to devote a position to default management/prevention. Discussing “little steps” to make a stairway. Partnership with schools – risk management on their internal investment. Schools are searching for help – problem with staff turnover Most of the documentation provided is a type of “incentive.” How effective is the “exit interview?” Most don’t go through an “exit” interview but drop out before. No measurement of impact of activities – that is the key element. What is delinquency rate of those that go through exit counseling vs. those students that don’t go through the counseling process? Concern about six-month grace period – Cohort calculations (#’s versus $’s) – Being asked to do workshops during school period for “financial” literacy versus debt management. One way of debt management is “don’t take debt.” With all the aid partnerships, should it be the financial aid office we go to? • Business Office • Student Life Develop good line of products and services and then bring in “training of the trainers.” It’s professional development for the aid office.
  17. 17. Financial literacy has not kept up with technology. DAY TWO – October 22, 2003 Gene welcomes all participants returning – thanks Dadizi Baker-Cummings again for all of her hard work. Assessing Student Behavior: Tricks and Traps – Dr. Chuck Seifert, Professor, Siena College Session Overview: • Need for evaluation o How do you get the correct data? o What do you do with the results after you get them? o Clarify what it is that you’re assessing? o How do you measure/What are you measuring?  A lot of different ways of asking question o Best instrument for measurement  Plagiarizing is good.  Lots of areas to look for ideas o There is no perfect assessment  Try to make it as good as you can  Report on weaknesses so limitations are understood  Any assessment is better than no assessment • Benefits from evaluation • Some common “traps” • Some helpful “tricks” Why Measure Outcomes? • Make decisions about the future use of a program or technique o One gutsy move to take o Best practices – learn from somebody else o Use the “best of the best” practices • Make decisions about modifications to a program or technique • To contribute to scientific understanding of the process o Learn how to do it better • For political or public relations purposes Levels of Evaluation • Reaction o Typical evaluations
  18. 18. o Training surveys, etc. o Does the response to the program really lead to learning? • Learning • Behavior • Results Classic Evaluation Designs • Anecdotal (qualitative) information o Any information you get is good o Is information representative of population or just a couple of people • One group pre- and post-measure designs o Good at collecting “trend” data o Maybe change is NOT related to intervention performed • Pre- and post-measure with control group o Best level o One group receives treatment, one group doesn’t o Better assessment of the intervention performed Some Common Traps • Missing the big picture o Are we removing default in the short term or long term • Correlation vs. causation  Correlation is the direct relationship between two things  Just looking at the relationship between two factors isn’t enough  Will look at relationship of two variables as causation o Reverse causation  Where you think ‘a’ causes ‘b’ but it really is ‘b’ causing ‘a’.  Just reporting correlation is incomplete o Indirect relationship  Where you know two things are related but there may be some other impacting factor o Dual causation  Does pay lead to an increase in satisfaction  Or, does satisfaction lead to an increase in pay  One may relate to the other or vice versa o Spurious correlation  These two factors have no real relationship but are actually correlated • Statistics don’t lie?  Need to pay attention to statistics assumptions o Statistical versus practical significance  Sample size an issue  Practical significance versus statistical significance  Don’t report as the ‘end all, be all’  What is affect?
  19. 19. o Comparing Macintosh to Red Delicious  Even when comparing apples to apples, there are inherent differences in them o Data mining  Always opportunity to find statistically significant variables  Try to find support for the various statistics Slides showing pictorial relationships of reverse causation, indirect relationship, and dual causation Some Useful Tricks • Hypothesize a-priori o Hypothesize before so that lack of information does not limit data availability o Can do cost benefit analysis of the program as well • Collect data o Need to collect to have effective assessment o Any data is better than no data o • Use standardized measures o Plagiarizing o Not violating copyright laws but using information used before that is standardized • Control as much as you can  Look at controlling as much as you can o Random selection of group participants is effective o Statistical • Use statistics to your benefit • Report only the facts o Report relevancy o Discuss issues that would or could have been done differently o Anything is better than nothing Question: Once you have an action after an intervention and you have your control group, how long do you track the results? Answer: This is an ethical question of withholding the intervention from the control group. One should provide the intervention to the control group and study the results of that as well, which is a longitudinal study. Question: follow up to above, once they have shown the intervention is effective, do they continue to follow-up.
