Default Aversion ConferenceBoston, MA

October 21 – 22, 2003

Tuesday, October 21, 2003

Opening Remarks – Paul Combe

Welcome Default Prevention/Debt Management most important thing ASA does Access doesn’t end until repayment ends As colleagues, we can share good ideas on default prevention/debt management

Ann Maria Fusco, Director, Eastern Region

Introduction of Roberta/regional structure Sharing of information began in ‘01 Piloted in NY – hosted by HESC Had last year in December hosted by USAF – found held better in October Thank you of sponsors for breaks and mixer held tonight Planning committee – thanks to them Official introductions round the table

Roberta Russo, Director, Northern Region

Thanks to all for attending; thanks to the committee and sponsors

Gene Greene, Boston Office

Third conference Information sharing has been successful in the past Off shoot of the 422(h) provisions

o Create and share ideas Open discussions encouraged Use the time to find “new ways” of doing things ED takes default prevention seriously As enablers and providers, we have a responsibility to the student Feel free to interact with the speakers

F. Duane Quinn, ASA Overview of agenda for the next two days Instead of reading the agenda, would like to review the theme of the agenda for

the next two days

Theme seems to be early communication with parents and students Provided story as example of the importance of communication We spend a lot of time discussing finance of education but it doesn’t seem to

“penetrate” the audience Audience is always new and first time in hearing about financial aid Spend today talking about communication with students

Introduction of first speaker

Financial Aid Early Awareness – Dara Duguay, Director, Jump$tart Coalition

Jump$tart is a personal finance coalition Used to confuse “financial” literacy with “reading” literacy From 1997, increased interest has prompted greater awareness of “financial”

literacy Student “financial” literacy profile (before vs. after)

Review of overheads –

Statistics 61% of 24-64 have not retirement savings 21% of undergrads owe between 3k and 7k on credit cards Mortgage delinquencies have surged to highest level since ‘92 Teens are projected to spend $175 billions in ‘03

Statistics College students borrower more in 1990 than ‘60-‘80 combined Graduate students owe 20, 402 on average loan and credit card debt Bankruptcies filed under 25 year olds were 150k in 2000, a ten-fold increase in 5

years 2002 personal savings rate was 2.4% - should be 10%

Personal Finance Survey Results

First survey in 1997, 31 question test (on website at www.jumpstart.org, downloadable)

Review one question from the test Average score was 57% in 1997, in 2000 was 52% Score dropped to 50.2% in 2002

o 65% feels “very sure” or “somewhat sure” about ability to manage finances

Question about where do students learn about finances? Top answer was home which might not be the best place depending upon parental experience in handling money.

The Good News

As little as ten hours instruction helped teens to better handle money

More Good News Adults age 30-49 had one year greater net worth when having a course in personal

finance in high school

Room polled regarding personal finance education – Who learned in high school, college – definitely not the majority in either case.

College credit cards – didn’t used to have in college. Students today are faced with very few requirements to obtain credit.

Major Jump$tart Activities – not a program but an “umbrella” organization directing resources

Standards and Benchmarks Clearinghouse Assessment Best Practices State Coalitions Monitoring Legislation

Standards and Benchmarks – what students need to know and be able to do: Income (gross vs. net) Money Management Spending and Credit Saving and Investing

Clearinghouse – www.jumpstartclearinghouse.org

Personal finance materials o Teaching guides, videos, CD’so Textbooks, websites…

Many free and low-cost sources

Assessment Bank of Test Questions

o Not tested then it’s not taught Task Force of Experts Linked to the Standards Partnership with CTB McGraw-Hill

Best Practices

Task force of experts For developers of education materials/curricula Guidelines for what works

State Coalitions – very important in integrating personal finance and integration into the curricula

Monitoring Legislation – not a lobbying firm, as they are non-profit but they can educate

Utah mandating personal finance Louisiana, Kansas, and South Carolina imbedding personal finance into classes Mississippi mandated “offering” of personal finance classes Teacher training a huge component

---No Child Left Behind Act – Title V, Sec 5131 – local innovative education programs, #11 is personal finance but is within a number of other programs and not getting priority over other issues (i.e., additional teachers, CPR classes, etc.)

