minneapolis, mn october 18-21 masfaa: time to refocus midwest association of student financial aid...
TRANSCRIPT
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Midwest Association of Student Midwest Association of Student Financial Aid AdministratorsFinancial Aid Administrators
How to Help Borrowers Tackle How to Help Borrowers Tackle Their New ChallengesTheir New Challenges
Presented by:
Beth EricksonBeth Erickson
Ronald HoppeRonald Hoppe
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
OverviewOverviewOverviewOverview
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What Will We Discuss?The new challenges that student
loan borrowers are facing.Why students are borrowing and
support for those who are.Assistance and options that are
available for those struggling to repay.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
The EconomyThe EconomyThe EconomyThe Economy
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Unemployment
8.0%
6.8%
9.5%
8.8%
10.0%
15.2%
9.9%
10.8%
9.0%
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What College Students are Saying
Recent Edison Media Research◦22% of students worry about having
enough cash to get through a typical week.
◦11% of those whose parents lost a job veered away from grad school because they couldn’t afford it.27% of students with job loses in their family considered dropping out.
◦32% said financial worries have a lot of impact on the stress they’re under.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Student Loan Student Loan DebtDebt
Student Loan Student Loan DebtDebt
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Increases in Student Loan DebtIn 2008, 67% of students
graduating from a four year program had student loan debt.
That represents 1.4 million students graduating with debt, up 27% from 1.1 million students in 2004.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Breaking it Down62% of graduates from public
universities had student loans.72% of graduates from private
nonprofit universities had student loans.
96% of graduates from private for-profit universities had student loan debts.◦A major increase from 2004, when 85% of
those graduates had student loans.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Average Debt Levels are Increasing The average debt level for
graduating seniors with student loans rose considerably in 2008.◦In 2004 the average was $18,650.◦In 2008 the average was $23,200.
An increase of 24% in just four years.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Breaking it DownAt public universities the average
debt was $20,200.(20% higher than 2004’s $16,850).
Private nonprofit universities the average debt was $27,650.(29% higher than 2004’s $21,500).
Private for-profit universities the average debt was $33050.(23% higher than 2004’s $26,850).
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Average Student Debt by State $19,241
64%$24,16972%
$26,20873%
$18,92865%
$18,58456%
$22,05360%
$19,01868%
$21,28360%
$21,95267%
*percentages in blue are average of graduates with student loan debt
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Reasons Why Reasons Why Students BorrowStudents Borrow
Reasons Why Reasons Why Students BorrowStudents Borrow
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Freshman Finance: Tips on Managing Your Money
Today Show Video
MINNEAPOLIS, MN OCTOBER 18-21
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Personal ExperienceLack of overall knowledgeJaded understanding of future
implicationsUnwilling to accept undesired
alternatives
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What Determines the Amount What Determines the Amount Students Borrow? Revisiting the Students Borrow? Revisiting the Crisis-Convenience Debate.Crisis-Convenience Debate. Journal of Student Financial Aid
◦ Volume 38, Number 1◦ Natala Hart and Shoumi Mustafa
“Students borrow to bridge the gap between total cost of attendance and the sum of grants, scholarships, and tuition discounts. One would expect the amount of loan to depend on the size of this gap, levels of family resources, and additionally, the cost of borrowing (p. 35).”
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What Determines… (cont.)
Hart and Mustafa found for students from families in the lowest SES, net costs and the availability of family resources were more significant determinants than the overall costs of borrowing or aid eligibility.
For students from middle- to upper-income families, increased low interest loan eligibility was the greater determinant.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What Determines… (cont.)
Before the increase in Stafford loans federally (and Perkins loans at some institutions), high interest alternative loans were the only option.
After the increase, because additional low interest loan options were available, overall borrowing increased, at percentages higher than those of net costs.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
School Support of School Support of Students and Students and
FamiliesFamilies
School Support of School Support of Students and Students and
FamiliesFamilies
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
What Support Is There for Borrowers?
Eliminating Federal Student Aid?University Aid CalculatorsThe Project on Student DebtStrategies to avoid debtTactics to help students and
families understand options for financial aid and expected future debt
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Eliminating Federal Eliminating Federal Student Aid?Student Aid?Some argue that ending federal
student aid programs would force colleges/universities to lower tuition rates and hold them accountable for how they are spending their money.
