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Default Management: Borrower Repayment Trends

September 24, 2012

Our school partners are increasingly focused on providing targeted, pro-active education to their students about managing their student loans.  As a servicer for millions of federal and private education loan borrowers, Nelnet has noticed some significant trends about borrower behavior that we’d like to share with you to help refine your borrower education efforts.

Nelnet finds that students who get into good patterns at the start of repayment are most likely to become on-time “repayers” for life.  Those who see their loan servicer as a financial partner are more likely to reach out to their servicer if they run into financial challenges in life.  This is so important – servicers have many tools to help when borrowers run into financial difficulties.  If they view the servicer as a bill collector, the opportunity to develop a productive relationship is less likely.

Details about borrower patterns include the following:

  • Borrowers who get into good and early repayment habits are less likely to default.  For these borrowers, if delinquency occurs at all, it is typically due to a life changing event.
  • Intervention efforts are most successful within the first 90 days of delinquency.  From then on, there is a higher likelihood of eventual default.  This trend may assist schools who are deciding how to most effectively conduct outreach campaigns to delinquent borrowers.
  • Setting up auto-pay is a good determinant of repayment success, as well as signing up for billing and electronic communications like Nelnet’s “Manage My Account” service.  Please encourage your students to sign up electronically with their servicer while still in school.
  • Good borrower contact information is critical.  Students in skip-trace status are much more likely to default.  Schools who collect updated contact information after entrance or exit counseling are encouraged to share it with servicers.
  • Much of the default or late stage delinquency group is made up of borrowers with small balances.
  • Late Stage Delinquency – Borrowers in this category are very difficult for servicers to reach since they have avoided contact with us for so long.  Schools may wish to reach out to students in this group to supplement servicers’ efforts.
  • Many borrowers have a knowledge gap when they go into repayment. They are unaware of what a servicer is, what deferments and forbearances are, that they have options in addition to standard  ten-year payment, and that servicers can assist them if they run into repayment difficulties.** Please consider conveying this information to your students.

Nelnet customizes its messages to borrowers by using the above trends and other critical data.  We will continue to share default prevention information with you.  By working together, we can better help students become financially successful for life.

Related Resources for Schools and Students:

Anne Del Plato, Eastern Reginal Director, Nelnet Partner Solutions

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