What Can You Do? Become a personal finance cheerleader Encourage educators to incorporate into existing classes Spread information about wealth of curricula, guest speaker, and teacher training

programs.

May have financial literacy hearings in Congress next week – very encouraged by interest by Congress and our organizations in preventative efforts

Outreach and Continued Care for At Risk Populations – Ann Coles, Senior Vice President, College Access Services, The Education Resources Institute (TERI)

Began working with financial aid in 1963 No federal aid, only institutional aid Thanks to many guaranty agencies for establishment of education resources

Prevention What does this mean? To keep from happening; to avert happenings Effective outreach campaigns – many you can see in the public health arena

o Designated Driverso Truth campaign (paid by tobacco settlement money)

Have not seen related types of campaigns related to college financing.

Student Loan Default Prevention Start with what we know

o Do research on student populationso Look at values, interests and goals

How can we provide support to at-risk populations that will help them avoid default?

Start with Parents/Families Parents more influential in shaping lives of students

o Ideas of what they want to do formed before entering high schoolo Study in TX – students with no interest in college more likely to say that

college not important in their families 11th and 12th grade students – parents less important

Students Need Tangible Parent Support Tangible means saving for college, visiting campuses, and attending financial aid

workshops

Parents/Families Lack Information Cultural Capital – having the knowledge passing through the generations about

what it takes to do something (i.e., college) Social Capital – networks and people you know who have done these things

o Not always found in lower income students High student/counselor ratios – external sources are limited

o Counselor ratios in NY, Chicago or CA can be 500-700 to 1 Limited Access to the Web – limiting factor

The Sallie Mae Fund Harris Poll Findings 45% of low-income parents have “no idea” how to pay for college Minority families express greater need for information Latino parents received aid info two years later than others 62% of parents did not name grants as a source of aid

Other Research Findings: ACE Reports Parents don’t consider loans financial aid Working more than 15 hrs/week decreases degree completion

Pre 11th Grade – What Parents Want College – Labor market connection

o Access to good jobs for their childreno Need to communicate value of education to meet these goals

Simple information regarding college costs and financial aido Need information about borrowingo Importance of academic preparedness

Role/benefits of borrowing

Limitations of Existing Outreach Efforts Not based on market research Insufficient audience identification Lack clear, compelling, repeated messages No message delivery in popular culture

o TV, radio and other mediao Lack of information availability

Lack of good info about the “product” - a college educationo What it is, what is involved, benefits.

Materials for parents not a high priorityo Info targeted to students, not parents

Effective Outreach Strategies Long-term investments – at least 3 years

o OK “Gear-Up” plan using commercial marketing techniques On-going activities more effective than one-time event

o Get more return on investment with continuing events Use commercial marketing techniques

o Issue materials in other languages Pay attention to families’ cultural backgrounds Encourage parents, other adults to actively support Information on how to prepare financially Promote easy savings options for low-income families Provide information in parents’ native languages Organize/Support campus trips Support parents talking to parents

o Training parents to discuss financial aid with other parents Provide financial incentives

Examples of Effective Outreach Campaigns College for Texans Project Access, The Sallie Mae Fund Community Foundation of North Carolina

College for Texans --- www.collegefortexans.com

Aid campaign: “Education. Go Get It.”o TV campaigns in English and Spanisho Purchased radio spots – underutilized and most affordableo Logo campaigno Local grass-roots efforts

Offered community/faith based organization $500 to have activities within their communities

Paying for college workshops Go Theatre: motivational performances

o Small vignettes on college/role models Business community involvement

Project Access – www.thesalliemaefund.org

Public awareness campaigns

o In both English and Spanish Paying for College workshop College scholarships:

o First in Familyo American Dreamo Unmet Need

Targets specific populations

Community Foundation of North Carolina – www.cfnc.org Partnership: College Foundation Inc., NC State Education Assistance Authority,

Pathways of North Carolina Helps students prepare for college and find best financial aid: Website, career

center, student planner, online applications, Paying for College Toll-free telephone information Ad campaign – billboards, radio, TV

o Public service announcements

Resources: NASFAA, ABC’s of Early Awareness

o www.nasfaa.org www.pathwaystocollege.net www.collegefortexans.org www.salliemaefund.com/project_access

Question: How do you deal with debt management when you are trying to provide access data – a person has to have financial literacy to understand debt management?

