Six steps to a default
management plan
Chansone Durden, TG Account
Executive Team Manager
If you’re worried about cohort default rates (CDRs), you’re not alone. Many
schools are concerned about 3-year CDRs, given a sluggish job market. What are
the consequences? A series of high CDRs or one very high rate can push a school
closer to sanctions, including provisional certification or even a loss of
Title IV eligibility.
Whatever your rate, there are things you can do now to tackle default.
First and foremost, draft a default management plan. If you have a plan
already, consider how to make your plan even better. Default prevention is a
major task for most schools, and a good plan can do multiple things to boost
your effort. It can work as a blueprint for your default management activities,
help establish accountability, and document your work on behalf of borrowers.
It can also be useful in persuading campus administration to devote more
resources to the default prevention cause.
How can you go about creating this all-important document? Here is a
high-level summary of steps.
1. Get management on board — Persuade your campus management team of the need for a plan, and you’ve
got some instant credibility in the eyes of the rest of the campus. If
management isn’t already enlisted in the default prevention cause, schedule a
meeting with senior administrative staff and work up the chain as you can. The
objective is to make your case quickly and succinctly, showing how default
affects your students and even the financial viability of your institution. You
should also show how effective default prevention practice can improve the
student experience and help safeguard your institution’s long-term educational
mission.
2. Gather staff feedback and form a
committee — Talk with campus departments that affect
students, which could include the registrar, bursar, admissions, enrollment
management, faculty, career placement, and financial aid or student services, to
name a few. From these areas, you should draw representatives and form a team.
Once your team is formed, make explicit the ramifications of default and start
building consensus on how to help borrowers succeed in repayment.
3. Understand borrowers’ needs and assess
school practice — Analyze borrower data related to
default. Generally, an effective statistical analysis will look for trends
among borrowers whose loans enter default. For example, borrowers who leave
school prematurely without a degree may be prone to delinquency and then default.
You should also perform an institutional self-assessment. Ideally, the
assessment will provide a baseline for your school’s default prevention
efforts, showing what your school does to tackle default and how well it
performs. To find this baseline, you could consider how effectively your school
helps students graduate on time ready to manage loan repayment. You might put
together a history of your institutions’ default rates. And you could talk with
students on what your school can do to better engage students so they feel
supported and prepared when repayment comes due.
4. Appoint a default prevention point
person — Along with setting such goals, you should consider
focusing at least one person on your school’s default aversion efforts and
training that individual in the details of CDRs, financial aid, and the
consequences of default. This person will manage the day-to-day work of default
prevention, including monitoring rates. He or she should also be responsible
for drafting the body of the report using input from campus assessments, staff
interviews, default data analysis, and other information.
5. Establish goals — In creating a plan, be
sure to set goals that meet the S.M.A.R.T. objectives. You’ve probably heard of
this business management acronym for setting goals that are Specific,
Measurable, Attainable, Relevant, and Time-bound. You have a ready measure in
your school’s CDR, but you should set other objectives — for example, providing
a given number of student workshops on managing debt or completing an analysis
of a borrower cohort. Remember: you’ll have to keep pace with the changing
needs of your students and the priorities of your campus.
6. Outline, then draft a plan — Create the structure of your school’s plan and then draft, revise, and
rewrite as needed. The heart of the plan should be tactics and strategies for addressing
weak points in borrower support. But what if your school doesn’t have the staff
to write a plan? Or perhaps you’d like to tap into the knowledge and resources
of an institution devoted solely to default aversion? In this case, your school
might consider outsourcing at least some of your default aversion
responsibilities, including creating a default management plan, to a
third-party servicer. Third-party servicers can be affordable given what they
can offer, including consultation and a focus on strategies for delinquency
prevention and default aversion.
Resources to tap now
TG’s HigherEDGE™ Default Aversion Solutions can
help you draft a default management plan tailored to your school’s needs.
HigherEDGE consultants can evaluate your campus default aversion practices and
provide a fresh perspective on empowering staff to reduce default. Together,
you can incorporate these ideas into a succinct document on your school’s
default prevention initiatives, one that shows how seriously your school takes
default prevention and how you have a concerted plan to reduce it.
Chansone Durden is an account executive team
manager with TG serving schools in SASFAA. You can reach Chansone at (800)
252-9743, ext. 6710, or by email at chansone.durden@tgslc.org. Additional information about TG can be found
online at www.TG.org.
