Early contact efforts have a positive effect on student loan default. When schools establish contact and stay in touch with borrowers, the likelihood of loan default drops dramatically. USA Funds® has found that borrowers who have made at least one payment, or entered deferment or forbearance, are very unlikely to default — primarily because these borrowers have established some type of relationship with their servicer.
Considering those results, USA Funds offers tips for communication efforts:
1. Early contact. Reach out to borrowers early in their grace period. Communicating early with student loan borrowers is critical to helping prevent them from defaulting on their loans.
2. Borrower contact information. Identify borrowers who don’t have valid contact information. If you can’t contact borrowers, you can’t help them.
3. Targeted intervention. Look for at-risk borrowers, based on shared characteristics or prior defaults. Focus on withdrawn or transfer students, those who have dropped below half-time enrollment, did not graduate or did not complete exit counseling, borrowers not meeting satisfactory academic progress requirements, or those in specific programs of study.
4. Ongoing communication. Include school and servicer information in letters and emails. Encourage borrowers to establish a relationship with the school and talk to servicers to set up an achievable repayment plan.
Help with borrower communications
USA Funds Borrower Connect™ automates borrower outreach to help promote successful student loan repayment and improve cohort default rates. Communication campaigns available in the tool can be targeted based on enrollment status. You can provide timely information as borrowers near the end of their grace, deferment or forbearance period, or enter delinquency, and identify borrowers with no valid contact information.
Early grace period communications alert borrowers that their repayment period will begin soon. School and servicer contact information is included in the communications, to ensure borrowers have that information available should they need assistance. The messages also remind borrowers that there are options available to them, and explain that their servicers will work with them to find a solution that fits their individual needs. Communications can be customized based on the borrower’s reason for entering the grace period — graduation, dropping to less-than-half-time enrollment or withdrawal — allowing for tailored messages for each type of grace borrower.
Communications for delinquent borrowers or for borrowers in deferment or forbearance who are resuming repayment also provide school and servicer contact information. The tone of the communications progressively becomes more urgent and emphatic as the number of days of delinquency increases.
Contact USA Funds to get more information about USA Funds Borrower Connect or to schedule a demonstration.