Had very little research on that. First hurdle is that people are reluctant to borrow. An understanding of the benefit and value of a loan in relation to education – is worth studying.

Communications: Providing Access to the Information – Hazel Mingo, ED, FSA, Office of Student Aid Awareness

SAA established in March 2001 New office within ED/FSA First time ED proactive program in outreach Past position has not been proactive in getting information out to the public

o Believed information best came from schools, counselors, or guaranty agencies

Simple message: College is possible and affordable. Federal government has money. Here is how you apply for it.

Three approaches:o Printed Materials – list of materials outside room

Student Guide

Publication renewed and updated annual Available in English/Spanish Also in Braille or in audio format Updated in November and mailed automatically to schools,

high school counselors, libraries Contains all state higher education agencies Has 1-800-4FEDAID number

High School Counselor Handbook Updated in the Fall Mailed to High-School Counselors Discusses TRIO, “Gear-UP” Consequences of default College/career choices Like feedback Has “one-pagers” that can be reproduced and provided to

students Repaying Your Student Loans

Discusses default consequences Limited printing

o Mailed to schools with high default rates Would like feedback for clarity, etc. Available in Spanish

Brochure for Teachers Discussed loan cancellations for teachers

One poster targets Native Americans Simple message directing to website or telephone number Targeted mailings to all Native American schools Share ordering information

“Bee” Poster Scholarship scam prevention Can be ordered on-line

o Internet FSA information on www.fsa.ed.gov

Site converts to Spanish Guiding toolbar on left side of home page Survey onsite – would like feedback Two EAC conferences Icon “My FSA” to personalize information Can track colleges/grade progression

o Outreach Staff limited to three persons Partner with other organizations who deal with the target

populations Do college fairs Work with churches and other faith-based organizations Write news articles for church newsletters

ESPN Radio, “Tom Joiner” web cast ads HUD technology centers in public housing communities National conference presentations

Portfolio Risk Management – Sybil Phillips, Director, Portfolio Management (ED, FSA)

Title IV this year is approximately $315 billion

What is Risk Management? Risk management is the continuous management of reducing exposure of loss

from non-performing loans. Includes a balanced review of business results and how to maximize

opportunities. Provides the foundation that supports the quality, composition and profitability of

loan portfolio.

Why is Risk Management important? ED owns or guarantees approximately $290 billion in outstanding student loans. In 2002 $56.5 billion was delivered in total new federal aid. There are approximately 22 million borrowers with student loans As a taxpayer you are a share/stakeholder in the federally insured student loan

portfolio

Advantages of Risk Management Manage through life of the loan Identifies borrower attributes throughout the life cycle of the loan that impact

performing and non-performing loans. Prevents a “scatter gun” approach to managing the portfolio, which leads to

managing on demand A focused vision and concentrated effort to managing default prevention and

reducing the cost to the taxpayer.o Proactive versus reactive

Tools for Risk Management Tools for default prevention

o Increased focus on default prevention rather than “default collector”o Transform data in knowledgeo Know the borrower through the life of the loano Identify significant patterns and trends of a delinquent borrower

Transform data into information Data mining is defined as an extraction activity whose goal is to discover hidden

facts contained in databases. Predictability analysis is knowing your borrower

Know the borrower through the life of the loan Implement services that may reduce delinquency, such as: electronic debit, EBPP Increase communication with the delinquent borrower earlier in the delinquency

period Educate the borrower on the consequences – help borrower to understand

Identify significant patterns or trends Look for patterns, trends, or changes Identify 20 percent of the risks with an 80% impact on delinquency Focus due diligence to include large dollars, # of days delinquent, risk factors of

the borrower

Slides of comparisons for the following issues: Composition of the portfolio – Direct Loans Composition of the Portfolio – FFEL Loans Defaulted Loans – FY 02 to FY 03 Direct Loans

o What state are they in – does this affect repayment?o Look at loan typeo Unemployment rate high in that state?o What type of repayment plans are they using?o Age of the borrower when default occurs –

