Business Plan for Default Law

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					    National Association of Student
     Financial Aid Administrators




The following is a presentation
    prepared for NASFAA’s
2008 Conference in Orlando, FL
         July 6-9, 2008

                                      Session No. 59
Enhancing Your School’s
Default Prevention
Activities
                 Presented by:
Marilyn Landrum, Missouri Dept Higher Education
 Cindy Butler, Metropolitan Community College
         Amy Frieling, Crowder College
Missouri Department of
   Higher Education

    Default Prevention
      is Everyone’s
        Business!
Today’s Agenda

• Missouri initiatives and services
• Ideas and best practices for default
  prevention and debt management from
  Metropolitan Community College
• Ideas and best practices in retention from
  Crowder College


                                               Slide 4
Preventing Default is Everyone’s Business

• Postsecondary institutions
• Guarantors
• Lenders and servicers




                                            Slide 5
Postsecondary Institutions

• Financial aid office
  – Packaging formulas and student debt
  – Entrance and exit counseling

• Admissions office
  – Admissions standards
  – Career plan for admitted students

• Academic advising office
  – Heavy and challenging course        loads
  – Communication with financial aid

                                                Slide 6
Postsecondary Institutions

• Business office
  – Tuition payment plans
  – Credit card solicitations and usage policies


• Instructional/program development office
  – Personal finance courses
  – Numbers of courses and course sequence

                                                   Slide 7
Postsecondary Institutions

• Student retention/services office
  – Establish a retention office or position
  – Create retention-related services


• Job placement and career counseling
  services
  – Assist graduates in finding employment
  – Create internships with local businesses and
    agencies                                       Slide 8
Guarantors and Default Prevention

• Guarantors
  – Default aversion activities during early stage
    delinquency
     • Guarantors are required to assist when loans are 60 or more
       days delinquent
     • Many guarantors do more than what is required by law
  – Default prevention activities
  – Financial literacy and debt management
    materials and services
  – Default prevention grant programs
                                                                     Slide 9
Missouri’s Default Prevention Grant


 • Other states have used Missouri as a model
 • Missouri’s program began in 2001
    –   Proposals solicited from schools periodically
    –   To date, 100% of the proposals received have been funded
    –   Basic grant award $25,000 a year
    –   Annual conference for grant recipients
 • Examples of DP grant usage:
    –   Conduct research to determine defaulter profile
    –   Implement financial literacy programs
    –   Establish retention services
    –   And more!                                                  Slide 10
DP Grant Measures of Success




                               Slide 11
DP Grant Measures of Success




                               Slide 12
DP Grant Measures of Success




                               Slide 13
DP Grant Measures of Success




                               Slide 14
             DP Grant Measures of Success
                                                      Four-Year Institutions Average Default Claims Paid
                      $1,300,000
                                                                                                                 $1,273,781
                      $1,200,000                                                                                  $1,257,827

                      $1,100,000
                                                                                             $991,438
                      $1,000,000
                                                                 $903,595                     $981,215
                       $900,000

                       $800,000
Default Claims Paid




                       $700,000                                         $768,654
                                       $613,827
                       $600,000

                       $500,000
                                       $491,581
                       $400,000

                       $300,000

                       $200,000

                       $100,000                                                                $44,437       $40,981
                                                                       $29,255
                                        $22,783
                                  $0
                                           FFY 04                     FFY 05                  FFY 06        FFY 07
                       Grant               $491,581                  $768,654                 $991,438     $1,273,781
                       Eligible            $613,827                  $903,595                 $981,215     $1,257,827
                       Not Eligible        $22,783                    $29,255                 $44,437       $40,981

                                                                                                                          Slide 15
            DP Grant Measures of Success
                                                     Two-Year Institutions Average Default Claims Paid
                      $700,000

                                                                                                              $637,101
                      $600,000                                                                                $628,626



                      $500,000
                                                                                       $438,511
                                                                    $403,045
Default Claims Paid




                      $400,000

                                      $326,508                                              $367,385
                      $300,000
                                                                    $293,751

