Grace Period Strategies Can Ensure Good
Student Loan Repayment Habits

The grace period for student-loan borrowers provides financial-aid professionals with a prime opportunity to avoid future loan-repayment problems.

The several months after students leave college can be used to ensure that borrowers get off on the right foot in the repayment of their loans. The USA Funds® Best Practices Manual offers financial-aid administrators the following "Grace period follow-up steps" among its collection of default-prevention strategies:

• Send at least two letters during the grace period to all students who have received Federal Stafford loans. The letters should begin immediately after a student's graduation and can continue as frequently as every month until repayment begins. The purpose of the letters is to help ensure that the borrower begins repayment on time and is informed of the options available if the student is unable to begin or continue to make payments on a timely basis.
• Keep copies of all letters mailed during the borrower's grace period in the student's financial-aid file. Mail all letters in envelopes stamped "Forwarding and Address Correction Requested" to ensure that you are notified when a borrower's address changes.
• In all letters, require a reply within two weeks from the date the letters were sent. Contact borrowers who do not reply, and document all telephone contact.
• For students whose letters are returned unopened, research more current contact information.
• If you cannot locate a current address, send letters to all reference/parent addresses in an effort to contact the borrower. Make a follow-up phone call to the references in a continued effort to find the borrower.
• Update school records with new information regarding the student's address, telephone number, e-mail address, etc.

The Best Practices Manual, online at www.usafunds.org, also includes samples of grace-period letters to students, as well as other debt-management tactics and tools for the student-loan-origination, in-school and loan-repayment phases. USA Funds' Default-Prevention Council and Debt-Management Team developed the manual as part of USA Funds' $12 million, multi-year initiative to help colleges and universities reduce student-loan defaults.

For more information about the Best Practices Manual and its grace-period default-prevention strategies, contact your USA Funds Debt-Management consultant, Carol Buchli, at 573-341-2542; toll-free at 800-551-1353, extension 7877; or by e-mail at cbuchli@usafunds.org.

Submitted by: Kathy Bixby, USA Funds Services, 800-742-9659.
Larry Viterna, USA Funds Services, 800-682-2955.