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7 Steps for Developing a Successful Default Prevention Plan

September 11, 2014

Rising default rates are a concern for many schools. Nelnet is working hard to keep our borrowers on track with their loan repayment and to help those who are falling behind. Below are steps you can take to develop an effective, comprehensive plan for your school. For more information and tips from schools like yours, go to Nelnet’s Default Prevention Page.

dp arrow1. Define the default-related issues at your school and share that information with key stakeholders.

To obtain executive support and buy–in from other divisions, it’s helpful to share data, tell stories of students who have defaulted, and present the cost implications of losing students before they’ve completed their programs.

2. Organize a cross-divisional team.

Since loan default is tied so closely to students who withdraw before program completion, a campus-wide approach is needed. In addition to financial aid, possible members of this cross-divisional intervention team may include Student Affairs, Faculty and Academic Advisors, Enrollment Management/Admissions, Student Accounts, Placement Office, and students. Set up recurring monthly or quarterly meetings to proactively prevent default, create action plans, and evaluate your success rate.

3. Gather data to identify at-risk borrowers at your school.

When you are analyzing which students are at risk of becoming defaulters at your school, it might not be easy to diagnose the main factors. Every school’s “who” is unique depending on its size, demographics, and programs. The “why” of loan default is just as important. Here are some common characteristics of those who are at risk of withdrawing before program completion and defaulting on their loans (from the December 2013 FSA Conference):

  • Older (median age of 38 years old)
  • Pell recipient/low-income
  • Undergraduate loans only
  • Median loan balance: $5,800
  • Poor financial literacy
  • Did not complete degree

4. Develop an in-school plan for at-risk students.

  • Reach out to at-risk students immediately with targeted, proactive interventions
  • Develop an early warning system for students demonstrating at-risk behavior
  • Help students remain in school if at all possible
    • If they’ve already left, help them return
    • If they will not return, help them understand their repayment obligations
  • Report withdrawal status to the Clearinghouse or NSLDS as soon as possible

5. Develop an in-school plan for all students.

  • Consider enhanced entrance and exit counseling
  • Provide financial literacy education
  • Collect address, cell phone number, email and references (annually at minimum)
  • Offer information about federal loan servicers and inform students of the importance of staying in communication with them

6. Develop an out-of-school follow-up plan with an emphasis on reaching out to at-risk students and delinquent borrowers.

  • Use social media to promote positive loan repayment habits
  • Ask borrowers to contact you if they have questions
  • Validate all borrower contact information
  • Offer re-enrollment or transfer assistance and employment counseling and search assistance
  • Once again review servicer information with students and urge them to contact their servicer
  • Communicate with borrowers through a variety of methods – phone calls, emails, and letters

7. Carry out the plan, monitor results, and adjust where needed.

  • Work with your federal loan servicers as you develop and execute your plan—they have resources, people, training, information, reports, and other services for schools and are in regular contact with your borrowers.
  • Continue to monitor performance statistics as noted in your plan—actions that impacted withdrawal rates, information obtained from students who withdrew, financial literacy program participation, success of various outreach efforts for delinquent borrowers, etc.
  • Review your draft Cohort Default Rates each year and update any incorrect information

For more information about Nelnet federal loan servicing or for assistance with your school’s default prevention efforts, please feel free to contact your Regional Director.

Anne Del Plato, Eastern Reginal Director, Nelnet Partner Solutions

Anne Del Plato, Eastern Regional Director, Nelnet Partner Solutions

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