increasing your student borrowers’ repayment success
DESCRIPTION
Session 38. Increasing Your Student Borrowers’ Repayment Success. Ed Pacchetti | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals. Agenda. Introductions The importance of loan repayment Results from FSA survey of borrowers in grace - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/1.jpg)
Ed Pacchetti | Dec. 2013U.S. Department of Education
2013 FSA Training Conference for Financial Aid Professionals
Increasing Your Student Borrowers’ Repayment Success
Session 38
![Page 2: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/2.jpg)
Agenda
1. Introductions
2. The importance of loan repayment
3. Results from FSA survey of borrowers in grace
4. Resources for repayment
5. Panel: Best practices for encouraging loan repayment
6. Question and answer
2
![Page 3: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/3.jpg)
Context: Student Loan Repayment
• 37 million federal student loan borrowers
• The median amount owed by new borrowers is $10,000 and the average is $20,000
• Debt levels for graduate borrowers are significantly higher: a median of $31,000 and an average of $51,000
• The majority of new borrowers will choose the standard ten-year repayment plan
3
![Page 4: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/4.jpg)
Cohort Default Rates are Increasing
SOURCE: NCES, Condition of Education 2013, Table 400, Number of postsecondary students who entered the student loan repayment phase, number of students who defaulted, and 2-year student loan cohort default rates, by level and control of institution: Fiscal years 2007 through 2010; IFAP, September 30, 2013, National Default Rate Briefings for FY 2011 2-Year Rates and FY 2010 3-Year Rates.
4
![Page 5: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/5.jpg)
Characteristics of Defaulters
• Older (median age of 38 years old)
• Pell recipient/low-income
• Undergraduate loans only
• Median loan balance: $5,800
• Poor financial literacy
• Did not complete degree
SOURCES: NSLDS, as of June 30, 2013; The Student Loan Default Trap: Why Borrowers Default and What Can Be Done About It, National Consumer Law Center, July 2012; What Matters in Student Loan Default: A Review of the Research Literature, Jacob P. K. Gross, Osman Cekic, Don Hossler, and Nick Hillman; Journal of Student Financial Aid, 2009; Calculating the Contribution of Demographic Differences to Default Rates , Mark Kantrowitz, May 2010.
5
![Page 6: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/6.jpg)
6
What do we know about
new borrowers
who are just about to begin
repaying their loans?
![Page 7: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/7.jpg)
Characteristics of Borrowers in Grace
7
SOURCE: NSLDS, as of June 30, 2013.
![Page 8: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/8.jpg)
Characteristics of Borrowers in Grace
Median loan balance for graduate students in grace
8
$0 $50K$25K
$6,000Median loan balance for undergraduate students in grace
$0 $50K$25K
$14,500
SOURCE: NSLDS, as of June 30, 2013.
![Page 9: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/9.jpg)
Typical Borrower in Grace
• 26 years old
• Graduated with a Bachelor’s degree
• Family income: $25,000
• Pell recipient
• Five loans in grace
• Undergraduate loans only
• Has not consulted any resources about loan repayment
9
NOTE: Loan balance is the median for both undergraduates and graduates combined SOURCE: NSLDS, as of June 30, 2013; CFI, Customer satisfaction survey of borrowers in grace, June 2013.
![Page 10: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/10.jpg)
Most Choose Standard Repayment• Nearly half of borrowers in grace plan to choose standard repayment.• A large number do not know enough or are undecided.
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
10
![Page 11: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/11.jpg)
Reason for Choosing Plan
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
11
![Page 12: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/12.jpg)
Consideration of IBR
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
• The majority (54%) did not consider income-based repayment (IBR) because they did not have enough information
12
![Page 13: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/13.jpg)
Understanding of Borrower in Grace• New borrowers
who completed their degree program rated their understanding of student loan options higher than borrowers who did not complete their degree
• There is a 14-point difference in confidence in their ability to manage their loans
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013.
13
![Page 14: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/14.jpg)
Borrower in Grace – by Balance• Borrowers with a
high balance (+$50K) were more likely to consolidate their loans and begin repayment than those who owed less
• They were also more likely to choose income-based repayment
Source: CFI, Customer satisfaction survey of borrowers in grace, June 2013; Questions 21: “At the end of your grace period, what action will you take related to your student loan(s)? and 29: “What repayment plan have you chosen, or do you plan to choose at the end of your grace period?”
14
![Page 15: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/15.jpg)
Borrower in Grace - Repayment
44% report not being contacted at all about their loans going into repayment
34% report not being aware of their repayment options
26% are undecided about what action they will take on their loans at the end of their grace period
35% of those planning to go into repayment at the end of their grace period, either don’t know or are undecided about their repayment plan
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013.
15
![Page 16: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/16.jpg)
Borrower in Grace - ResourcesGone to find out information from… % of
RespondentsOnline loan servicer account management 40%Studentloans.gov website 25%Talking with friends or family 21%NSLDS website 18%Exit counseling at my school 18%Not used any of these sources of information 17%Studentaid.gov website 15%Phone number for loan servicer 14%Talking with staff at my school 12%Other online government resources 4%Online non-government resources 4%Other 4%Mobile phone apps 1%Social media resources 1%
Source: CFI, customer satisfaction survey of borrowers in grace, June 2013, Question 12: Where have you gone to find out information about your repayment options, your grace period, or how to manage your student loan(s)? – check all that apply.
16
![Page 17: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/17.jpg)
17
Resources
for Repayment
![Page 18: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/18.jpg)
StudentLoans.gov
18
![Page 19: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/19.jpg)
FACT Tool
19
![Page 20: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/20.jpg)
Loan Repayment Estimator
20
Available at Studentloans.gov.
![Page 21: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/21.jpg)
Loan Repayment Estimator
21
Repayment plans and loan payment calculators are available at: http://studentaid.ed.gov/repay-loans/understand/plans#estimator
![Page 22: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/22.jpg)
22
Panel Presentations:
Best Practices for Repayment
![Page 23: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/23.jpg)
Sallie Mae - Loan Lifecycle Touch Points
23
New Loan In School Entering Grace Exiting Grace
Open Rate 35% 40% 39% 38%
Click Rate 5% 13% 19% 26%
Delinquency Rate n/a 31% - control | 23% - test 38% - control | 22% - test 55% - control | 26% - test
IDR App. Rate n/a 1% - control | 2% - test 3% - control | 4% - test 2% - control | 6% - test
Key Points
• Highlights total loans and amount borrowed to date
• Online account set up• Look for future communications
• General reminder email• No action is required• Online account set up
• What is Grace• When to expect your first statement• In-School Deferment reminder• Income-Driven Repayment plan
information• Online account set up• Look for future communications
• Sent about 45 days before first payment due date
• Highlights total payment amount due and the due date
• Income-Driven Repayment plan information
Note: Delinquency measured at 15 days past due
![Page 24: Increasing Your Student Borrowers’ Repayment Success](https://reader036.vdocuments.net/reader036/viewer/2022081520/5681378f550346895d9f2e4c/html5/thumbnails/24.jpg)
QUESTIONS?
24