New Regulations – Rehabilitation, AWG and PLUS

Adverse Credit

Collection Agency Perspective

Lynn HeinemanSenior Vice President

Account Control Technology, Inc.

Pre & Post 7/1 Regulation Changes

• # of activations (accounts into billing) have stayed status quo on ED, increased in guarantor side • Turn Rate of Activations into Rehabs has decreased since 7/1 regulation changes

Customer and

ActivationsActivations that Became Rehabs Sum of RateActivation Month

Client A 892 461 51.68%7/2014 225 82 36.44%8/2014 352 194 55.11%9/2014 315 185 58.73%

Client B 688 369 53.63%7/2014 203 103 50.74%8/2014 237 137 57.81%9/2014 248 129 52.02%

Client C 1336 751 56.21%7/2014 434 267 61.52%8/2014 466 258 55.36%9/2014 436 226 51.83%

Grand Total 2916 1581 52.49%

Credit Score to Balance Range

# OF ACCOUNTS

RANGE $0-$5K $5K-$10K $10K-$15K $15K-$20K $20K-$30K $30K-$40K $40K-$50K $50K-$75K$75K-$100K $100K+

650+ 131 213 212 138 176 94 66 82 16 10

600-649 98 165 151 112 128 72 32 55 11 14

550-599 186 280 204 117 129 81 37 60 13 19

500-549 524 583 384 226 280 145 91 91 32 27

450-499 1,587 1,460 813 488 584 306 170 230 49 12

400-449 3,170 2,920 1,532 833 951 519 316 358 47

350-399 7,529 6,914 3,240 1,745 1,885 974 542 613 85 1

300-349 11,331 10,508 5,085 2,577 2,569 1,297 730 786 106 2

250-299 11,010 10,499 5,821 2,616 2,668 1,215 651 710 102 2

200-249 6,661 6,865 4,453 2,204 2,277 958 508 522 61 2

150-199 2,938 3,273 2,278 1,268 1,346 648 328 323 44 1

100-149 1,872 2,063 1,314 781 888 495 257 317 24 2

Balance to Income Activations

Balance /

Income $0-$5K $5K-$10K $10K-$15K $15K-$20K $20K-$30K $30K-$40K$40K-$50K

$50K-$75K

$75K-$100K $100K+

90K+ 1.5% 5.5% 13.2% 17.6% 13.6% 16.1% 26.2% 17.9% 29.4% 33.9%

60K-90K 1.1% 3.3% 7.7% 12.1% 13.0% 16.1% 15.7% 19.7% 20.8% 18.1%

50K-60K 0.9% 3.6% 8.3% 11.9% 14.0% 14.2% 18.5% 18.4% 18.6% 13.2%

40K-50K 1.5% 4.6% 9.4% 12.1% 15.3% 18.4% 14.3% 19.2% 24.4% 17.1%

30K-40K 1.4% 4.8% 9.0% 11.9% 15.5% 14.8% 17.3% 19.3% 16.7% 20.7%

<30K 1.4% 3.8% 8.5% 10.4% 11.6% 14.0% 10.3% 10.4% 13.5% 13.9%

Total 1.3% 4.3% 9.3% 12.7% 13.8% 15.6% 17.0% 17.5% 20.6% 19.5%

Additional Changes since 7/1

• Changed our process to adapt to new 7/1 regulations• Enhanced technology to streamline the process, improved efficiencies• SignNow technology used where permitted by client

• Clients who have kept the process borrower friendly have better success in rehab

• Fall Out Rate since 7/1 has increased• We contribute this to the change in programs as middle class having to pay larger balances

under the 15% rule than pre 7/1 • Lose more at first talk off due to income & expense validation • Proof of Expenses is another area where fall out occurs

• NSF increases seen in the lowest bracket - $5 payments• Overall the percentage of payments to NSFs about the same

• Percentage of AWG Rehabs have increased since post 7/1• Many taking advantage of the suspension • 70-80% return on updated paperwork for those in this group

Impact of Income-Driven Repayment

Pre 7/1/2014 Post 7/1/2014

Inco

me

Inco

me

Balance Balance

Pre 7/1/2014 Post 7/1/20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

26%

4%

36%

6%

25%

5%11%3%

77%

4%

> $200

$100 - $200

$50 - $100

$25 - $50

$5 - $25

$5

% o

f N

ew

Rehab A

rrangem

ents

$114 average $29 average

Rehabilitation Payment Trends

Payment Range

Rehabilitation Completion Rate Trends

July August September0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

31% 33%

47%

24%

33%

30% (Est)15%

14% (Est)

10% (Est)3% (Est)

3% (Est)

Month 4 (120 Days)

Month 3 (90 Days)

Month 2 (60 Days)

Month 1 (30 Days)

% o

f S

etu

ps C

om

ple

ted

73%

83%

90%

Observations• All but the highest income borrowers can now qualify and afford their rehabilitation payments• The number of borrowers completing the rehabilitation program should increase as a result of these regulatory changes• Lower payments will likely mean a higher percentage of rehab agreements will complete the qualifying period • Even with AWG suspension rules, the rehab program remains attractive to garnishees• Due to the number of borrowers needing to utilize an income-driven repayment program, aiding a borrower’s transition to his/her new lender’s payment plan is increasingly important

Plus adverse creditBetsy MayotteAmerican Student AssistanceNovember 4, 2014

Background

• November, 2011 ED modified PLUS credit check

• Before change - 72% approved, 28% denied

• After change – 38% denied

• Some HBCU’s jumped 75%

PLUS Loan Definitions

• Charged off – debt written off as loss, still subject to collection action

• In collection – a debt sent to a collection agency or is subject to more intense collection efforts due to inaction or unsatisfactory action by the borrower

Plus loan – adverse credit• An applicant for a PLUS loan is considered to have adverse credit if they:

• Has one or more debts totaling more than $2,085 that• Are 90 days or more past due (as of date of credit report) or• Have been placed in collection or charged off within the last two years

• Has been subject to one or more of the following in the last 5 years:• Default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment,

or • Write off of a Title IV debt

Plus loan - adverse credit

• Maximum debt threshold will be adjusted if the change in the Consumer Price Index is $100 or more• Rounded up to the nearest $5• Changes announced in federal register

Plus loan - counseling

• Counseling available to all PLUS borrowers and endorsers• No later than 2015-2016 academic year

• Mandatory for borrowers who obtain loan due to appeal or endorser

Plus loan - counseling

• Voluntary counseling will contain• Repayment estimator• Repayment plan information• Budgeting information• Strategies to avoid delinquency and default

Plus loan - counseling

• Mandatory counseling will contain• Repayment estimator• Repayment plan information• Budgeting information• Strategies to avoid delinquency and default• Additional financial literacy information• Current debt level and estimated repayment amounts

Plus loan – other changes

• Credit checks will remain valid for 180 days• Default rates will be published “as appropriate”

Questions