Defaulted loans FY02-03 – Eastern Regional states

Common characteristics of delinquent and defaulted population

Withdrawn from school and did not complete their studies Do not get the advantage of “aging through” their full 6 month grace as the result

of late enrollment notification Incorrect telephone numbers What about email addresses?

What is FSA doing to mitigate risk?

Created a Portfolio/Risk management group to focus on the risk associated with Title IV programs

o Responsible for supporting the management and performance evaluation of federally guaranteed loan programs and Pell grants

o Identify and analyze risk exposureo Develop and manage portfolio strategieso Forecasts default levelso Reviews treatment of recovery dollars and rate by ED to ensure reporting

reflects complete loss exposure to the taxpayer Created an inventory of all default management initiatives within FSA Created a enterprise-side Default Management Group focused on:

o Communicationo Technical Assistance for borrowers and institutions

o Performance measureso Program integrityo Tools for Aversiono Default Collection

Slide for FSA-wide Risk Management Strategy Chart

Slide for National Student Loan Cohort Default Rate Chart Shows focusing and collaboration efforts have been successful

Why is Risk Management Important?

Cautions – we have been through good employment periods and a good economy Prepared for “The Perfect Storm” Be prepared to manage risk

***LUNCH

School Panel: Debt Management Tools and Needs for the Future

Betsy Groves, Associate Director, UMass. MedicalMichelle Tufau, Associate Director, Student Financing, Wellesley CollegeRachele Jackman, Director, Financial Aid, Lincoln Technical CollegeModerator: Paul Garrard, Vice President, NCHELP

Introduction: Continual reference to borrower “life cycles” and “timelines.” Speaker reviewed varying lifecycles of a sample student. At some point, the student enters repayment. During the period to time before repayment, there are a number of opportunities to educate the student.

Introduction of panel members:

Betsy Groves: Overview of school structure/programs.

Start with open house for admitted students. First time debt is discussed. “If they live through medical school like a doctor, they’ll live like a student while

a doctor.” Review of Stafford loan programs with concentration on default ramifications Do one-on-one with Perkins loans while reviewing Stafford Do two workshops: fall and spring Fall – underclassman focused on budgeting, how not to use a credit card and

ramifications of non-payment of credit card Spring – upperclassman focused and managing student loan debt, credit and credit

scores, “real world” information Spend more time on exits with individual or small groups.

o School outlines total debt picture and works with students to defer loans. When student graduates, gets deferment forms and total loan picture. Stresses availability of forbearance to prevent delinquency and/or default Try to pay down debt but use forbearance, too.

Question: Do you have medical residents that call with questions or assistance? Yes, you don’t have to have gone to UMass to receive counseling. Lots of students don’t know who their lenders are…

Follow up --- Wish list. Would like to have access to DL information to get status of Direct Loans.

Rachele Jackman:

Corporate offices in NJ – operates 23 computer and technical training School level include entrance and exit counseling Default prevention at corporate level will be overview

o Has staff of 7 multi-cultural individualso Assigned full campuseso Responsible for notifications received from lender/guaranty agency

Has one person that controls grace period notifications for all campus sites Uses this to contact student and/or begin skip tracing if needed. Skip tracing tools:

o Directory assistanceo Servicer informationo On-line search engines

Ultimate web pages (prison and military search)o Experian information for relativeso Reference sheet informationo Target nights and Saturday callso Uses at on-set, will start process again if all have failed

Default rate down to 5.7% for the entire company

Michelle Tufau: Fifty percent of student body having financial aid Efforts to start financing start at the sophomore year in high school If you decide to apply to school, look at credit report and start now to plan

payments. Once accepted, speak to families in the spring before enrollment. Speak to parents and students

o What can school expect from familyo Try to do entrance counseling before arriving

