Putting the Puzzle Together

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Putting the Puzzle Together
Late Stage Delinquency Assistance for

FFELP, W. D. Ford Direct and Perkins Loans
Ruth T. Vincent, Director of GHEAC John
Pierson, Client Account Manager, School Relations
SFA Kenneth Banks,
Client Account Manager, School Relations SFA
2004 GSFC Annual Conference March 3 4, 2004
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Overview

• Georgia FY 2001 Cohort Default Rates
• Defaulter Characteristics
• Georgia Economic Issues Impacting Default
• Late State Delinquency Assistance
• How LSDA Works
• Benefits
• Whats Next

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FY 2001 Cohort Default Rates By School Type
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Cohort Default RatesNational, Georgia and GHEAC
RatesFederal Fiscal Years 1992-2001
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Georgia FY 2001 Cohort Default Rates

• Georgia schools with cohort default rates higher
  than 10 typically serve low income students and
  are concentrated in middle and south Georgia
  where economic conditions limit opportunities.

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Typical Defaulter Characteristics

• 71 have withdrawn from school and did not
  complete studies.
• 84 have a seemingly short grace period due to
  dropping out and late notification of drop out to
  the lender.
• 45 have bad telephone numbers at the time of
  default.
• 58 have not been successfully contacted by
  telephone during the delinquency period .

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Georgia Economic Issues Impacting Defaults

• During the recent economic downturn, Georgia lost
  more jobs than any state in the nation.
• Georgias credit score released by Experian in
  September 2003 is 43rd of the 50 states and the
  District of Columbia.
• Georgia consistently ranks 2nd to 5th in
  bankruptcy filings.
• 3000 homes in metro Atlanta are in foreclosure
  each month.
• Metro Atlanta ranks among the highest in balances
  carried on credit cards.

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Late Stage Delinquency Assistance

• What is Late Stage Delinquency Assistance (LSDA)?
• ü   A strategy for targeting borrowers who are
  most likely to default241- 360 days delinquent.
• ü   A strategy for communicating with
  borrowers.
• ü   A strategy for reducing Cohort Default
  Rates.
• Experience from the LSDA pilots

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Borrower Delinquency Pattern
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Schools Can Help

• Assist the severely delinquent borrowers in
  establishing communications with the
  lender/servicer and/or guarantor.
• This is a small subset of borrowers that have not
  responded to attempts to communicate and help
  them resolve their delinquency.
• These borrowers will frequently respond to school
  outreach.
• User Guides available for DL and FFEL schools.

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How LSDA Works

• Using information provided by the guarantor or
  lender/servicer, focus on borrowers at the
  highest level of delinquency for that cohort
  year.
• School uses resources available to it and makes
  contact with the borrower, who at this stage is
  in denial and may welcome a helpful call from the
  school.
• School acts as a facilitator to get the borrower,
  lender/servicer and/or guarantor to work together
  to resolve the delinquency.

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Sample Late Stage Delinquency Assistance (LSDA)
Report
The Late Stage Delinquency Assistance Report
provides the most recent report of borrowers
from your institution that are between 241 and
360 days delinquent and that can affect your
cohort default rate.
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Sample Results for Late Stage Delinquency
Assistance (LSDA) Schools 2nd Quarter 2002 CDR
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Durability of Cures

• 14 months after the delinquency was cured, 82.49
  of the borrowers did not default.
• 24 months after the delinquency was cured, 76.70
  of the borrowers did not default.

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Perkins LSDA

• Perkins Late Stage Borrowers
• 180-240 days delinquent
• Current default cohort
• Who is servicing the loan?
• Institution
• Outside contractor
• Why is this important?

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Perkins LSDA

• Stafford LSDA principles apply
• Do something different
• Light touch
• Monthly attention works best
• Limited investment cost, time and staff

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Perkins LSDA

• When doing LSDA for both Perkins and Stafford
• QC your data before you start
• Review delinquency lists for overlap.
• Update contact information.
• Borrower Contact process How will you do it?
• Separate LSDA process for each program?
• Combined LSDA process?
• Know the rules
• Resolution for Stafford and Perkins may be
  different.

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Benefits

• Provides greatest possible return for the
  smallest investment of staff time and money.
• Reinforces schools role as a helpful party.
• Rescues over 30 of the potential defaulters.
• Reduces the schools Cohort Default Rate.
• Improves the integrity of the program.

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Contact information

• Ken Banks
• 404-562-6261
• Kenneth.Banks_at_ed.gov
• John Pierson
• 404-562-6269
• John.Pierson_at_ed.gov
• Carole Jones
• 770-724-9130
• Carole_at_gsfc.org

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Whats Next?

• GHEAC Pilot
• Adapting the technique to what you are currently
  doing

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LSDA

• Q As

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Putting the Puzzle Together!
Colleges
Parents
Students
Financial Aid