Session #54

Default Prevention
2008

Mark Walsh
Angelita Dozier
Topics for today
• 2005 Official CDRs
• IDCs and eCDR Appeals
• Statewide Default Projects
• Defaulter Characteristics
• Early, in-school, and late stage
strategies
• Default Prevention Grants

2
Topics for today (Con’t)
Guaranty Agencies and Lenders

• Regulatory Requirement
• Cohort Default Rate Release
Dates
• 2005 Official Cohort Default
Rates – Fast Facts
• Data Correction

3
Default Prevention and
Management
Three team structure:
• CDR Operations
• CDR Challenges, Adjustments,
and Appeals
• Default Prevention Outreach

4
National Student Loan
Default Rates

5
Schools Subject to Sanctions
Issued
date 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
700
642
Number of Schools

600

500
433
402
400
330

300
236

No
200
138
Sanctions
100
42
11 6 4 0 1 0 0
0
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

The school numbers are pre-appeal and include only schools impacted by the three years of 25% or greater
sanction. A school can be on extended sanction and is therefore reflected in multiple year counts. Since
1991, 1,161 unique schools were sanctioned under the three years of 25% or greater sanction.

6
National4.5%
CDR by5.1%
Sector 4.6%

100% CDR CDR CDR

19% 21% 21%
90% 7.3% 8.6% 8.2%

80% CDR CDR CDR

14% 15% 15%
7.4% 7.9% 7.6%
70%
CDR
60% CDR CDR
66% 3.0% 64% 65%
3.2% 2.7%
50%
40%

30%
20%
10%
2003 2004 2005
0%
2003 2004 2005
Stacks may not sum to 2
100% due to rounding. Public and Private 4-yr Other Schools Proprietary Schools

7
The highest CDRs
• 9.6% Puerto Rico
• 7.4% Alaska
• 7.2% Nevada
• 7.0% Arizona
• 6.9% Georgia
• 6.9% West Virginia
• 6.8% Arkansas
• 6.0% Kentucky

8
2005 Official CDR – Fast Facts
• The 4.6% CDR represents a
9.8% decrease from the FY 2004
rate of 5.1%
• Borrowers entering repayment
increased 24% over FY 2004
• Defaulted borrowers increased
12% over FY 2004

9
Incorrect Data Challenge
• Review consists of a careful
examination by the school of
their LRDR, school, and outside
source records
• Opportunity for schools to work
with data managers (guarantors)
to correct errors

10
“New” eCDR Appeal Process
e-CDR Appeals, a new vehicle for
schools to electronically submit
challenges, adjustments, and
appeals, will be a single web-based
user interface for schools, for ED,
and for data managers.

11
What are the benefits?
• Eliminates the mailing and
tracking of hard copy documents
• Minimizes the risk for disclosure
of personally identifiable info
• Reduces the chances of late or
incomplete submissions

12
When is the first release?
• February 2008
–Schools may challenge 2006
draft cohort default rates via
Incorrect Data Challenges
–Features automatic routing to
the correct Data Manager

13
When is the second release?
• September 2008
–Schools may challenge 2006
official cohort default rates via
Uncorrected Data Adjustments
and New Data Adjustments

14
Default Prevention Activities
• State projects are selected
according to:
–Cohort Default Rate
–Volume of dollars in default
–Opportunities available to get
our message out

15
Statewide Default Prevention
Projects Underway
2005: Nevada and Puerto Rico
2006: Ohio, Michigan, Georgia,
Florida, and Arkansas
2007: California and New York

16
2008 Message
• Defaulter characteristics
• Student success and retention
• Financial literacy
• Timely/accurate NSLDS reporting
• Managing delinquency & LSDA
• Dollars in default
• Private Loans

17
Defaulter Characteristics
• 89% did not receive their full 6
month grace period due to late
enrollment notification (sample)
• 54% had bad telephone numbers
(actual population)

Source: January 2007 Analysis 
of Federal Direct Loan Portfolio

18
Defaulter Characteristics
• 94% were not successfully
contacted by phone during the
360-day collection effort leading
up to default (sample)
• 71% withdrew without completing
(actual population)
Source: January 2007 Analysis 
of Federal Direct Loan Portfolio

19
Early Stages of Enrollment
• Emphasis on Student Success:
–Students often receive up to 3
hours credit for workshops
–Orientation sessions and events
to integrate students into school
is mandatory at some colleges.
Institutional Strategies to Improve Govt. Student Loan Repayment 03/06

20
Late Registration
• Has student
missed classes?
• Does a late start
indicate poor or
no preparation?
• Is this student
at an increased
risk of default?

