TASFAA Community Blog
Borrower boot camp: Get your graduates in repayment shape with these five tips
Doug Savage, TG Senior Regional Account Executive
Say you had the chance to send next semester’s graduates through a “basic training” in loan repayment - a regimen that taught them not only the essentials of responsible repayment, but offered tips on safeguarding their finances in a tough economy. What would you include in the course? How would you help borrowers focus on lean living, building financial muscle, and preparing for the endurance test that is, in essence, repayment?
Here is an “exercise plan” designed to suggest to borrowers a successful path to loan repayment. You could include many things in such a plan; this version offers just an example. Consider adapting these suggestions for your own campus needs, using the information as a supplement to exit counseling, or including it in future communications by mail or email.
For more suggestions on what to include in your basic training content for borrowers, contact your colleagues in the field, including guarantors. Guarantors work in all phases of the life of the loan and will likely have materials and ideas on what borrowers should keep in mind as they begin repayment.
Doug Savage is a senior regional account executive with TG. You can reach Doug at (800) 252-9743, ext. 6711, or by email at firstname.lastname@example.org. Additional information about TG can be found online at www.tg.org.
Is Income-Based Repayment the Best Option for My Students?
You’ve heard a lot about Income-Based Repayment, or IBR, but is it a one-size-fits-all solution for every student loan borrower? Below are some things to consider as you advise your current and former students on this repayment option.
IBR Has Benefits
Under current provisions, the benefits of IBR include a lowered monthly payment amount, currently capped at 15 percent of the borrower’s discretionary income, and forgiveness of any balance that remains after 25 years and 300 payments. If the borrower is eligible for Public Service Loan Forgiveness, that forgiveness may take place after just 10 years. Additionally, if the borrower’s IBR payment does not cover the interest accruing on any subsidized loans, the government will pay the remaining interest for up to three consecutive years from the date the borrower begins IBR.
IBR Also Has Drawbacks
IBR can be more expensive for the borrower in the long run. The lowered payments can cost the borrower more interest over the life of the loan, thoughundefinedin most casesundefinedthe increase in interest will be less than the late fees and collection costs of a defaulted loan. Also, if the borrower’s income rises to the point that they no longer qualify for the lowered IBR payment, their payment will return to the standard payment level, and the borrower will begin to make more progress toward paying down their balance.
Identify Borrowers Who Benefit Most from IBR
While IBR isn’t the right option for every borrower, it is a plan that may work well for those with lower earnings, relative to their debt, looking for an affordable payment based on their income and family size. It is also a good option for borrowers entering public service careers, as they could also take advantage of Public Service Loan Forgiveness, and receive loan forgiveness sooner.
Not Every Borrower is Eligible
To qualify for IBR, borrowers must demonstrate a partial financial hardship. This means that their annual student loan payment amount is more than 15 percent of the difference between adjusted gross income and 150 percent of the poverty line for their state and family size. If the calculated IBR payment is lower than the borrower’s payment under the 10-year standard repayment plan, they qualify.
Not Every Loan Type is Eligible
IBR-eligible loans include FFELP and Direct Stafford, Grad PLUS, and Federal Consolidation loans, as well as Perkins loans included in a FFELP or Direct consolidation loan. However, Parent PLUS loans, consolidation loans that include a Parent PLUS loan, private and alternative loans, and defaulted loans are not eligible.
IBR Forgiveness Amounts Will Be Taxed as Income
As the regulations stand now, the forgiveness amount will be taxed as income. There has been legislation proposed to change this, but it has not made progress in congress since its introduction.
Changes to IBR Are on the Way
New borrowers, on or after July 1, 2014, will be eligible for two new IBR provisions. First, their payment will be limited to only 10 percent of their discretionary income, rather than the current 15 percent. Secondly, they will be eligible for forgiveness after 20 years, instead of 25.
The IBR Application Must Be Completed Annually
Borrowers must apply for IBR every year in order to receive reduced payments, and the application can be tricky to complete correctly. Some tips to help ease the process:
Understanding IBR is the key to making sure that this option is matched with the borrowers who can benefit most. IBR may not be the best option for every borrower, but for some it can be an ideal solution for making student loan payments more manageable in the long run.
Dave Bowman is a Regional Marketing Director with Great Lakes, serving schools in TASFAA. You can reach Dave at (888) 685-1604, or by e-mail at DBowman@glhec.org. Additional information about Great Lakes can be found online at www.mygreatlakes.org
Dear Financial Aid Colleagues:
When Governor Bill Haslam released his proposed FY 13 budget to the General Assembly it he included an increase of $6.6 million for the Tennessee Student Assistance Award (TSAA). This is more than double last year’s request. $3.2 million is being recommended in the State’s core services budget and another $3.4 million is proposed in general appropriations. If the additional grant funds are appropriated, over 3,000 additional students could be served for this upcoming fall semester.
Additionally, both the recommended appropriations are in the ‘recurring’ column rather than the ‘non-recurring’ or one-time column. Consequently, if the improvements are adopted, it increases the program’s annual base funding for future budget considerations.