  20. 20. Answer: There is not concrete answer but you can study for a cycle and use a smaller group for the control.
  21. 21. Servicing “Innovative Practices” Panel Panelists: Mark Walsh – Lead, School Relations Branch, ED Kathleen Gibbons, Program Manager, Debt Management, Nellie Mae Steve LeGore, Asst. VP, Default Prevention, AES Moderator: Deena Engle, Asst. VP, Default Prevention, AES Kathleen Gibbons: Presentation overview – • Nellie Mae is a national student loan provider of FFEL and private EXCEL along with other Sallie Mae products. Nellie Mae is a wholly owned affiliate of Sallie Mae since 1999. • Nellie Mae is committed to encouraging financial literacy among their student borrowers and provides a number of financial management tools to high school seniors, college freshman, community college transfer students and entering graduate students. • Nellie Mae has performed a number of studies on credit card usage and provides customized financial awareness programs, such as Financial Management Tips for Students, or FINMAN: www.nelliemae.com/finman/index.html Steve LeGore: • Discussion from Steve is from the perspective of a servicer for default prevention • From a collection standpoint, not going to see approx. 80% of his accounts • May become “miniature collection agencies” due to alternative loan program growth • Contact using external factors (weather, football games, popular television programs) to concentrate on times to call. • Outbound and inbound separated by department o If concentrating on outbound for default aversion you may be missing the inbound callers and an opportunity for contact • Use good common sense practices that work for you and the industry • Use all available avenues to your advantage Mark Walsh: • Presentation on Late Stage Delinquency Assistance (LSDA) • Involvement of schools • Overview of cohort default rates through the past 5 years • Work more delinquent accounts first • Provided statistics that outline defaulter characteristics
  22. 22. o 84% do not receive the advantage of the full 6 month grace period due to late enrollment notification o 71% have withdrawn from school and did not complete studies o 43% have had bad telephone numbers at the time of default o 58% have not successfully been contacted by telephone during the 360 day collection effort during delinquency • Schools can help – students frequently respond to school outreach • Overview of tools available for many Direct Loan schools Question: What is a good contact rate? Answer: 10-15% with a live borrower. Guarantor “Innovative Practices” Panel: George Covino, National Director, USA Funds Amy Kerwin, Chief Guaranty Support Officer, Great Lakes Pat Kaiser, Vice President of Student Services, VSAC Moderator: Shelley Saunders, VP of Strategic Services, ASA George Covino: • Financial literacy is a primary opportunity to increase student satisfaction • Research showed that further action needed • Developed “Life Skills Curriculum” o Seamless approach o Providing in format and time when ready to receive o Modules – Undergraduate and Graduate with multiple objectives in each  Graduate still under development and in pilot stages o Trainers manuals, student skills books appropriate to module, CD-ROM on budget, Quicken software, Posters for schools, Power point presentations Amy Kerwin: • Customize approach, not “one size fits all” • Call center most effective default aversion strategy • Implement effective hiring practices o Look for employees that can meet “core” skills requirements o Provide loan counselors with tools to help them be both efficient and effective o Immediate access to forbearance and deferment forms o Provide feedback on performance and offer employee incentives for top performers
