5W s of Student Loan Defaulters

Transcription

1 5W s of Student Loan Defaulters Presented by: Dennis Christich Ron Lee Pat Robles-Friebert, Inceptia Strategic Business Directors WASFAA Conference W s of Student Loan Defaulters Who is defaulting? Why are they defaulting? What tactics are you currently using to improve student success? Where can improvements be made? When is it most effective to reach student borrowers? 2 Strategic Business Directors, Inceptia 1

2 A major part of any plan is to periodically review progress in preventing defaults. One element of this review is a comprehensive analysis of defaulters who is defaulting and why. Schools can then use this information to improve their default prevention and management practices and initiatives. -Department of Education Sample Default Management Plan 3 UNDERSTANDING COHORT DEFAULT RATES 4 Strategic Business Directors, Inceptia 2

3 CDR Equation Borrowers in the cohort who default within cohort default 3 year period (Numerator) Cohort of federal student loan borrowers who enter repayment during cohort fiscal year (Denominator) X 100 = CDR 5 Cohort Year 2013 October 1, 2012 Enter Repayment September 30, 2013 September 30, 2014 September 30, 2015 Track Default Status 6 Strategic Business Directors, Inceptia 3

4 Open Cohort Years 7 STATE OF THE INDUSTRY 8 Strategic Business Directors, Inceptia 4

5 Trends in Student Borrowing Amount of Loans (in Billions) $52 $56 $64 $74 $83 $88 $92 $101 $103 $116 $120 $118 $110 Source: Trends in Student Aid 2013, The College Board 9 How big is the problem? Student Loan Debt (in Billions) $516 $577 $657 $750 $848 $948 $1,040 $1, Jun-14 Source: National Student Loan Data System (NSLDS) 10 Strategic Business Directors, Inceptia 5

6 Average Student Loan Debt 11 Student Loans in Trouble Delinquency / Default 18% Bankruptcy / Disability 1% Forbearance 15% Current on payments 49% Deferment 18% Source: Federal Reserve Bank of New York, Household Debt and Credit Q2, Strategic Business Directors, Inceptia 6

7 13 National Three-Year Cohort Default Rate 11.8% 12.3% 13.4% 14.7% 13.7% Cohort Default Rate 8.4% 9.2% FY05 FY06 FY07 FY08 FY09 FY10 FY11 * Three-year rates are trial rates for FY05 through FY08 and became official for FY Strategic Business Directors, Inceptia 7

8 National Cohort Default Rates by Sector 2009 CDR 2010 CDR 2011 CDR 22.7% 21.8% 19.1% 18.3% 20.9% 20.5% 9.3% 8.9% 7.9% 7.5% 8.2% 7.2% Proprietary Public Two Public Four Private 15 Cohort Default Rates Public Institutions % 20.9% 20.5% 11.0% 13.0% 12.9% 7.9% 9.3% 8.9% Public 2 Years or Less 4 Years or More Confidential. Do not copy or redistribute without expressed written permission from Inceptia. 16 Strategic Business Directors, Inceptia 8

9 Cohort Default Rates Private Institutions % 16.0% 15.7% 7.5% 8.2% 7.2% 7.3% 8.0% 7.0% Private Institutions 2 Years or Less 4 Years or More Confidential. Do not copy or redistribute without expressed written permission from Inceptia. 17 Cohort Default Rates Proprietary Institutions % 22.5% 23.0% 21.8% 21.3% 20.1% 19.1% 22.1% 18.6% Proprietary 2 Years or Less 4 Years or More Confidential. Do not copy or redistribute without expressed written permission from Inceptia. 18 Strategic Business Directors, Inceptia 9

10 COMPREHENSIVE ANALYSIS OF DEFAULTERS RESEARCH STUDY 19 Why Analyze Your Data? Benchmark Profile Magnitude of the Problem Target Resources Ongoing Success 20 Strategic Business Directors, Inceptia 10