Questions in office encouraged Eliminated all credit card advertising on campus Stay on top of unknown student addresses Keep website updated

o Has credit card counselingo Debt counselingo Uses email as primary source of communication

Workshops all year roundo Seniors receive financial planning 101 counseling

Student loan debt is discussed “True” cost of money is discussed Very well attended

o Freshman workshop discussed budgeting, peer pressure, and finance School concerned with socio-economic imbalance causing peer

pressure and spending to keep up with “the Jones.”o Offer safe place to talk about credit problems

Wish List??o Consolidation Workshop with pitfalls and rewardso Looking for more information on budgetingo Lenders/servicers to conduct exit counselingo Many students do not stay in the US which causes payment difficultieso Be in touch with students before they graduate

Cohort at 1.6% for the recent year; Perkins is at 4%

Questions: News has been good about default rates – referred to Sybil’s presentation and that “The Perfect Storm” is coming. What are your needs in the future? And, whose responsibility is it to partner with the students?

Answers: UMass keeps contact due to “learning contract” and has a different relationship because they students are easy to track due to population. Lincoln’s time is spent tracking and skip tracing students – would also like to have access to on-line systems. Reports are helpful, too. Delinquency reports highlight that everybody is on the same page.

Question: Does Lincoln track impact on borrowers on the calls made during grace period?

Answer: Yes, they definitely note an impact and improved customer relations with requesting forbearance/deferments.

Question: With skip tracing on private loans, finding increased usage of cell phones instead of land phones. Having more difficult time skip-tracing calls. Has school done anything to track cell phone numbers? UMass asks for cell phone number and provides in-house pager. Wellesley feels that it is a problem in defaults – did amnesty program in Perkins. Follow-up on cell phone question in that the loan is not secured so you couldn’t contact them for collection efforts due to breach of privacy issues. Equifax sells utility database with information on cell, heat, telephone, etc.

Question: Is there any other corporate incentive that Lincoln has other than default rate improvement?

Answer: No. Some campuses used to be a fifty percent default rate. Need to maintain their default rate.

Question: (directed to Rachele) Do you primarily work with students in their grace period and do you work with them at other periods.

Answer: Work with students primarily in grace through mailing, calling, skip tracing (if needed).

Question: Does than include dropouts? Answer: Yes. They are much harder to locate.

Question: Other topics that students need more information on?Answer: One thing is: “How does their student loan debt impact their abilities to buy a home.” Consolidation is huge. They get mailings and they are ineligible.

Question for panel: How aggressive is the school for students that are not defaulted but delinquent?

Answer: It’s not about the default rate. People who default don’t give.

Question: Has the panel seen any spike in default rate?

Answer: No, seen steady decline.

Question: Discussion of parental involvement

Answer: Wellesley believes that it is a family affair

Question: Does school do more than just call attempt if delinquent?

Answer: Send email, flag follow-up, makes call, send letter.Question: If it continues to show up as unresolved?

Answer: Activities performed every month.

Question: At point of first contact, on a scale of 1 to 10, 10 being the highest, what is the financial literacy of your incoming population?

Answer: Most answered 1 or 2, finding that it is socio-economic, people of color, etc. Those people who received financial aid are better equipped to handle financial issues versus a student who had their education paid by parents.

BREAK OUT SESSION:

What can we be doing better for schools?

Debt management is not just entrance and exit counseling—

What did you hear today that makes you think we need to accelerate or need to do to help?

Missed hearing impact of alternative and private loanso Seeing parents shy away from PLUS loanso Fighting battle to get parents to take PLUSo Wondering if others see the same thingo Undergraduates with huge private loan debto Believe correct and will get worse

Going to be lender to fill that nicheo Pre-conference surveys – alternative loans keep popping upo Impact of alternative loan programs on student AND federal loan

programso Study discussed at NCHELP fall conference

Schools focused on low cohort default rates – not focused on students defaulting outside cohort period.

o May look like a good job being done but loans will still continue to default.

o Most default occurs 7 years into the loan (in repayment?). This is outside the cohort rate.

