Catch the Rhythm of VFA Best Practices _____

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Catch the Rhythm of VFA Best Practices_____

• Anita Kermes, EdFund
• Mike Ryan, ASA
• Amy Kerwin, Great Lakes
• Rinn Harper, TG
• Moderator Jay Downs Siska, EdD., Chela Financial

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VFA and Best Practices

• Anita Kermes, EDFUND

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• How Does EDFUND Help?

• Points of intervention
• 1st Counseling withdrawn borrowers
• 2nd Early delinquency counseling
• 3rd Late-stage delinquency counseling

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Early Withdrawal Counseling

• Contact shortly after leaving school
• Here to help
• Discuss options
• Return to school
• Repayment options
• Follow up

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Questions?
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TRANSITION
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Grace CounselingAssisting Borrowers Before
Repayment

• Mike Ryan
• Vice President of Borrower Services
• American Student Assistance

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ASA Wellness Approach

• ASA Mission Assist borrowers in successfully
  completing a program of education financing and
  repayment
• Wellness Premise With the right information at
  the right time, no borrower working in good faith
  should default

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Wellness Fundamentals

• Build relationships early
• Maintain positive working relationships
• Proactive preventive outreach
• Informative intuitive messaging
• Non-threatening but factual
• Solutions to fit borrowers needs
• Customized counseling

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Grace Counseling Pilot

• Experiment to reach out to borrowers prior to the
  start of repayment
• Joint ASA / ACS (AFSA) initiative
• Calls to pilot borrowers to discuss repayment
• Follow-up letter after call
• ASA Financial First Aid Kit

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Grace Counseling Pilot

• Pilot group results (relative to control group)
• Lower overall delinquency rate
• Higher use of automatic payments (ACH)
• More use of graduated repayment
• Higher rate of consolidation
• Pilot expanded into Journeys Program

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Journeys Program

• Initial information packet
• Repayment options guide
• Deferment/forbearance information
• Budget worksheet
• Reply card
• Outbound counselor calls
• Ongoing newsletter series

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Initial Letter
Reply Card
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Journeys Newsletters

• Debt management
• Returning to school
• Job search
• Pros cons of consolidation
• Moving out of parents home

• Borrower confessions
• Saving for summer vacation
• Resume writing tips
• Interviewing tips

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Newsletter-All Borrowers
Newsletter-Grad Borrowers
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Measuring Impact of Journeys Program
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Thank You!
Mike Ryan Vice President of Borrower
Services American Student Assistance 330 Stuart
Street Boston, MA 02116 [phone] mryan_at_amsa.
com
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TRANSITION
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VFA Best Practices Defaulted Loan
Rehabilitation_____

• Amy Kerwin, Great Lakes Higher Education
  Corporation and Affiliates

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Rehabilitation Most Appropriate Default
Resolution Tool

• Borrower Benefits
• Allows the borrower to regain all of the benefits
  of the FFELP
• Restores the borrowers eligibility for
  additional financial aid
• Removes the default from the borrowers credit
  history
• Lender Benefits
• Lenders obtain student loan assets without
  incurring acquisition fees
• Borrowers are rehabilitated with an established
  payment history, lowering the risk of re-default

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Rehabilitation Most Appropriate Default
Resolution Tool

• School Benefits
• Allows the borrower to obtain additional
  financial aid to return to school
• Department of Education Benefits
• Reduces the reinsurance liability
• Preliminary data indicates the default recidivism
  rate on rehabilitated loans is less than that on
  defaulted loans that are consolidated

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Rehabilitation Program Options

• Great Lakes provides borrowers with 3 options for
  rehabilitating their defaulted student loans
• Standard Rehabilitation
• Income-Sensitive Rehabilitation
• Balance- Sensitive Rehabilitation

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Rehabilitation Option Similarities

• All 3 rehabilitation program options share the
  following characteristics
• The borrower is required to make 12 voluntary,
  timely payments during the rehabilitation period.
• The borrower must return a signed rehabilitation
  agreement prior to the 12th monthly payment.
• Great Lakes does not add collection costs to the
  borrowers balance at the time the rehabilitated
  loan is sold to the lender.

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Unique CharacteristicsStandard Rehabilitation

• The borrowers monthly payment during the
  rehabilitation period is the amount necessary to
  amortize the loan over a 10-year repayment
  period.

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Unique Characteristics Income-Sensitive
Rehabilitation

• The borrowers monthly payment is an amount
  deemed to be reasonable and affordable based on
  the borrowers financial circumstances.
• The borrower must provide a financial statement
  to support the monthly payment.
• The borrower must provide support for an expected
  change in financial situation sufficient to allow
  the borrower to meet the increased payment amount
  required after rehabilitation.

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Unique CharacteristicsBalance-Sensitive
Rehabilitation

• The borrower must have a defaulted loan balance
  in excess of 10,000 to qualify for this option.
• The borrowers monthly payment is the amount that
  would be required if, after rehabilitation, the
  loans are consolidated into an FFELP
  Consolidation Loan utilizing the maximum allowed
  repayment term.
• The borrower must complete and return an FFELP
  Consolidation Loan application prior to the 12th
  monthly payment.

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Tips for Rehabilitation Program Success

• Structure collection agency compensation
  agreements to provide higher incentives for
  rehabilitation than other post-default
  recoveries.
• To reduce recidivism rates on rehabilitated
  loans, limit income-sensitive rehabilitation to
  borrowers who expect an improvement in financial
  circumstances.
• Ensure updated borrower address and telephone
  number information is obtained prior to
  rehabilitation and passed to the rehabilitating
  lender.

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Tips for Rehabilitation Program Success

• Structure the transition from the guaranty agency
  to the rehabilitating lender such that the
  borrowers payment stream is not broken. The
  borrower should be required to make the first
  post-rehabilitation payment 1 month after he/she
  makes the twelfth rehabilitation payment.

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Rehabilitation-Focused Default Recovery Program
Results

• Great Lakes FFY 2003 rehabilitation results
• 9,562 borrowers rehabilitated
• 78,661,600 rehabilitated
• As of 9/30/03, 5,584 borrowers participating in a
  rehabilitation agreement have made 6 or more
  payments.

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Questions?
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TRANSITION
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Default Prevention

• Rinn Harper
• TG

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Default Aversion Efforts

• Includes
• Early Awareness Outreach Programs
• Grace Period Counseling
• Recall Recovery

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Tools

• A Clear and Present Danger A Model for
  Institutions of Higher Learning

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The Demonstration

• Every office has a role in default aversion

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Tools

• Servicers Your Partners in Default Aversion
• A Guide for Institutions of Higher Learning

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TRANSITION
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