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TRANSCRIPT
YOUR LOGO
Crash Course: Private Student Loan Collections
& Recoveries
NCCR Conference
November 3rd, 2011
NCCR Conference
November 3rd, 2011
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Recent Press & Market Sizing
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Session Agenda
Brief Introduction of Panel
Basics & Fundamentals
Case Study: Lessons Learned
Questions
1
2
3
4
5
Topics to be covered today include:
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Press & Market Sizing
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There has been a lot written recently in mainstream press about the size of
student loans . . . yes, it is now a trillion dollar pot, with $100 billion funded in ‘10.
Full‐time undergraduate students borrowed an average of $4,963 in 2010, up 63% from
decade earlier after adjusting for inflation (USA Today: “Student loan debt hits record levels”:
).
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Market Sizing, continued
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The cost of college continues to go up & private loans are there
to meet the emerging gap . .
. which means that issuers have ample
volume to contend with.
Some key drivers of new PSL originations include: Sallie Mae, Discover, Chase, and First
Marblehead…
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Recent Performance Trends
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Delinquencies and default trends are improving from their recessionary peaks, but there is
still a lot of work to be done…
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How is student loan collections different from bankcard?
Bigger balances (which can influence collectors)
Example: extensive work effort, above what segmentation tells you
Not dischargeable in bankruptcy (so a longer collection tail)
A co‐borrower can often exist, which requires a skilled talk‐off
Younger demographic
Fewer assets (& therefore, a thinner credit file)
Great potential for long‐term improvement
Adversely, a student loan can seriously hurt their credit and negatively impact them as their life situation develops
Often, there is less aggressive pre‐collections effort done
Documentation is usually better, however
For whatever reason, the debt buyer market remains fractured & not developed
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Basics & Fundamentals
Distinction between federal & private (even if student doesn’t get it)
Federal contract is separate topic entirely (even if they are billed together prior to default)
Private requires substantially less capital expenditure for an agency (no GSA req’t, but no long‐term guaranteed placements)
Role of servicers in the effort (both origination & collection)
Creates confusion to the debtor: “I am calling from xxx on behalf of yyy with regards to your zzz loan from xxx”
Critical to integrate operations between agencies and servicers (data transfer)
Non‐cash cures as a resolution tool (forbearance, etc.)
Each issuer has different thresholds on how it can be leveraged, largely dependent on the regulatory structure
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Strategy Lessons Learned From The Field
Pre‐Default‐
Jeff S., SIMM
Co‐borrower strategies
Interaction w/ servicer
Managing student toolsPayment options
Forbearance, MGRS
More education on loan, including about multiple loans w/ different dates
Often competing w/ federal loan effort (by multiple entities)
Daily dialer effort
Post‐Default‐
Don S, MRS
How do you manage multiple accountsSystemically
Work flows & SLAs
Payments applied across loans
Cosignor is king!Skip tracing importance
Wide range in liquidation rates amongst issuers, due to pre‐default work strategy differences
Different BK approach
Rehab is sometimes available
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Case Study #1: Always Opportunity
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With active performance management, you can truly drive performance to another level:
Our effort commenced
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Case Study #2: Underwriting can Help
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Modeling and analytics are playing a larger role in the PSL marketplace, from originations
through to servicing , collections, and recovery…
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Best Practices for Account Lifecycle
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Wrap‐Up
Questions & Answers
Thanks for your attendance & participation
Brad Dey, [email protected], 804.274.8125
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