STUDENT FINANCE
A Personalized Approach to Managing Student Loan Delinquency
by Kristina Tirloni R
ecent statistics show that nearly 10 percent of U.S. residents age 18 or older are enrolled in college, compared to just over 8 percent in 2000. As the demand for a college education has risen, so too has the demand for federal student loans. In fact, ac- cording the College Board’s Trends in Student Aid 2011 report, federal loan volume has increased 139 percent over the last 10 years.
As institutions manage the growing number of students and increased borrowing, they must also remain mindful of their cohort default rates (CDR). Tat means providing meaningful guidance to student borrowers about their responsibilities and options for repayment after leaving school. Today, many institutions are turning to trusted
industry peers to help mitigate borrower delinquencies through the use of third-party services. In 2011, TG introduced its default management service, Higher- EDGETM Default Aversion Solutions, with other industry providers including ASA, Nelnet and ECMC initiating similar ventures to assist schools with their default prevention efforts. Tese for-fee services are designed to help prevent federal student loan borrowers from defaulting on their loans by delivering personal- ized communications and outreach strategies that go beyond those a school is generally able to provide. “We help school administrators identify their default management goals, organize a campus-wide default prevention program and provide additional support to help borrowers stay out of default,” ex- plained Mark Brody, assistant team manager for TG’s HigherEDGE Default Aversion Solutions. “We seek to understand what is going on at the campus level, as delinquency and default problems don’t usually arise, and are not solved, overnight.”
As those in the financial aid office understand, high default rates bring a lot of consequences. Stu- dent borrowers risk damage to their credit and wage garnishment, among other repercussions, and schools face increased oversight and potential loss of Title IV eligibility.
20 SEPT/OCT 2012 •
TODAYSCAMPUS.COM
“For some campuses, a large percentage of their tuition payments come from the student loan program. Defaults do not just affect students, they may also affect an institution’s ability to keep its doors open,” Brody said.
THE EFFECTS OF DEBT ON A STUDENT Victor D., of Austin, admits he didn’t go to college with a plan in place; however, he expected to gain some in- sight on his future as he progressed through the classes for his computer security certification. He also assumed he would find a job immediately after graduation to help repay the loans he was using to finance his educa- tion.
After leaving school, he began receiving informa- tion about his student loans from the school and loan servicers, but described the communications he received as confusing. He was unsure to whom he owed money, and eventually his loans became delinquent. “I knew that the loans had to be paid back, but I
just didn’t understand the specifics of repayment,” he said. “None of the process made sense to me, and I had major problems trying to reach anyone to set up defer- ments while I looked for work.” In 2011, Victor’s loans were included in a default
services agreement between his former school and TG’s HigherEDGE Default Aversion Solutions. Te High- erEDGE team contacted Victor about his delinquent status and payment situation. Te team worked to edu- cate him on his options and turn around his damaging repayment history. Today, Victor is current on his loans, has developed a budget that he is able to live with and plans to be free of his student loan debt in five years. “Students think it’s easy to get a federal student
loan,” said Demorris Hicks, a HigherEDGE borrower solutions specialist. “However, the reality of the re- sponsibility hits when the student enters repayment. By the time a borrower allows his or her loan to become delinquent, all of sudden it’s a scary thing. Life happens, though, and we understand that and work to explain what the borrower can do to get back on track.”
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