                      $200,000
                                      $182,104


                      $100,000

                                            $5,879                  $14,603                  $14,634     $18,218
                                 $0
                                           FFY 04                    FFY 05                  FFY 06      FFY 07
                      Grant               $182,104                  $293,751                $367,385     $637,101
                      Eligible            $326,508                  $403,045                $438,511     $628,626
                      Not Eligible          $5,879                  $14,603                  $14,634     $18,218

                                                                                                                     Slide 16
            DP Grant Measures of Success
                                                    Technical Institutions Average Default Claims Paid
                      $900,000
                                                                                                             $866,499
                      $800,000

                      $700,000

                      $600,000
                                                                                          $539,455
Default Claims Paid




                                                                                                             $494,390
                      $500,000

                      $400,000                                   $375,375
                                                                                          $319,761
                      $300,000        $285,228                      $269,104


                      $200,000        $170,053

                      $100,000                                                                           $43,031
                                                                                             $27,816
                                       $24,376                       $15,532
                                 $0
                                          FFY04                     FFY05                    FFY06        FFY07
                      Grant              $285,228                  $375,375                 $539,455     $866,499
                      Eligible           $170,053                  $269,104                 $319,761     $494,390
                      Not Eligible       $24,376                    $15,532                  $27,816     $43,031
                                                                                                                        Slide 17
DP Grant Measures of Success
                                                    All Institutions Average Default Claims Paid
                      $1,000,000
                                                                                                          $956,657
                       $900,000
                                                                                                       $830,365

                       $800,000
                                                                                        $730,774

                       $700,000                                 $663,659
Default Claims Paid




                                                                                        $588,114
                       $600,000

                       $500,000        $452,114                 $465,000


                       $400,000
                                        $303,197
                       $300,000

                       $200,000

                       $100,000
                                                                 $23,752                   $35,372   $40,891
                                          $22,556
                                  $0
                                          FFY 04                 FFY 05                    FFY 06    FFY 07
                       Grant             $303,197               $465,000                  $588,114   $830,365
                       Eligible          $452,114               $663,659                  $730,774   $956,657
                       Not Eligible       $22,556                $23,752                   $35,372   $40,891

                                                                                                                     Slide 18
Other Missouri Initiatives

• Curriculum Alignment Initiative (CAI)
   – Goal to reduce remedial coursework by entering
     college freshmen
   – Benefits of reduced remedial coursework:
      • Reduced overall cost of a degree or certificate
      • Improved retention and graduation rates
• Tuition stabilization legislation enacted August 28,
  2007
• Financial literacy coursework in high school
   – Mandated by Missouri legislation in 2006             Slide 19
Metropolitan Community
       College


     Our Plan is
      Working!
Metropolitan Community College

•   5 campuses (2 urban, 3 sub-urban)
•   27,000 degree seeking; 43,000 total students
•   Open admission
•   $26 Million total FA to 9,400 students
•   $8 Million to 2,400 student borrowers
•   Decentralized FA operation
•   We don’t package student loans
•   PeopleSoft



                                                   Slide 21
Metropolitan Community College

  Borrowing has increased 437% since 2002
      • 600 to 2,400 students
    • $1.8M to $8M loan volume

  We experienced a huge spike in borrowing
  (+1,000) in 2004-05 and default management
                became a priority.

                                               Slide 22
Metropolitan Community College




                                 Slide 23
Metropolitan Community College
              Began a Default Prevention Initiative

 •   May 2005 MDHE’s Default Prevention staff spoke to approximately 45
     staff, administrators and officers.
 •   December 2005 formed an interdepartmental district-wide Default
     Prevention Task Force:
      –   District Director of Student Financial Aid, Chair
      –   District Student Fiscal Aid Manager
      –   Dean of Student Development (MCC-Penn Valley)
      –   Registrar (MCC-Longview)
      –   Head Cashier (MCC-Blue River)
      –   Financial Aid Manager (MCC-Maple Woods)
      –   Financial Aid Supervisor (MCC-Penn Valley)
      –   Manager of Payment Services (MCC-Business and Technology)
      –   Counselor (Educational Opportunity Center)

                                                                          Slide 24
Metropolitan Community College

     Developed a comprehensive DP plan
        that included these elements:
 •   Review and revision of institutional policies and procedures
 •   Data analysis
 •   Student focus groups
 •   Review and development of student borrower communications
 •   A robust loan counseling program
 •   Late Stage Delinquency Assistance (LSDA)
 •   A personal financial literacy and financial planning program
 •   Communication with employees


