How to Help Students in Repayment -
An Insight to Lower Default Rates
by Mark Krings, Regional Director, National Student Loan Program
Peru State College in Nebraska developed initiatives and tools that dropped their student loan default rate by more than 10 percent over the past four years. Financial Aid Director Diana Lind shares the secret of Peru State's success.
Inform students about other funding options besides loans. Peru State provides students with information about grants, work-study, and scholarships to give them a broader understanding of how to pay for college. Lind recommends the Educational Planning Center website for scholarship searches and also offers scholarship workshops on campus.
Help students think before they borrow. Peru State implemented a "Loan Amount Request" form that requires students to assess their level of financial need, rather than automatically receive the maximum loan. The form also includes a chart of loan limits to assist students in determining their loan amount. Lind also limits information about alternative loans to help keep student loan debt down and the chances of repayment up.
Compare future salaries and student loan repayment. If students are awarded a loan, they also receive a chart depicting the average annual salary of their future occupation and manageable loan debt and monthly student loan payment. "Many students have unrealistic expectations about future salaries. The chart puts into perspective how much of their monthly income will be spent repaying their student loan," Lind said.
Invite outside speakers to help students understand debt management. Lind invites experts from the community to talk to students about default prevention, credit card and loan management, and financial fitness.
Use entrance and exit counseling to provide complete repayment information. Peru State uses the Mapping Your Future website for online entrance counseling and a videotape for students who visit the office. At exit counseling, students receive a list of all their loan debt and anticipated monthly payment amounts.
Help delinquent students regain their good standing. Lind sends students a letter advising them of their delinquent status. She includes loan repayment information provided by their servicer, along with the servicer's phone number to streamline the question and answer process, and a brochure explaining deferment, forbearance, and repayment options.
Review the draft cohort default rates to help students get out of default. Upon receiving draft cohort default rates, Lind identifies which students are in default and sends them a letter and a brochure explaining options for getting out of default by repaying or consolidating their loan. The brochure also reminds students of the consequences of default.
These strategies helped Peru State lower the school's cohort default rate. "Our draft rate of 3.5% is the lowest it has been since 1987, and NSLP has been a great partner in our default prevention program," said Lind.
For more information about delinquency and default prevention tools and strategies that schools can use to educate borrowers, contact Connie Kent, NSLP Debt Management Director, at 800-735-8778.
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