▲Items provided to schools include: Wrappers

o Documentation written by school (i.e., default consequences document, etc.) with logo of sponsor

Exit conferences Workshops CD’s

Need somebody accountable (Default Prevention Manager) at the school. It’s hard to find support for commitment unless the cohort default rate is high. School Resources slim. Guaranty agencies have reports that they can provide but the schools have fewer resources to devote a position to default management/prevention.

Discussing “little steps” to make a stairway.

Partnership with schools – risk management on their internal investment. Schools are searching for help – problem with staff turnover

Topic Two: Providing Debt Management Services to SchoolsFacilitator: Paul Garrard

Most of the documentation provided is a type of “incentive.”

How effective is the “exit interview?” Most don’t go through an “exit” interview but drop out before.

No measurement of impact of activities – that is the key element.

What is delinquency rate of those that go through exit counseling vs. those students that don’t go through the counseling process?

Concern about six-month grace period –

Cohort calculations (#’s versus $’s) –

Being asked to do workshops during school period for “financial” literacy versus debt management. One way of debt management is “don’t take debt.”

With all the aid partnerships, should it be the financial aid office we go to?

Business Office Student Life

Develop good line of products and services and then bring in “training of the trainers.” It’s professional development for the aid office.

Financial literacy has not kept up with technology.

DAY TWO – October 22, 2003

Gene welcomes all participants returning – thanks Dadizi Baker-Cummings again for all of her hard work.

Assessing Student Behavior: Tricks and Traps – Dr. Chuck Seifert, Professor, Siena College

Session Overview: Need for evaluation

o How do you get the correct data?o What do you do with the results after you get them?o Clarify what it is that you’re assessing?o How do you measure/What are you measuring?

A lot of different ways of asking question

o Best instrument for measurement Plagiarizing is good. Lots of areas to look for ideas

o There is no perfect assessment Try to make it as good as you can Report on weaknesses so limitations are understood Any assessment is better than no assessment

Benefits from evaluation Some common “traps” Some helpful “tricks”

Why Measure Outcomes? Make decisions about the future use of a program or technique

o One gutsy move to takeo Best practices – learn from somebody elseo Use the “best of the best” practices

Make decisions about modifications to a program or technique To contribute to scientific understanding of the process

o Learn how to do it better For political or public relations purposes

Levels of Evaluation Reaction

o Typical evaluationso Training surveys, etc.o Does the response to the program really lead to learning?

Learning Behavior Results

Classic Evaluation Designs Anecdotal (qualitative) information

o Any information you get is goodo Is information representative of population or just a couple of people

One group pre- and post-measure designso Good at collecting “trend” datao Maybe change is NOT related to intervention performed

Pre- and post-measure with control groupo Best levelo One group receives treatment, one group doesn’to Better assessment of the intervention performed

Some Common Traps Missing the big picture

o Are we removing default in the short term or long term Correlation vs. causation

Correlation is the direct relationship between two things Just looking at the relationship between two factors isn’t enough Will look at relationship of two variables as causation

o Reverse causation Where you think ‘a’ causes ‘b’ but it really is ‘b’ causing ‘a’. Just reporting correlation is incomplete

o Indirect relationship Where you know two things are related but there may be some

other impacting factoro Dual causation

Does pay lead to an increase in satisfaction Or, does satisfaction lead to an increase in pay One may relate to the other or vice versa

o Spurious correlation These two factors have no real relationship but are actually

correlated Statistics don’t lie?