New Perkins Loan Legislation
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
University Aid CalculatorsUniversity of Illinois at Urbana-Ch
ampaign Financial Aid Calculator
Purdue University Net Price Calculator
Williams College Net Price Calculator
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Project on Student Debthttp://projectonstudentdebt.org/Mission: For Americans of all socio-economic
backgrounds, borrowing has become a primary way to pay for higher education. The Project on Student Debt works to increase public understanding of this trend and the implications for our families, economy, and society. Recognizing that loans play a critical role in making college possible, the Project's goal is to identify cost-effective solutions that expand educational opportunity, protect family financial security, and advance economic competitiveness.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Project on Student DebtNews UpdatesPublicationsRecent Data and ResearchAdvice for BorrowersTell Your StoryPolicy Initiatives
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Strategies to Avoid DebtUnderstand It
◦ Focus on paying the most expensive (those with the highest interest rate) debts first.
Keep Your Credit Score High◦ Protect your credit report and credit score.
Know Where to go for Help◦ Call your creditors and let them know what is
happening.◦ National Foundation of Credit Counselors or the
Independent Association or Credit Counselors.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Tactics to Help Students and Tactics to Help Students and Families Understand Families Understand Options for Financial Aid Options for Financial Aid and Expected and Expected FutureFuture DebtDebt
Entrance/Exit Counseling Pre-College AwarenessMoney Smart Program
Collaborations
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Entrance/Exit CounselingAre current Entrance/Exit
Counseling requirements sufficient enough?
Should private lenders be required to create entrance/exit counseling sessions for their borrowers?
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Pre-College Awareness The Institute for College Access
and Success – 10/2008Financial Aid is most effective when
students and families learn about it early enough to make the right choices and plans about high school coursework, family savings, work and earnings, and college options.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Pre-College Awareness (cont.) Generally, parents’ ability to estimate
college costs accurately is positively correlated with income.
A survey of 1,090 parents of 18- to 24-year olds and 811 young adults age 18 to 24 conducted by The Sallie Mae Fund in 2002 found that 62% did not name grants as sources of financial aid, 58% did not name scholarships, and 64% did not name loans.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Pre-College Awareness (cont.)The average age at which a
student first receives financial aid info is 14 years for families with household incomes over $75,000 and 16 years for families with household incomes under $25,000.
Financial Aid CalendarThe ABC's of Early Awareness
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Money Smart CollaborationsStarted in Chicago but currently
taking place in cities in 5 states (IL, IN, IA, MI, and WI)
Six days of free presentations by community groups, financial institutions, government agencies, educational organizations, and financial experts, all designed to help consumers learn to better manage their personal finances
www.moneysmartweek.org
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Repayment Repayment SolutionsSolutions
Repayment Repayment SolutionsSolutions
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Student Loan DefaultsAccording to the U. S.
Department of Education 6.7% of student loans for fiscal year 2007 defaulted.
This involved more than 225,000 borrowers.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Why Borrowers are Not Able to PayUnemployment/
UnderemploymentForeclosurePrioritization of
paying billsBehind on billsRising cost of livingSingle Parent
Monthly payments are too high
Excessive Student Loan Debt
Holidays – paying for gifts
Job security concerns
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Overcoming ObjectionsBorrowers are telling us…
◦“I’m struggling to pay all my bills right now due to the economy”.
One of our best WIIFMs…◦“The present state of the economy
can definitely makes things stressful. That’s why I would like to help you get rid of at least this one worry by finding a solution for this account”.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Finding the Best SolutionCan you pay that today?
How much can you pay today?
Ask if a payment can be made by the 5th business day
PAYDAYS
Reason for Delinquency
Program Options
Sources of Income
When can you pay?
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Borrower RavesSarah had been laid off since January and was feeling really depressed about being behind on her bills. She was nervous about talking to us, but said that Joe’s friendly and personable nature made it easier for to talk about her predicament. She said that Joe was extremely helpful. Sarah was pleased to know that Great Lakes had such solid policies and procedures to assist borrowers and was staffed with such excellent employees like Joe who could carry them out so exceptionally well.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Borrower RavesNaomi said that she has been spending her day off work trying to figure out a plan for her student loans. She spent 4 hours on the phone calling various lenders. Unfortunately she was left confused and frustrated.