In order to help ensure that these improvements are passed by the Tennessee General Assembly, we need our TSAA recipients to send a ‘thank you’ notes for the grant program to their elected officials. Please do all you can to send your students to the Tennessee Student Aid Alliance website in order to send their notes of thanks electronically. It’s a very easy process that will only take a few moments of their time but may result in millions added to the TSAA program.
Here’s the TN Student Aid Alliance link: http://savestudentaid.tnsaa.org/5819/take-action-support-tennessee-students/
Or go to www.tnsaa.org and click on Action Center.
Please feel to contact me!
Dr. Claude Pressnell
Tennessee Independent Colleges and Universities Association
1031 17th Avenue South
Nashville, Tennessee 37212
615-242-6400, ext. 201 direct voice line
Reviewing the Accuracy of Your Cohort Default Rate Reports
By Dave Bowman, Regional Marketing Director
Recently, the first draft three-year cohort default rates (CDRs) were sent to schools. The switch from a two-year rate to a three-year rate means that this calculation includes an additional year of defaulted loans. The draft calculation includes the percentage of borrowers who first entered repayment between October 1, 2008, and September 30, 2009, who subsequently defaulted on or before September 30, 2011. With the additional year included, almost every school is seeing a higher three-year CDR.
The draft three-year rates are for informational purposes only and are not challengeable. However, the Department of Education has provided them to give schools a preview of what to expect once the three-year rates become real. While not every school will need to challenge the information used to calculate their three-year rate once they are officially released, every school should want to ensure that its newly-released rate is accurate and become familiar with the challenge/appeal process before next year. Take time to make sure that correct information was used to calculate your school’s CDR, so that your official rate, when released, is as accurate as possible.
Know what the cohort default rate package contains.
The cohort default rate package comes to you in an electronic format and arrives via the Student Aid Internet Gateway, and is issued in early February of each year. You will find a cover letter and two types of Loan Record Detail Reports (LRDR), the extract-type and the reader-friendly version. The extract-type file is best used for loading CDR data into a database while the reader-friendly version is best used for schools that wish to simply view the information.
Know how to read the LRDR.
Many of the challenges that are submitted to the Department every year are unwarranted. Save your school time and effort by ensuring you are reading your school’s LRDR correctly.
The LRDRundefinedcreated for the Department by the National Student Loan Data System (NSLDS) using the information that schools, data managers, and various offices within the Department have submitted to the NSLDSundefinedlists specific information for each loan that was included in your school’s CDR.
In addition to demographic information about your school, you will be able to find information about the borrowers included in the CDR calculation, and the date the CDR was calculated.
Be aware of the codes used by the Department on this form, including:
•· Loan type codes
•· Enrollment status codes
•· Usage codes
•· Claim reason codes
•· Loan status codes
•· Academic level codes
•· Data manager codes
More information about theses codes is available at http://ifap.ed.gov/DefaultManagement/guide/attachments/Ch2pnt3LRDRpt2.doc, page 2.3-7 and 8.
Know what actions to take.
Save a copy of all of your school’s LRDRs:
•· To use in the event of a challenge, adjustment, or appeal
•· To compare draft and official rates
•· To compare rates from one fiscal year to the next
Also, take the time to review the accuracy of the data used to calculate the draft CDR. Compare the information in the LRDR to your school records to ensure that the students on your system match those listed in the report.
Take action if you find an error.
If any of the information used in the draft rate is inaccurate, your school should file the appropriate challenge. Be aware that a school that fails to challenge the accuracy of its draft CDR may not contest the accuracy of the data in the official CDR. Incorrect data can be resolved by taking these steps:
•· Locate the Guarantor/Servicer number on the LRDR, and use it to obtain the name and address of the data manager who is responsible for the loan. You will need to have this information in order to submitting a challenge, adjustment, and/or appeal. Be aware that there could be a cost for review of your information by a servicer.
•· There are several categories of errors, and it is important to find the correct category for the error you have found. Note that incorrect data challenges apply to the draft rate, while adjustments and appeals apply to the official rate. More information on these categories can be found at http://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html.
•· You must use the eCDR Appeals System to submit a draft rate challenge. The eCDR process includes registering for a user account, creating an organizational and individual profile, creating a new case, uploading the applicable LRDR extracts, adding detail, and submitting the case.
•· If additional documentation is requested, you will be contacted via email by the data manager or the Department of Education, depending on the type of challenge or appeal.
Analyze your default management plan
Always take the time to look at the borrowers from your school who have defaulted. What do borrowers who have defaulted have in common, and how do they compare to your broader student body? Think about what steps you could take to lower your default rate, so that your school can avoid sanctions and benefit from a lower CDR, and your former students can avoid the consequences of default while building a more solid financial future.
Tips for getting students thinking about repayment while they’re still in school
With student debt balances higher than usual and a job market that remains challenging, worsening cohort default rates are a worry on many campuses.
Raul Lerma, interim executive director of financial aid and veterans affairs at El Paso Community College, says that his school’s numbers have been bucking the trend. Here are some tips he offers based on his experience. These three methods all involve ways schools can engage current students now to actively prevent default later.