Need to pay attention to statistics assumptionso Statistical versus practical significance

Sample size an issue Practical significance versus statistical significance Don’t report as the ‘end all, be all’ What is affect?

o Comparing Macintosh to Red Delicious Even when comparing apples to apples, there are inherent

differences in themo Data mining

Always opportunity to find statistically significant variables Try to find support for the various statistics

Slides showing pictorial relationships of reverse causation, indirect relationship, and dual causation

Some Useful Tricks Hypothesize a-priori

o Hypothesize before so that lack of information does not limit data availability

o Can do cost benefit analysis of the program as well Collect data

o Need to collect to have effective assessmento Any data is better than no datao

Use standardized measureso Plagiarizingo Not violating copyright laws but using information used before that is

standardized Control as much as you can

Look at controlling as much as you cano Random selection of group participants is effectiveo Statistical

Use statistics to your benefit Report only the facts

o Report relevancyo Discuss issues that would or could have been done differentlyo Anything is better than nothing

Question: Once you have an action after an intervention and you have your control group, how long do you track the results?

Answer: This is an ethical question of withholding the intervention from the control group. One should provide the intervention to the control group and study the results of that as well, which is a longitudinal study.

Question: follow up to above, once they have shown the intervention is effective, do they continue to follow-up.

Answer: There is not concrete answer but you can study for a cycle and use a smaller group for the control.

Servicing “Innovative Practices” Panel

Panelists: Mark Walsh – Lead, School Relations Branch, EDKathleen Gibbons, Program Manager, Debt Management, Nellie MaeSteve LeGore, Asst. VP, Default Prevention, AES

Moderator: Deena Engle, Asst. VP, Default Prevention, AES

Kathleen Gibbons:

Presentation overview –

Nellie Mae is a national student loan provider of FFEL and private EXCEL along with other Sallie Mae products. Nellie Mae is a wholly owned affiliate of Sallie Mae since 1999.

Nellie Mae is committed to encouraging financial literacy among their student borrowers and provides a number of financial management tools to high school seniors, college freshman, community college transfer students and entering graduate students.

Nellie Mae has performed a number of studies on credit card usage and provides customized financial awareness programs, such as Financial Management Tips for Students, or FINMAN: www.nelliemae.com/finman/index.html

Steve LeGore:

Discussion from Steve is from the perspective of a servicer for default prevention From a collection standpoint, not going to see approx. 80% of his accounts May become “miniature collection agencies” due to alternative loan program

growth Contact using external factors (weather, football games, popular television

programs) to concentrate on times to call. Outbound and inbound separated by department

o If concentrating on outbound for default aversion you may be missing the inbound callers and an opportunity for contact

Use good common sense practices that work for you and the industry Use all available avenues to your advantage

Mark Walsh:

Presentation on Late Stage Delinquency Assistance (LSDA) Involvement of schools Overview of cohort default rates through the past 5 years Work more delinquent accounts first Provided statistics that outline defaulter characteristics

o 84% do not receive the advantage of the full 6 month grace period due to late enrollment notification

o 71% have withdrawn from school and did not complete studieso 43% have had bad telephone numbers at the time of defaulto 58% have not successfully been contacted by telephone during the 360 day

collection effort during delinquency Schools can help – students frequently respond to school outreach Overview of tools available for many Direct Loan schools

Question: What is a good contact rate?

Answer: 10-15% with a live borrower.

Guarantor “Innovative Practices”

Panel: George Covino, National Director, USA FundsAmy Kerwin, Chief Guaranty Support Officer, Great Lakes Pat Kaiser, Vice President of Student Services, VSAC

Moderator: Shelley Saunders, VP of Strategic Services, ASA

George Covino:

Financial literacy is a primary opportunity to increase student satisfaction Research showed that further action needed Developed “Life Skills Curriculum”

o Seamless approacho Providing in format and time when ready to receiveo Modules – Undergraduate and Graduate with multiple objectives in each

Graduate still under development and in pilot stageso Trainers manuals, student skills books appropriate to module, CD-ROM

on budget, Quicken software, Posters for schools, Power point presentations

Amy Kerwin:

Customize approach, not “one size fits all” Call center most effective default aversion strategy Implement effective hiring practices

o Look for employees that can meet “core” skills requirementso Provide loan counselors with tools to help them be both efficient and

effectiveo Immediate access to forbearance and deferment formso Provide feedback on performance and offer employee incentives for top

performers Feedback not tracked to number of calls per hour but to the

delinquencies resolved

Use customized lenders/email campaigns Use of on-line web chats Borrower specific options Share demographic information with school and lender partners Develop auto dialer call campaigns Develop strategies aimed at high-risk borrowers Develop tools to measure success of each default aversion initiative

