USA Funds Debt Manager Helps Community College Trim Default Rate

Carolyn Cox has no doubt that USA Funds Debt Manager^® helped Hagerstown Community College reduce its 2005 cohort-default rate by nearly 47 percent from the 2004 rate.

She says the type of students in that cohort — mostly traditional students right out of high school — probably contributed to the decline as well. The school’s 2005 cohort-default rate was 4.4 percent, down from 8.3 percent in 2004.

Cox is the director of student financial aid at the college, located in rural Maryland about 70 miles west of Baltimore. The school started using USA Funds^®  Debt Manager last year to communicate with students about their loans. USA Funds Debt Manager is a Web-based communications tool that helps financial-aid administrators connect with borrowers and prevent student-loan defaults.

“We knew we were experiencing an increase of nontraditional students in short-term programs, and we wanted to be proactive and start working with students before delinquency and default became a really big problem,” says Stephny Lietuvnikas, a financial-aid counselor in the office.

In the last three years, the number of short-term, nonstandard programs offered by the college has jumped to more than 100, up from 39. And enrollment has increased by about 12 percent, mostly with nontraditional students — many of them new to this country — enrolling in short-term programs such as allied nursing. The short-term programs last one or two semesters.

“Helping these nontraditional students understand student-loan literacy is a real challenge,” Cox says.

Addressing future challenges
Both Cox and Lietuvnikas expect the school’s rate to creep up again primarily because of the changing student demographics. But they also expect USA Funds Debt Manager to play an important role in keeping the school’s cohort-default rate below 10 percent.

About 60 percent of the school’s 3,600 students use financial aid, and about one-third qualify for federal Pell Grants. The school requires students to complete student-loan counseling annually and provides in-person group sessions for students enrolled in short-term education programs. Cox says the school soon will start a pilot program offering one-on-one counseling where needed.

Since the summer of 2006, Lietuvnikas has been using USA Funds Debt Manager to send about 50 letters and e-mail messages weekly to education-loan borrowers who are delinquent in repaying their student loans. They start receiving the letters and messages when their payments are 20 days past due and receive a different communication each month they are delinquent.

When students call the financial-aid office, they talk to one of three staff members who have been specially trained to help them find requested information such as a lender addresses or deferment forms.

“Some of the students don’t understand that they can obtain a deferment if they are unemployed,” Cox says.

Monitoring default-prevention results
Lietuvnikas says the best feature of USA Funds Debt Manager is how easy it is to use. “With just a click of a few buttons, the letters are printed,” she says, estimating that she spends about two hours a month communicating with delinquent borrowers.

She also relies on the tool’s Delinquency Aging Report, which tracks delinquencies and calculates an estimated cohort-default rate. “It’s nice that we don’t have to wait for the report from the Department of Education,” she says. “We can see what’s coming up and make changes to meet our goals.”