11 Cohort Default File Analysis 60 variables 1, 2 or 3 years Benchmark Report Tracking changes with each new CDR file Who is defaulting? 21 Cohort Default Research Project 16 Institutions Four-Year College Sample 11,630 borrowers total 6,707 borrowers did not complete a degree (58%) 4,923 borrowers completed (42%) Two-Year College Sample 15,013 borrowers total 11,414 borrowers did not complete a degree (76%) 3,599 borrowers completed a program or degree (24%) 22 Strategic Business Directors, Inceptia 11

12 Completion is paramount! 23 Two-Year Schools Who is defaulting? 27% Default Rate 11% Drop Outs Completers 24 Strategic Business Directors, Inceptia 12

13 Two-Year Students Non-Completers Segment Default Rate All Non-Completers 27% Pell Eligible 42% Academic SAP 1 st Term 38% 1 st Term GPA <1.0 37% 1 st Term Credits Completed <50% 35% Needed English Remediation 34% Male 32% Students of Color 31% 25 Two-Year Students Completers Segment Default Rate All Completers 11% Cumulative GPA <2.0 38% Personal & Culinary Services 37% Construction Trades 26% Have Completed <70% of Credits Attempted 21% 26 Strategic Business Directors, Inceptia 13

14 Four-Year Students Who is defaulting? Default Rate 20% 6% Drop Outs Completers 27 Four-Year Students Non-Completers Segment % Default All Non-Completers 20% 1 st Term Credits Completed <50% 35% Cumulative GPA <1.0 34% Academic SAP 1 st Term 30% 1 st Term GPA <2.0 29% Needed Remediation 25% 28 Strategic Business Directors, Inceptia 14

15 Four-Year Students Completers Segment % Default All Completers 6% English Language & Literature 12% Foreign Languages 12% Less than 70% Credits Completed 10% Area, Ethnic & Group Studies 10% Low Income (Family Income <$30K) 9% Cumulative GPA % 29 TACTICS TO IMPROVE STUDENT SUCCESS 30 Strategic Business Directors, Inceptia 15

16 Where and What Improvements Can Be Made? 1. Make a list of current strategies and processes. 2. Be proactive! Understand the unique characteristics of your at-risk borrowers Create a default prevention plan (whether required by the ED or not). Implement or enhance financial education programs and borrower communication outreach. 31 U.S. Department of Education Default Prevention Plan Requirements An effective default prevention and management plan (required or not) can ensure your students have the financial tools required for successful student loan repayment. Default Prevention Taskforce Create Default Prevention and Management Plan Measureable Objectives Department of Education Approval 32 Strategic Business Directors, Inceptia 16

17 Possible Strategies Financial Education Comprehensive online financial education program Peer-to-peer advising First-year experience class Alumni services Other approaches? 33 Possible Strategies Borrower Outreach Clear communication In-person counseling Grace program Delinquency program s Letters Phone calls 34 Strategic Business Directors, Inceptia 17

18 Possible Strategies Others SAP analysis Grant opportunities Early 150% tracking Cohort Activity Report Strategic Business Directors, Inceptia 18

19 37 Presentation Starter Kit 38 Strategic Business Directors, Inceptia 19

20 Cohort Activity Report 39 Comparison Chart 40 Strategic Business Directors, Inceptia 20

21 Impact Report 41 CDR Tool 42 Strategic Business Directors, Inceptia 21

22 Selecting the Right Partner 43 5 W s of Student Loan Defaulters Who is defaulting? Why are they defaulting? What tactics are you currently using to improve student success? Where can improvements be made? When is it most effective to reach student borrowers? 44 Strategic Business Directors, Inceptia 22

23 QUESTIONS 45 CONTACT INFORMATION Dennis Christich Strategic Business Director Ron Lee Strategic Business Director Pat Robles-Friebert Strategic Business Director Follow us on 46 Strategic Business Directors, Inceptia 23