Pat Kaiser:

Building a Better Studento Choosing a careero Planning for collegeo Going to collegeo Paying for college

Before you borrowo Parents save – VSAC administers the state 529 plano Financial literacyo Work with financial planners, guidance counselors, home schoolerso Career and college planning

Outreach programs 4th grade through adulto Newsletters, strategies and magazine to PSAT list

College planning & financial aid informationo Career fairso Parent nightso E-guidance – career planning moduleo College pathways

VSAC resource centero Customer service and career & education planning

As you borrow (if you need to borrow)o Apply for other sources of aid: grants, scholarships, etc.o Check and compare your awards letterso Check into institutional aid and worko Use current income to avoid borrowing more than you absolutely needo Stay away from credit cards

Don’t buy short term fun with long term payments When you borrow

o Borrow only what you needo Find the best deal

Borrower benefits Sooner is better than later For sure is better than maybe

o Look for good serviceo Check out Consolidation

o Use tax credits and tax deductible interest After you borrow – default prevention activities

o SELECT (Entrance and Exit Counseling) Personalized and onsite at school

o Teleserviceo Account accesso VSAC resource centero Early intervention callso Extended hours (evenings and weekends)o Creation of info database for counselorso Use of third party billing couponso Promise to pay not received report callso Identifying rolling delinquencieso Referral to CCCS

Question: Have you gotten any feedback from aid officers on the push to compare award letters?

Answer: Thinks they would if they didn’t provide the full services. If you have a choice of schools that offer the same degree, why not compare costs. Wants educated consumers who know where to look.

Question: Call centers, open on weekends, nights. Are you open for both out and inbound during those hours? Staffing, is it full staffing or based on numbers?

Answer: Do no take incoming calls on Sunday. Other times are open for inbound and outbound but have up and down periods where staff is varied. Varied also on Saturdays/Sundays, open one per month with full staff as mandatory, rest of the Saturdays/Sundays are overtime.

Question: Concern about approach where you ask for payment up front versus offering deferment upfront. Are you getting negative feedback?

Answer: Getting positive feedback and some borrowers are responding well to the question of making payments first. In some cases, nobody had asked for payment.

***LUNCH

Ombudsman and Related Issues – Grace Bartini, Ombudsman, ASADeb Wiley, Ombudsman, ED

Deb Wiley:

Loves issues being put into place making the debt “real” Putting the loan into the context of the borrower’s experience Regulations are a “minimum” operation tool Research has shown that personal contact increases customer satisfaction Cases have not been decreasing as expected Top 5 issues for fy03

o Loan cancellationo Balance is too high/not righto Repayment schedule is a problemo Consolidation – I can’t consolidateo Default

Top 4 issues do not have anything to do default which shows that borrowers want to manage their loans better

Grace Bartini:

Finds dealing with borrowers who have issues and are not in default. Take the borrower’s repayment methods/personality into consideration when

providing assistance Perception that something had been done inappropriately can be the largest hurdle We don’t want to “cause” defaults School initiatives New ASA initiative

o Developing an Amnesty programo “One Borrower, One Solution”

Federal Update – Ann Maria Fusco

Went from three “channels” to three “services” FMS/LaRS staff work for CFO NSLDS in Financial Partners Single Identifier Data Mart – Release III

o Would like guaranty agencies VFA’s – looking a cost neutrality OIG Report on Financial Partners review Financial Partner review schedule out CRI drafted manual

o Presented in a 4-hour session at the NCHELP conference in Memphis.

o Ann Maria is the point persono ED will be doing LaRS reviews

Risk Management

Wrap-Up – Ann Maria Fusco

Suggests taking our conference to a national level in addition to the smaller ones

Developing greater resource locations Would like suggestions of improvements/changes

Gene Greene –

Culture is changing to default prevention

CLOSE