ATeam Work Shop

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Perspectives on Debt Management
Joe Statuto- Wells Fargo Bank Nadia Keyes-
Edfinancial Services Joanie Walker- American
Student Assistance R. Dewey Knight- The
University of Mississippi
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Default PreventionA Lenders Perspective
Joe Statuto Sales Manager Wells Fargo Bank
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Lenders Perspective

• Cost Impact of CCRAA (College Cost Reduction and
  Access Act)
• Subsidy Cuts
• .85 on PLUS/Grad PLUS for FFEL for profit
  lenders (.70 for non-profits)
• .55 on Stafford for FFEL for profit lenders (.40
  for non-profits)
• Elimination of Exceptional Performer Designation
• Reduction in Insurance
• 97 to 95 (2012)
• Lender Origination Fee Increase
• .50 to 1.0

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• Possible Impacts of CCRAA on Default and
  Delinquency
• Possible increase in National and School default
  rate
• Use of Administrative Forbearances may have
  artificially deflated cohorts
• Streamlining of operations and changing of
  business model
• Positive Impact consistency in contact from
  loan application to final repayment, development
  of relationship
• Negative Impact experience in servicing
  portfolio internally

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• Responsibility of the Lender is to Proactively
  Educate Upfront
• Online loan selection products
• Call centers that are setup to identify the needs
  of the borrower prior to recommending loan
  programs
• Private loans offered when federal loans have
  been exhausted or students do not qualify
• Support borrowing what is needed than what can be
  accessed

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• Creating an Informed Borrower
• Educating students regarding the benefits of
  completing their college education and managing
  their money by providing financial education
  tools
• Utilization of the correct mediums to engage
  students

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Financial Services Havent Yet Made a Relevant
Connection
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Financial Services Havent Yet Made a Relevant
Connection
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Consumers and Social Media
The numbers spike dramatically for youth, the
next generation
Source Social Technographics , Forrester
Research, April 19, 2007
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• Partnering with schools to offer the following
• resources to better educate students upfront
  will
• assist in creating a more informed borrower
• Online financial education programs and
  information (school and lender website)
• Orientation, Freshmen Experience Classes/Programs
  and Application Process
• Blogs
• Social Forums
• Online tools/calculators
• Budget forecast worksheets
• Printed materials

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Default PreventionA Servicers Perspective
Nadia Keyes Vice President of Customer
Care Edfinancial Services
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Early Intervention Methods

• Focused efforts on early delinquency accounts
• Easier to make 1 2 payments and identify any
  long term repayment hurdles
• Opportunity to educate borrowers on repayment
  options to deter delinquency and default

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Early Intervention Practices

• Contact borrowers within 30 days of
• Entering Repayment from a deferment
• Forbearance end
• Grace period end
• Contact borrowers same month as loans load to our
  servicing system
• Conversion
• Rehabilitation

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School Focus

• It is important to identify trends and work
  closely with the school to provide tools to
  strategically plan the right approach.
• Specialized portfolio analysis reports allowing
  for tracking of withdraws and stages of
  delinquency of student attending the institution.

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Sample Reports
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Extra Due Diligence Efforts
As a servicer Edfinancial realizes the need to go
beyond the minimum due diligence standards and
strategically makes additional phone and letter
attempts combined with e-mail blasts and early
intervention efforts to assist our borrowers
manage their student loan debt.
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Sample Online Payment E-blast Campaign
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Sample Early Intervention
E-Blast Campaign
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Sample Special Delinquency E-blast
Campaign
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Specialized Default Aversion Team

• A final attempt is made through our specialized
  Default Aversion team to offer assistance to the
  borrower prior to default.
• Strategy is to make one final, intensive effort
  to collect on the delinquent loan and cancel
  claim process.
• Partnership with Claims Team to identify accounts
  nearing claim submittal and aggressively pursuing
  final collection
• Accounts transferred to a default aversion
  specialist at 290 Days.
• Concentrated skip tracing efforts
• Focus on contact efforts before claim sent to
  guarantor
• Stress consequences of default and importance of
  repairing credit history.

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Specialty Services

• Dedicated 1-800 number for schools and guarantors
  allowing three-way calling with borrower,
  guarantor or school.
• Specialty training for schools on default
  aversion.
• Customized email address and text chat option for
  default prevention.
• 24-7 voice response system allowing borrows to
  access their account information, request a
  deferment or forbearance and make payments
  anytime.

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Summary

• Edfinancial Services believes that default
  prevention begins with exceptional customer
  service at the time of application as well as
  during repayment.
• We are always striving to improve our methods and
  processes to reduce delinquency and avert
  default.

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Default PreventionA Guarantors Perspective
Joanie Walker Regional Account Executive American
Student Assistance
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Guarantee Agency

• Has agreement with DOE to administer the
  guaranteed student loan program.
• 35 State and National Guarantors
• Designated states
• Operate under traditional or VFA model
• Guarantors provide
• Guarantee of loans
• Value added benefits

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Guarantor Models

• Standard Model
• Receive less compensation for preventing student
  loan defaults than for collecting student loan
  defaults
• Approximately 60 of a standard guarantors
  revenue is derived from the collection of
  defaulted student loans, while less than 10 of
  its revenue comes from default prevention and
  zero for delinquency prevention
• Funding mix is not aligned with the value
  proposition of the guarantor which is to assist
  borrowers in achieving both a successful
  educational and repayment exercise
• 31 guarantors have standard model

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Guarantor Model cont.