  23. 23.  Feedback not tracked to number of calls per hour but to the delinquencies resolved • Use customized lenders/email campaigns • Use of on-line web chats • Borrower specific options • Share demographic information with school and lender partners • Develop auto dialer call campaigns • Develop strategies aimed at high-risk borrowers • Develop tools to measure success of each default aversion initiative Pat Kaiser: • Building a Better Student o Choosing a career o Planning for college o Going to college o Paying for college • Before you borrow o Parents save – VSAC administers the state 529 plan o Financial literacy o Work with financial planners, guidance counselors, home schoolers o Career and college planning  Outreach programs 4th grade through adult o Newsletters, strategies and magazine to PSAT list • College planning & financial aid information o Career fairs o Parent nights o E-guidance – career planning module o College pathways • VSAC resource center o Customer service and career & education planning • As you borrow (if you need to borrow) o Apply for other sources of aid: grants, scholarships, etc. o Check and compare your awards letters o Check into institutional aid and work o Use current income to avoid borrowing more than you absolutely need o Stay away from credit cards  Don’t buy short term fun with long term payments • When you borrow o Borrow only what you need o Find the best deal  Borrower benefits • Sooner is better than later
  24. 24. • For sure is better than maybe o Look for good service o Check out Consolidation o Use tax credits and tax deductible interest • After you borrow – default prevention activities o SELECT (Entrance and Exit Counseling)  Personalized and onsite at school o Teleservice o Account access o VSAC resource center o Early intervention calls o Extended hours (evenings and weekends) o Creation of info database for counselors o Use of third party billing coupons o Promise to pay not received report calls o Identifying rolling delinquencies o Referral to CCCS Question: Have you gotten any feedback from aid officers on the push to compare award letters? Answer: Thinks they would if they didn’t provide the full services. If you have a choice of schools that offer the same degree, why not compare costs. Wants educated consumers who know where to look. Question: Call centers, open on weekends, nights. Are you open for both out and inbound during those hours? Staffing, is it full staffing or based on numbers? Answer: Do no take incoming calls on Sunday. Other times are open for inbound and outbound but have up and down periods where staff is varied. Varied also on Saturdays/ Sundays, open one per month with full staff as mandatory, rest of the Saturdays/Sundays are overtime. Question: Concern about approach where you ask for payment up front versus offering deferment upfront. Are you getting negative feedback? Answer: Getting positive feedback and some borrowers are responding well to the question of making payments first. In some cases, nobody had asked for payment. ***LUNCH
  25. 25. Ombudsman and Related Issues – Grace Bartini, Ombudsman, ASA Deb Wiley, Ombudsman, ED Deb Wiley: • Loves issues being put into place making the debt “real” • Putting the loan into the context of the borrower’s experience • Regulations are a “minimum” operation tool • Research has shown that personal contact increases customer satisfaction • Cases have not been decreasing as expected • Top 5 issues for fy03 o Loan cancellation o Balance is too high/not right o Repayment schedule is a problem o Consolidation – I can’t consolidate o Default • Top 4 issues do not have anything to do default which shows that borrowers want to manage their loans better Grace Bartini: • Finds dealing with borrowers who have issues and are not in default. • Take the borrower’s repayment methods/personality into consideration when providing assistance • Perception that something had been done inappropriately can be the largest hurdle • We don’t want to “cause” defaults • School initiatives • New ASA initiative o Developing an Amnesty program o “One Borrower, One Solution” Federal Update – Ann Maria Fusco • Went from three “channels” to three “services” • FMS/LaRS staff work for CFO • NSLDS in Financial Partners • Single Identifier • Data Mart – Release III o Would like guaranty agencies • VFA’s – looking a cost neutrality • OIG Report on Financial Partners review • Financial Partner review schedule out
  26. 26. • CRI drafted manual o Presented in a 4-hour session at the NCHELP conference in Memphis. o Ann Maria is the point person o ED will be doing LaRS reviews • Risk Management Wrap-Up – Ann Maria Fusco • Suggests taking our conference to a national level in addition to the smaller ones • Developing greater resource locations • Would like suggestions of improvements/changes Gene Greene – Culture is changing to default prevention CLOSE