Reducing Delinquency

1
Reducing Delinquency

• Financial Literacy
• Default Prevention
• Default Aversion

2
Financial Literacy

• Can begin in elementary school
• Example Take Your Child to Work Day
• Play games with play money or just pretend
• Give them a salary and explain deductions
• Show pictures of different houses accompanying
  rent or house payment
• Give them appropriate expenses related to the
  house for electricity, water, gas, etc.
• Show pictures of cars and associated costs
• Bottom line is to show Income vs. Expenses

3
Financial Literacy

• Some high schools and colleges teach courses or
  have workshops related to financial literacy.
• Many institutions teach the basics of budgeting,
  how to write checks and reconciling a bank
  statement.
• Many students have debit cards and credit cards
  and do not know the implications of using them.

4
Financial Literacy

• It is predicted that the amount received in
  private loans (for education) will exceed those
  of federal loans in the near future.
• Some websites with good information
• www.jumpstart.org
• www.mappingyourfuture.org
• www.360financialliteracy.org

5
Interesting Reading

• Book entitled Generation Debt Why Now is a
  Terrible Time to be Young, by Anya Kamenetz
• College tuition costs are growing faster than
  inflation
• Parents already in debt no savings for college
  for children
• Social and Economic Upheaval

6
Default Prevention

• NMSLGC can partner with schools to provide
  default prevention information. This would occur
  before the student receives a loan.
• Completing the entrance and exit counseling
  information may not be enough.
• Most borrowers do not understand interest
  capitalization and when it occurs.
• Some think interest does not accrue during
  deferment and forbearance periods.

7
Default Aversion

• Default Aversion takes place when a borrower is
  at least 61 days delinquent.
• NMSL utilizes call campaigns, letters, flyers and
  postcards to let borrowers know we are there to
  assist and provide guidance to get them out of
  delinquency.

8
Parting Thought on Delinquency

• Even if your institution and/or the guarantor
  have low cohort default rates, we ALL share the
  responsibility to inform students of financial
  responsibilities and consequences of debt.