By Susan Shogren, Regional Training Executive
The U.S. Department of Education distributed 2011 two-year cohort default rate notifications to schools on Monday, and 2010 three-year rates are due soon. If your school’s rates are higher than you’d like, get started now to make sure next year’s rates improve.
In a webcast with more than 100 participants last week, I shared eight tried-and-true tips to help schools prevent default and avoid the sanctions that can result from high cohort default rates.
Some of these best practices, from the Department and USA Funds®, may be familiar to you. But whether you regularly put these ideas into practice or you’re learning about them for the first time, now’s a great time to focus on the following default prevention tips:
1. Communicate with borrowers at key decision points.
Think of the life cycle of a student as having four phases: application and first 90 days, in-school, final year and award completion, and post-graduation. Each phase represents a new opportunity to make a difference. Tailor your methods and messages according to the stage in the life cycle of the student, and you’ll be communicating what they need to hear when they need to hear it.
2. Introduce financial literacy programs.
Many schools today are recognizing that financial literacy is a key component of a college student’s educational experience. I know a school that invites financial aid staff to conduct a workshop during a required student success class for new students. The presentation covers budgeting, saving, credit and credit card management, identity theft, federal loans, consumer loans, and repayment options on federal loans.
3. Communicate across campus.
As a former financial aid administrator, I understand: Too often, when a concern is related to financial issues, other campus offices consider that concern to be the sole responsibility of the financial aid office. But default prevention should be a school-wide effort. Student success includes leaving campus with manageable levels of debt, equipped with information to successfully pay back student loans. Everyone has a vested interest in helping make this success possible.
4. Focus on retention and student success.
The Department studied its student loan portfolio and found that more than 70 percent of students who defaulted on their federal education loans left school before completing their programs. That correlation is impossible to ignore. Many schools now are dedicating staff to student retention activities, in an effort to boost student and school success and reduce default rates.
5. Identify and counsel at-risk students.
Know which types of your students are most likely to default on their education loans. Whether you’re studying data or — as one school I know of did — polling students about their concerns directly, you don’t have to make assumptions. Once you create a profile of your at-risk students, then you can develop a data-driven plan that really works.
6. Use timely and accurate enrollment reporting.
This practice not only is a regulatory requirement, but it also promotes school and student success. You’ll help ensure that your borrowers who are in school continue to qualify for deferment, and that those who leave school enter their grace and repayment periods on the correct dates. Having accurate separation dates on file for your students places them in the correct cohorts when calculating default rates.
7. Review NSLDS and repayment information.
Regularly take a look at your reports from the National Student Loan Data System to promote good debt management for your students — and simplify your life as well. Use the data to inform your outreach to borrowers once they leave school. And keep tabs on the accuracy of your NSLDS data to make it less likely that you’ll need to challenge draft cohort default rate data.
8. Maintain contact with former students.
Start your outreach to former students early in their grace periods, when they need guidance from a trusted adviser to get off on the right foot in repayment. Staying in contact and assisting borrowers who become delinquent in making their payments will help you get them back on track and prevent default. Use targeted strategies to assist your borrowers who already have defaulted as well.
USA Funds has a variety of tools to help you lower your school’s default rate, including those focused on borrower communication and financial literacy. And if you’d like to learn more about the importance of early communication with borrowers, register for a free webcast set for Oct. 8.