21
Late Registration
Sun Mon Tue Wed Thu Fri Sat
First
Day
of Classes
22 23 24 25

26 27 28 29 30 31

2
Sun Mon
3 44 5 6 7
Tues Wed Thurs Fri
8
Sat
Last
9 Day
to Register
11 12 13 14 15
Student Misses 7 Classes

22
In-School & Late Enrollment
• Schools utilize system-generated
reports from student records
systems, weekly or bi-weekly, to
identify withdrawals at the
earliest stage possible.

Institutional Strategies to Improve Govt. Student Loan Repayment 03/06

23
Distance Learning and Default
• FSA does not routinely collect data
on default in distance education
programs
• Anecdotal info = increased risk
–What is your experience?
–Are there best practices?
• How can FSA help?
• Opportunities for collaboration?

24
Managing Delinquencies
Late Stage Delinquency Assistance
• For both DL and FFEL schools
• Why can schools be effective?
• How does it work?
• Compliments guaranty agency
late stage efforts

25
Managing Delinquencies
• Increased due diligence on high
volume borrowers
• Pre-repayment counseling
–Establish relationship
–Verify correct repayment status
and check monthly payment
–Update all contact information

26
Default Prevention Grants
• Encourages schools to engage in
default prevention activities
• Often resources (staff time, $)
are obstacles to default
prevention work
• Schools are likely to maintain
activities beyond the life of the
grant program

27
Default Prevention Grants
• Schools submit proposals
• Can fund position dedicated to
default prevention
• Conduct analysis of defaulting
borrowers
• Identify and share best practices
identified by schools

28
Financial Partners Services
Default Coordination Team

• Cohort Default Rates for

Guaranty Agencies and Lenders

29
Regulatory Requirement
• Under Section 430(e) of the
Higher Education Act of 1965, as
amended(HEA), the Department
of Education is required to
publish the cohort default rates
of lenders, guaranty agencies
and schools participating as a
lender in the FFEL Program.

30
Cohort Default Rates Release
Dates
Rates are released twice a year:

DRAFT RATES:
• Guaranty Agencies Cohort –
mailed in February
• Lenders - obtained from NSLDS
website at www.nsldsfap.ed.gov

31
Cohort Default Rates Release
Dates
BENEFITS OF DRAFT RATES:
• Guaranty agencies and lenders
may review data for accuracy
• Identify any anomalies and data
conflicts
• Opportunity to make necessary
data correction prior to
calculation of official rates

32
Cohort Default Rates Release
Dates (Con’t)
OFFICIAL RATES:
• Guaranty Agency and Lender
rates released in September

33
2005 Official CDR – Fast Facts
• Highest guaranty agency rate
was 10.3% (5.0% increase
from FY 04 rate)
• Lowest guaranty agency rate
was 1.5% (same rate as FY 04)
• Five guaranty agencies had a
1.0% or greater increase

34
2005 Official CDR – Fast Facts
(Con’t)
• Eight guaranty agencies had
a 1.0% or greater decrease

35
 Data Correction
• Any guaranty agency or
lender that receives an official
cohort default rate is provided
the opportunity to correct its
most recent official cohort
default rate.

36
 Data Correction (Con’t)
Reason for Requesting a Data
Correction?

• Data Conflicts – occurs when a

Guaranty Agency is not able to
report on a loan because of a
data/identifier conflict with another
loan already reported to (NSLDS).

37
Data Correction (Con’t)
Where to submit Data Corrections?

• Guaranty agencies must submit

incorrect data request to the
Department for corrections.
• Lenders must submit incorrect data
request to the guaranty agency for
corrections.

38
Contact Information
We appreciate your feedback
and comments. We can be
reached at:

• Phone:816-268-0412
• Email:mark.walsh@ed.gov
• Fax:816-268-0441

39
Contact Information
We appreciate your feedback and
comments. We can be reached
at:

• Phone: Default Coordination Team

202-377-3053

• Fax: 202-275-0913

40