Start repayment now
“The basic challenge,” he says, “is to help the students understand that they really do have to pay this money back. Sometimes it doesn’t seem real to them that they actually will need to make payments at some point.
“Therefore, it’s a good idea to get them making payments while they’re still in school. That might just be $50, but it’s still a good idea, because it creates two benefits. First, it chips away at the amount a little, and that’s obviously good, but the second benefit is more important: that tiny payment creates the habit and makes repayment real for them.”
Use in-person entrance counseling
Another strategy Lerma uses to manage default rates is to require in-person entrance counseling every academic year. “A lot of schools do this counseling online,” he says, “or it’s in-person the first year and online after that. But I think in-person counseling makes more of an impact, so we require it every academic year.”
Besides the impact of being in a session with an actual instructor, Lerma notes that there is also the benefit of teachable moments as students can ask questions, with an expert to answer at that moment.
Reinforce with brochures or even intermediate sessions
Lerma says that his office has also been employing a tactic of reinforcing loan repayment concepts often. “Whenever a student comes in our office for any reason,” he says, “we ask if they have loans. If they do, we give them an informative booklet.” The idea is that it might take several attempts to gain the student’s deep attention and have them engage the subject matter. Reinforcing the material with the brochure boosts the likelihood that students will read and understand the important information they need to grasp.
He adds, “We’re also considering the idea of getting students in for intermediate counseling sessions to reinforce what they may have forgotten from entrance counseling.”
In short, getting students to start repaying their loans while still in school (even if it’s only $50 per month), using in-person rather than online entrance counseling, and reinforcing the importance of repayment at every opportunity, may be effective ways to keep cohort default rates under control. The results at El Paso Community College seem to confirm that they are.
Doug Savage is a Senior Regional Account Executive with TG serving schools in TASFAA. You can reach Doug at (800) 252-9743, ext. 6711, or by email at email@example.com. Additional information about TG can be found online at www.TG.org.
Congratulations are in order for all our following colleagues!
Trevecca Nazareene University is happy to announce that Kylie Pruitt has rejoined the Financial Aid staff as Associate Director of Financial Aid (she was previously Director of FA at Aquinas). Angie Register, Financial Aid Counselor is expecting a new baby in January.
Columbia State: Brenda Burney became the new FA Director at the end of April (formerly at Art Institue of TN). Bill McCord (who formerly was at Nashville State then Morehead State) is back in TN as the Technical Coordinator at Columbia State. Tammy Noragon is now Scholarship Coordinator (previously with Witchita State University). Rakida Sims is the FA Coordinator for the Columbia State Williamson County Campus (previously with Art Institute of TN).
South College: Kim Cintron became Mrs. Jeff Long on a beautiful October day (October 21, 2011).
Rhodes College: Kim Prestridge (Assoc. Director of FA) will be giving birth to a son (Zachary) scheduled Friday Nov. 11th via C-section, and will return to work in January.
MTSU: MTSU's scholarship staff moved to a separate office in April. The new Scholarship Office is located in James Union Building, room 206. The Financial Aid Office has two new employees: Trina Wilson joined MTSU in May and is the Assistant Director responsible for the loan programs. Joanie Walker joined MTSU full-time in September as a Coordinator after serving as the lead person in the school's Call Center this past summer. Leann Eaton has moved up to Associate Director of Operations.
We are at a turning point on federal student aid funding and I am writing to ask you to sign on to a simple statement of support that calls on our lawmakers to Save Student Aid.
Because of our nation's historic economic downturn, we've already seen $30 billion cut from our federal student aid programs. The Joint Select Committee on Deficit Reduction, also known as the Super Committee, has until Nov. 23 to come up with a plan to reduce the nation's debt. Federal student aid could very well be on the chopping block and students need your voice to defend the programs that grant access to postsecondary education.
As you know, this is an incredibly challenging time for students all over the country, including those you serve on a daily basis. The recession has driven more students back to campus to improve their skills and job prospects, and a lot of those students have higher economic needs. Meanwhile, federal and state governments have cut back their support. It is critical to preserve what financial aid is still available for deserving students so they can better qualify for the jobs that will help our economy grow.
As student aid administrators you see evidence of these situations everyday on your college campus. But Super Committee members and other members of Congress need to hear more-and they need to hear it from as many people as possible, particularly those of you who work directly with students.
That's why the Student Aid Alliance, a coalition of national higher education organizations representing thousands of campuses and millions of presidents, students, faculty and administrators has organized a campaign to Save Student Aid. The campaign will reach to out to all campus constituencies, encouraging grassroots involvement. As one of the founding members of the Alliance, NASFAA encourages you to join us in this campaign.
As the Super Committee's deadline nears, we need your help. Please sign our statement of support, expressing the opinion that for our country's short- and long-term economic health, student aid funding must be preserved. This is a simple and easy step to make your voice heard.
If you're interested in getting more involved after you've signed on, you'll see other options for actions you can take by visiting NASFAA's Save Student Aid Facebook campaign.
Your voice is powerful and students need it now more than ever. Please join your fellow administrators as well as the students from across the country in asking the Super Committee and our lawmakers to Save Student Aid.
Statement of Support link:
Contact Us: firstname.lastname@example.org