• Voluntary Flexible Agreement (VFA)
• Permitted by the HERA of 1998
• Agreements test new and innovative methods for
  carrying out activities required by guarantors to
  more efficiently and effectively manage the FFEL
  program
• VFA guarantors incorporate a comprehensive
  modification to the traditional guarantor payment
  structure and tie federal payments to improved
  performance and portfolio management
• 4 guarantors have VFAs

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Trigger Rate

• Trigger rate represents the amount of Loans in a
  guarantors portfolio that default in one fiscal
  year, as a percentage of the amount of loans in
  repayment in that same year.
• Numerator defaulted loans
• Denominator loans in repayment
• DOE uses trigger rate to monitor a guarantors
  success at default aversion. The lower a
  guarantors trigger rate, the better its success
  in default prevention.

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Trigger Rate cont.

• National Average 2006
• 1. 57
• ASA Trigger Rate
• -.98
• -60 percent better than the national
  average
• -97 ASA loans are in good standing

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Cohort Default Rate (CDR)

• FFELP guarantor cohort default rates are
  calculated by dividing the number of borrowers
  who defaulted at the end of a specific time
  interval, by the total of number of borrowers in
  the cohort.
• Numerator borrowers who defaulted
• Denominator number of borrowers in the cohort
• CDR snapshot of specific year

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ASAs Cohort Default Rate

• National Average
• -4.6
• ASA Cohort Default Rate 2005
• -1.5
• Lowest in the nation and lowest of all national
  guarantors for the seventh year in a row.

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• Default Prevention Wellness
• Encourages new students to be a Wise
  Borrower -How to Be a Wise Borrower booklet
• Provides financial aid literacy to enrolled
  students -Take Control of Your Money (sent
  with NOG) How to Be a Wise Borrower (use for
  orientations and
• resend) Invest in Your Future

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Journeys Wellness

• Journeys
• Targets all recent graduates towards the end of
  their grace period
• Receive Journeys every quarter for 18 months
• Combines telephone counseling, customized
  communications and a series of personal finance
  newsletters, in print or e-format
• Provides borrowers with the right information at
  the right time
• Co-branding available upon request by school

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Transitions Wellness

• Transitions
• Contacts high risk borrowers, such as students
  who separate from school without obtaining a
  degree
• ASA works with school to identify these at risk
  borrowers early to offer support and guidance
• All telephone counseling, printed and electronic
  communications are geared to the needs of these
  borrowers
• Dedicated website

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Bright Beginnings Wellness

• Bright Beginnings
• Wellness for defaulted borrowers
• Everyone deserves the opportunity to begin anew
• Materials encourage borrowers to begin and follow
  the path to rehabilitation
• Borrowers are congratulated when milestones are
  achieved
• Once student is handed-off to servicer, ASA
  continues to send monthly payment reminders via
  email or text messaging

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ASA Servicer Wellness

• Strengthen partnerships with servicers
• Review timelines to develop post-origination
  activities
• 3-way conference calling
• Identify opportunities to increase awareness and
  education to borrowers on debt management
• Co-branding

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Co-Branding

• ASA research has shown
• Borrowers respond well to mail and email messages
  bearing a familiar name
• Catches the borrowers attention
• ASA Pilot Program
• 250 percent more borrowers responded to Journeys
  communication that was co-branded with their alma
  mater than did those who received non co-branded
  material.

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Student Debt and Alumni Giving

• ASA sponsored study
• Two sets of data
• -alumni from ASA files
• -alumni for medium sized public Midwestern
  University
• Results
• - Education debt indeed impacts alumni giving
• - Effect an institution long-term
• Not just a financial aid issue
• Reveals borrowers perceptions of their debt,
  their feelings on fin aid literacy and the
  helpfulness of their institution when it comes to
  debt management support.

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Default Prevention 4-Year
Public Schools
Perspective
R. Dewey Knight Associate Director The University
of Mississippi
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Ole Miss Model

• ELM/NDN
• Multiple Lender Partners
• Multiple Servicers
• Multiple Guarantors
• Robust Annual Lender Partner Reviews
• Informed Borrowers
• Negative to DTC Activities

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Ole Miss Cohort Default Rates

• 1994 3.9 2000 4.9
• 3.4 2001 2.9
• 3.5 2002 2.7
• 1997 3.5 2003 2.3
• 1998 3.5 2004 3.2
• 1999 2.6 2005 1.6

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AVERAGES AND GOAL

• 10 Year Average 3.1
• 5 Year average 2.5
• Goal 1.0 or Less

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Default Variables

• Economic Climate
• Student Demographics
• Retention Rates
• Graduation Rates
• Institutional Initiatives/Decisions

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Institutional Intiatives/Decisions

• Availability of InformationELM Student Inquiry,
  OpenNet Inquiry, NSLDS, Meteor, On-line and Print
  Comparisons
• Entrance/Exit CounselingOn-line versus In-person
• On-line communicationsE-mail Infomertials,
  Blogs, Listserv, Web site
• Financial Planning Forums
• Cohort Default Data Analysis
• Lender/Servicer/Guarantor Partner Selection

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Future Institutional Initiatives

• Financial Literacy Education
• Interim Counseling
• Robust Analysis of Partners PerformanceLenders,
  Servicers, Guarantors
• Automated E-mail responses and Chats
• Customized Default Prevention Plan for Ole Miss

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Schools Role in Default Management

• Act as the Maestro in Conducting an Orchestra
  Composed of InstrumentsLenders , Servicers, and
  Guarantors