Spotlight on the Value of Guarantor Services: Debt Management Services
USA Funds®’ debt management services can help schools prevent their student-borrowers from defaulting and help lower the schools’ cohort default rates. Just ask financial aid professionals at Contra Costa College and the Los Angeles Film School, whose most recent default rates show marked improvement.
In the last year, Contra Costa College’s cohort default rate dropped to 9.8 percent from 14 percent — a 30 percent decrease. At the Los Angeles Film School, the most recent cohort rate is 9.2 percent, a 26 percent drop from the previous year’s rate of 12.5 percent.
Both schools have turned to a variety of USA Funds products and services for default prevention assistance, and to the expertise of their USA Funds debt management consultant, Carole Ann Simpson.
Simpson helped both schools implement tools to communicate with students and to help ensure that the students understand their rights and responsibilities as student loan borrowers and the consequences of default. USA Funds’ team of debt management consultants works with colleges, universities and private career schools to assess and strengthen campus-based initiatives to prevent default, and to promote student retention and degree completion.
Last year USA Funds’ debt management consultants assisted 501 schools and conducted workshops for more than 1,500 participants. Staff members from Contra Costa College and Los Angeles Film School, for example, have attended workshops exploring retention tools, conducted by USA Funds in partnership with the higher education consulting firm Noel-Levitz.
To help them connect with their borrowers and prevent defaults, the schools use the Web-based communications tool USA Funds Debt Manager®.
Financial aid professionals at both schools use USA Funds Debt Manager to help them send letters monthly to students who are delinquent on their student loans.
To make requesting payment assistance easier for her borrowers, “I usually attach deferment or forbearance forms to the mailing, and I highlight the important parts for students to complete,” says Kenia Selva, financial aid coordinator at the Los Angeles Film School. “I also include a prepaid envelope with a pen inside each mailing to make it more convenient for students.”
At Contra Costa College in San Pablo, Calif., financial aid specialist Barbara Rance says she informs students about their options during repayment, such as lowering their monthly payments, consolidating their loans or requesting a deferment or forbearance. She also points them to the online resource USA Funds Loan SolutionsSM.
“Students can explore their options and either call their lenders or come into the financial aid office, and we can assist them,” Rance says. “We do not want students to default.”
USA Funds, along with other guarantors, are proposing to expand the services they deliver to assist borrowers in the William D. Ford Direct Loan Program, as the U.S. Congress considers student loan reform legislation. Debt management assistance is among those services.
Selva and Rance say they use other tools from USA Funds to prevent education loan defaults as well, including those focused on financial literacy and loan counseling.
“All of these things combined empower students with the knowledge they need about borrowing money,” says Rance. Her school requires students to complete online entrance counseling through USA Funds Loan Counselor® before their education loans are certified. Then students must complete USA Funds Life Skills® financial literacy training before their second loan disbursement.
In addition to assisting them in preventing student loan defaults, USA Funds’ debt management tools help Selva and Rance save time in the financial aid office.
“By using USA Funds’ services, I have been able to save valuable time and focus on other tasks,” Rance says. “More students are requesting student loans, because of the economy. Being able to certify loans more quickly and get them to students is a plus.”