She called Great Lakes and first got a hold of Ron in the afternoon, and then later talked to Jermaine in the evening. She raved about how much better she felt about her student loans after talking to both of them.
She said that out of all the companies that she has ever dealt with that Great Lakes definitely provides the best customer service. Naomi said that “Ron and Jermaine have restored my faith in humankind.”
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Tools You Can Tools You Can UseUse
Tools You Can Tools You Can UseUse
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Tools That Can HelpDitch the Debt Gremlin
◦www.IBRinfo.orgGreat Lakes Website
◦Phone Counseling Support◦Deferment Form Instructions◦Borrowers at Risk Report◦Delinquency Letter Tool
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Phone Counseling Support
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Deferment Form Instructions
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Borrowers at Risk Report
MINNEAPOLIS, MN OCTOBER 18-21
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Delinquency Letter Tools
MINNEAPOLIS, MN OCTOBER 18-21
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Repayment & Repayment & Monthly Payment Monthly Payment
OptionsOptions
Repayment & Repayment & Monthly Payment Monthly Payment
OptionsOptions
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Payment PlansGraduated Repayment – a plan
that allows the monthly payment amount to increase over the repayment period. This option can help with a need for temporarily lowered payments.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Extended Repayments – a plan that extends the life of a loan in order to allow borrowers more time to pay it back. Must have a current minimum of $30,000 in principle and interest and no outstanding student loan balance as of 10/07/98 to qualify.
Payment Plans
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Income-sensitive repayment – A plan that allows the monthly payment to be lowered if the loan holder determines that the borrowers total monthly income is insufficient to allow them to make their standard monthly payments.
Payment Plans
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Income Based Repayment (IBR) – A plan where the monthly payments are determined by income and family size. Monthly payments cannot exceed 15% of the borrower's income. Any remaining balance is forgiven after 25 years and 300 qualifying payments.
Payment Plans
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Non-Repayment Non-Repayment OptionsOptions
Non-Repayment Non-Repayment OptionsOptions
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Options For Those That Can’t PayDeferments – borrowers can
suspend their payments due to Economic Hardship, Unemployment or while in school.
Forbearances – another method of payment suspension, based on income or up to the discretion of the lender.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
IBR (zero payment) – in some cases borrowers are not required to make payments based on their income.
Options For Those That Can’t Pay
MINNEAPOLIS, MN OCTOBER 18-21
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Promises Obtained
July 2008 - June 2009
10%
20%
30%
40%
50%
JulyAug
SeptOct
NovDec
Jan FebMar
AprMay
June
Payments
Deferments
Forbearances
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Tools for Tools for Delinquent Delinquent BorrowersBorrowers
Tools for Tools for Delinquent Delinquent BorrowersBorrowers
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Tools For Delinquent BorrowersIncome Based Repayment
◦IBR Calculator www.IBRinfo.org
National Student Loan Data System ◦Student Access to Loan Data
www.nslds.ed.govGreat Lakes Web-site
◦Trouble making payments tool www.mygreatlakes.org
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
The Split The Split BorrowerBorrowerThe Split The Split BorrowerBorrower
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Who are you and what did you do with my lender?Growth of Split Servicing
◦Students use multiple lender/guarantor options to take advantage of benefits.
◦Students consolidated while in school
◦PUT program
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Who are you and what did you do with my lender?How do we help the Split
borrower from communication overload and sheer confusion◦National Student Loan Data System
(www.nslds.ed.gov) doesn’t provide any private loan info
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
The MissionThe MissionThe MissionThe Mission
MINNEAPOLIS, MN OCTOBER 18-21
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Things We Can All Do to Assist Our Student BorrowersArm your students with the
knowledge they need.Encourage them to keep track of
where their loans are. Encourage them to contact their
lender.Let them know that options are
available during difficult times.
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Questions?
MINNEAPOLIS, MN OCTOBER 18-21
MASFAA: TIME TO REFOCUS
Midwest Association of Student Midwest Association of Student Financial Aid AdministratorsFinancial Aid Administrators
How to Help Borrowers Tackle How to Help Borrowers Tackle Their New ChallengesTheir New Challenges
Presented by:
Beth EricksonBeth Erickson
Ronald HoppeRonald Hoppe