Financial aid professionals are passionate about their work because they believe in helping students gain access to a brighter future through higher education. They also know a higher education costs money, and most students would have no chance at getting it without financial support.

At the same time, financial aid professionals are acutely aware of the consequences when student loan borrowers fail to meet their repayment obligations after they leave school. Unfortunately, today’s circumstances have intensified this issue. A strained economy and diminished job prospects for students have led to increased cohort default rates (CDRs) across the nation. The transition to a 3-year calculation will cause rates to spike even further, with tough penalties for schools with high CDRs.

In light of today’s economic and student aid realities, having an effective default aversion program has never been more important. Other than through CDRs, however, how can schools assess their default aversion activities? The questions below represent a good start. Use this quick check to help you determine your program’s strengths and weaknesses — and where to focus improvement efforts in the future.

Does your school have an interdepartmental default aversion committee charged with reviewing and revising your school’s default aversion plan?
Since student loan default and high CDRs affect the entire school, not just the financial aid office, it’s important to involve the entire school in the solution. Doing so not only gains buy-in for your school’s default management efforts from areas essential to their success, but also gathers a wider range of ideas and strategies than relying on just one office would produce.

If your school lacks a default aversion committee with representation from across your campus, work to create one by reaching out to as many student-affecting areas as possible — including the registrar’s office, bursar’s office, admissions office, enrollment management office, career placement office, and faculty members.

Once your team is formed, make explicit the ramifications of default and build consensus on an approach to helping borrowers succeed in repayment. From this consensus, your team can oversee the creation or enhancement of a concerted default aversion plan. Finally, ensure the plan’s relevance and effectiveness by instituting a regular review and revision period, preferably every one to two years.

Does your school have an interdepartmental enrollment management committee that addresses the effects of financial literacy, debt management, and student retention on default rates?
As we all know, degree completion has a significant impact on a student’s likelihood to repay student loans successfully. For this reason, a school’s enrollment management plan — and especially the component of that plan focused on student retention — plays a major part in the school’s default aversion strategy.

Just as with default aversion, student retention is a campus-wide responsibility. It is, therefore, in the best interest of the institution to focus on satisfactory academic progress and timely degree completion while equipping students with the skills to manage the financial obligations they incur during and after school. Doing so will increase their chances of leaving school with a degree in hand and avoid defaulting on their loans.

Has your school established achievable short-term and challenging long-term goals to lower your school's CDR?
The CDR is an indicator, an easily understood measure signifying how well your students are handling repayment. By lowering it, you will help more students repay their loans successfully, thus avoiding the unpleasant consequences of default.

Defining precise goals for lowering your CDR will help motivate your school to decisive action to meet those goals, as well as help you measure just how effective your program is. To accomplish this, be sure to set goals that meet the S.M.A.R.T. criteria: Specific, Measurable, Attainable, Relevant, and Time-bound.

To help accomplish these goals, consider assigning at least one person to focus primarily on your school’s default aversion efforts, and training that individual in the details of CDRs, financial aid, and the consequences of default.

Does your school have personnel dedicated to contacting at-risk borrowers about their student loans during their grace period as well as borrowers who are delinquent on their student loans?
No matter how much effort you put into educating your borrowers while still in school, some will not manage to begin repaying their loans on time. For many of these borrowers, communication with the school may be enough to nudge them into a regular repayment pattern, whether because they don’t fully understand their financial obligation, don’t know how to start making payments or where they should go, or just haven’t thought about it yet.

For this reason, having staff members assigned to contacting borrowers is a must for any school that wants to manage its default rate effectively.

Remember, however, that loan servicers and guarantors are required to communicate with borrowers as part of their due diligence activities. These communications by letter, email, and phone come at key times during delinquency and serve to underscore a borrower’s repayment obligations. Be aware of these time frames and actions so that you can stagger, and echo, the message of repayment at other times. Finally, it’s a good idea, when you contact students, to avoid any tone of a collection agency.

Self-awareness is always the first step to improvement. By asking yourself these strategic questions, you will take strides to improve your school’s default management efforts.

Learn more about CDRs and default prevention
For questions about default prevention, contact TG's Default Aversion team at defaultaversion@tgslc.org. Other helpful resources and tools on CDR-related topics are available through TG Online.

Ben Loya is a regional account executive with TG serving schools in MASFAA. You can reach Ben at (800) 252-9743, ext. 6718, or by e-mail at ben.loya@tgslc.org. Additional information about TG can be found online at www.tgslc.org.