                                                                    Slide 25
Metropolitan Community College

                         Developed a timeline for the plan
          Activity                    Action Steps                   Outcomes and                     Responsibility         Anticipated
                                                                  Measures of Success                                        Completion
  Default Prevention         Complete and submit MCC             Request submitted            District Director of Student   07/2006
  Coordinator position       Personnel Action Request                                         Financial Aid and DP Task
  creation                                                                                    Force
                             Hire Coordinator                    Coordinator hired            District Director of Student   09/2006
                                                                                              Financial Aid and Human
                                                                                              Resources Department



  MCC institutional policy   Review Satisfactory Academic        100% of Student              DP Steering Committee and      12/2006
  review                     Progress Policy                     Services Deans will          Financial Aid Process
                                                                 support policy changes       Improvement Group
                             Review all policies and             100% of Student              DP Coordinator and Financial   12/2006
                             procedures related to student       Services Deans will          Aid Loan Group
                             loan program                        support policy changes



  Data analysis              Analyze existing data to recreate   Data analyzed                DP Coordinator and Research    02/2007
                             the "MCC experience" of                                          & Assessment Department
                             students who default
                             Identify common characteristics     Characteristics identified   DP Coordinator and Research    03/2007
                             among defaulters                                                 & Assessment Department


                                                                                                                                           Slide 26
Metropolitan Community College

         Instituted a New Default Prevention
                 Coordinator Position

 • Key to the success of the plan: someone to develop,
   implement, manage, monitor and evaluate the default
   prevention program
 • Applied for and received a $25K MDHE DP Grant to
   offset part of the Coordinator’s salary
 • Worked hard to set the position at the highest
   allowable level
 • Certified Financial Planner credential desired
                                                         Slide 27
Metropolitan Community College


  Current Default Prevention Activities
      • Cohort Default Rate Analysis
      • Individual Student Activities
      • District wide Loan Team
      • Defaulter Profiles



                                          Slide 28
Metropolitan Community College

Cohort Default Rate Analysis
    Comparing the Loan Detail Record to our institutional records, the National Student Loan Data
    System, guarantor and servicer records


•   COHORT YEAR 2005
     – Subtracted 2 defaulters
     – Added 17 excluded borrowers
     – 3.5 to 3.2                                                 # Students in Default
                                                                        # Borrowers
•   COHORT YEAR 2006
•   Subtracting 1 defaulter
•   Adding 326 excluded borrowers
•   9.1 to 6.9


                                                                                                    Slide 29
Metropolitan Community College

Individual Student Activities
• Grace period communication
• Delinquency assistance
• Late stage delinquency assistance
• Resource for loan issues



                                      Slide 30
Metropolitan Community College

District-Wide Loan Team
• Policies and procedures
• Standardized loan process and borrower
  communications
• Monitor, anticipate and react to industry
  changes


                                              Slide 31
Metropolitan Community College

Defaulter Profile
•   Created from U.S. Department of Education Defaulter Profile Template and
    Cohort Default Rate Loan Detail Record for the five most recent Cohort
    Default Periods
•   Can use these characteristics to identify student borrowers who share them
    and offer additional services to help them understand and manage debt




                                                                                 Slide 32
Metropolitan Community College

       Results of MCC Defaulter Research

Common characteristics of MCC defaulters that appear to be
meaningful (percentages are for 2006 cohort)

•   18 to 25 years old (45%)
•   Independent status (87%)
•   Satisfactory Academic Progress issues (70%)
•   High withdrawal rate (86%)
•   Remedial placement test scores (86%)
•   FAFSA EFC of zero (44%)
•   Students seeking an Associates in Arts degree (52%)
                                                             Slide 33
Metropolitan Community College

              Results of MCC Defaulter Research

Common characteristics of MCC defaulters that appear not to be
as meaningful. (This surprised us.)


