USA Funds Debt Manager Helps School Attack Default Rate Before It’s Too Late

When Sandra Dankwa receives her school’s 2007 draft cohort default rate from the U.S. Department of Education in February, she likely won’t get any surprises — thanks, in part, to USA Funds Debt Manager^®.

Dankwa is the financial aid director for Career Technical Institute in Washington D.C. The school began using USA Funds^® Debt Manager in August 2006 to communicate with borrowers during repayment.

USA Funds Debt Manager is a Web-based communication tool that helps school officials connect with borrowers and prevent student loan defaults.

The tool had helped to keep the school’s 2006 cohort default rate to 12.4 percent. Last December, shortly after Dankwa joined the staff, she worked with USA Funds debt management consultant Eileen Muhlig to run a Delinquency Aging Report based on the information in USA Funds Debt Manager. The information helped her gauge where the school’s 2007 cohort default rate was heading.

Dankwa was shocked to learn her school’s 2007 cohort default rate had the potential to reach 40 percent.

“We were almost reaching the maximum cohort default rate allowed under the Federal Family Education Loan Program,” she says.

Getting results
She and Muhlig conferred and decided to drastically change the format of the letters Career Technical was sending students who were delinquent on payments and to increase the frequency of the letters.

“Our old format had a lot of words and was just not catching the attention of the students,” Dankwa says.

The new letters, based on a design developed by Paul Steele when he was the default manager for the northern region of the International Academy of Design and Technology, use clip art of an alarm clock to show the students that “time is running out” and include a bulleted list of the consequences of default.

The students responded and started taking action. Today, the Delinquency Aging Report projects Career Technical’s 2007 cohort default rate will be 9.6 percent — a 22 percent drop from the 2006 cohort default rate and an astronomical decline from the rate projected last December.

Regular communication
Dankwa sends out about 100 letters each week to students who are behind on their student loan payments. She generally starts during the student’s grace period with a simple reminder letter that repayment will start soon. When students get behind on their student loan payments, she continues sending letters until they respond.

Since she changed the format of the letters, she says, about half of the students receiving letters call the office to find out their options. “Depending on their situation, we have them complete a deferment form and file it, or we have them contact their lender,” Dankwa says.

Nearly all of Career Technical’s 484 students use some sort of financial aid. Students enroll in programs that last six to nine months and prepare them to work in medical or business offices. Many of the students are seeking skills to help them change careers.

“Repayment comes fast since our programs are short,” she says.

Next year Dankwa says she plans to begin tracking and monitoring calls to students through the call feature on USA Funds Debt Manager.

“USA Funds Debt Manager is very user-friendly and gives us the information we need,” she says.