• Transfer from another institution
• GPA < 2.0



                                                                 Slide 34
Metropolitan Community College

                   In the WORKS…


•   Student Focus Groups
•   Better Loan Counseling
•   SIFE Peer Counselors
•   Comprehensive communication plan
•   Coordinator currently completing CFP program
•   Financial Literacy program

                                                   Slide 35
Crowder College and
    Retention

     Crowder’s
 “F.I.T. Model” for
Retention Services
Objectives

• Increase student retention and academic
  performance
• Create a supportive network of programs and
  services for “at risk” students
• Collaborate campus wide
  – Various Committees are engaged
  – All Deans plus the President, and the College Council are actively
    involved
  – All faculty are involved
  – All staff are informed about the campus wide effort to retain
    students
                                                                     Slide 37
Target Populations

• Academically unprepared
    – Developmental students
    – Academically “at risk” students
•   First generation students
•   Low income
•   Persons of color
•   Non-traditional students
•   Learning disabled students
•   Stop outs/drop outs
                                        Slide 38
        Improving Student Success & Retention
                                                         80% of our students
                                                               come thru this
                                       Students        “pipeline” with one or
                                                        more developmental
                                                                   education
                                                                 placements
                                     Assessment


Goal: Improve        Job Ready                     College-
4-year transfer                                    Ready
and job
placement


        Career & Tech Students for                Transfer to Universities
        Employers                                                            Slide 39
How are we addressing
the “pipeline” issue?
• As a result of integrating the F.I.T. Retention Model
  activities into AQIP Action Projects, Crowder has identified
  outcomes measures that we plan to track as we work on
  Action Projects, which ties into our retention efforts:
   – Student completion of developmental sequences, including the college-
     level class
   – Student completion and success (i.e. grades) rates in developmental
     education courses
   – Student completion and success (i.e. grades) rates in subsequent course
     work
   – Retention of developmental students, fall-to-spring and fall-to-fall
   – Degree completion university-transfer rates of developmental students
   – Improvement in course post-assessments
   – Establishment of better systems to facilitate all of the above
                                                                           Slide 40
AQIP Developmental Ed Committee and
Student Retention

PROPOSED ACTIVITIES:
•   Assessing Success of Developmental Ed Students
•   Continue to assess and potentially expand Mastery Learning
•   Also, explore the feasibility on have expanding learning beyond the 16-week
    semester
•   Continue to examine and alter the College Orientation Courses and other
    student success courses based on success data
•   Continue to examine the effectiveness of reading placements and
    prerequisites
•   Create a curriculum (e.g. smaller certificates within more general degrees)
    and Career & Transfer Services model that better places students into jobs or
    universities


                                                                               Slide 41
Crowder’s F.I.T. Retention Model

• Frontline services
  – Reduce numbers of incoming under-prepared students
  – Increase communication and coordination with school leaders
  – Remove barriers during transition
• Intermediate services
  – Increase student support services on campus
  – Increase communication and coordination with faculty
• Transition services
  – Assist students in transferring to 4-year institutions
  – Improve workforce development
  – Meet Missouri performance standards
                                                                  Slide 42
Examples of Frontline Services

• Early alert process during enrollment
• Dual credit/enrollment options to non
  traditional students
• College orientation program since fall 2005
  – This is now a Crowder College degree
    requirement for all majors
• Pre-career testing and career planning
  services
                                            Slide 43
Examples of Intermediate Services
• College Connections course for academically “at risk”
  students
   – Test-taking skills
   – Calculating GPAs and managing academic status
   – Career planning, budgeting, and personal decision making
     skills
• College Success course for any student
• Early alerts from faculty for poorly performing
  students
   – Postcards promoting retention services
• Enrollment management for stopouts and dropouts
   – Weekly reports of withdrawing students
   – Students are contacted                                     Slide 44
Examples of Transition Services

• Transfer and articulation agreements
• Employer training services
• Job placement agreements and internships with local
  businesses



     We feel that unless retention is someone’s
                specific responsibility,
        it will be no one’s responsibility.

                                                        Slide 45
Session Wrap Up
Questions?

         3515 Amazonas Drive
       Jefferson City, MO 651O9
            (8OO) 473-6757
             (573) 751-3940
          Fax (573) 751-6635
           Info@dhe.mo.gov
            www.dhe.mo.gov
                                  Slide 47
Slide 48

				
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