When you are reaching out and counseling borrowers, it is important to take his or her specific circumstances into account to find the best possible plan, whether it be short-term or long-term. Many borrowers aren’t aware of all of the options available to them.
To really make sure a plan for long-term repayment success is established, it is a good practice to connect the borrower with the loan servicer and remain on the line with the borrower and servicer. Once the call is finished, ensure the borrower understands what was agreed upon and has all of the relevant contact information. It may take a little more time, but this level of assistance will improve the borrower outcome.
In this guide, we’ll cover best practices for helping your students make wise decisions about education loan debt and how it’s in the best interest of both your students and your school.
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For your students, excessive debt can affect future plans. For your school, students’ poor decisions about borrowing and repayment can have an impact on cohort default rates as well as gainful employment measures.
Communicating with borrowers at key decision points is among the best ways to improve your cohort default rate. Here are some tips for helping students make wise choices about borrowing at four key decision-making points during the life cycle of a student:
Application and first 90 days
The start of students’ time at your institution is a critical time to begin counseling borrowers by sending messages about borrowing and managing student loan debt.
In activities such as new student orientation and loan counseling, encourage minimal reliance on borrowing. This message will help students keep their overall debt levels low — and their monthly payments manageable in the future. Share information about average debt levels and repayment terms, so students make informed decisions about whether and how much they’ll borrow.
Rather than overwhelming new students with everything at once, provide targeted bits of education loan information at the specific times they’ll need those details at application and in the first 90 days.
For some students, applying for federal education loans is their first experience with borrowing money. Financial education at this stage reinforces your earlier messages and helps students become educated consumers.
When counseling borrowers about their student loans, provide tips for minimizing debt and making wise financial decisions, and help them estimate future income and gauge their ability to repay their loans. Share information about student loan repayment options and how students can track what they owe.
More than 70 percent of students who default on federal education loans left school without earning a degree. So make it a campuswide priority to keep students in school to complete their degree work. Work with other academic and student services offices on campus to identify students with enrollment or loan repayment concerns — and address those issues.
Final year and program completion
Students nearing the end of their academic programs are at a point in which your influence sets the stage for successful repayment.
Federal regulations require schools to ensure that all students borrowing federal education loans receive exit counseling as they cease half-time enrollment. Counseling borrowers on their student loan repayment options can allow them earlier on to choose the plan that best fits their situation.
Work with your institution’s career placement office to ensure that borrowers identify and pursue jobs that are a good fit for their training — and that will help them repay their student loans.
Communication and support shouldn’t end when a student no longer is enrolled. Actually, it’s when the student has left school that this support is most important.
Now is the time when the relationship you’ve built with students through the previous decision points pays off. Borrowers may not recognize communications from lenders, servicers and guarantors, but they’re more likely to notice and respond to letters, emails and phone calls from the school they attended.
Reach out to borrowers early and follow up frequently about tools and resources — including many available online — to assist as they repay their loans.
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As financial aid professionals, we know counseling borrowers in various stages of repayment is an important part of reducing or maintaining your institution’s cohort default rate. Here are some tips to improve your borrower outreach:
Every institution is different. When a new school customer contracts with us to help with borrower outreach, we create a custom strategy based on that institution’s individual goals and borrowers. Work with your team to analyze your borrower data to determine what you would like to accomplish with your borrower outreach efforts and where you should focus your attention.
Managing multiple borrower cohorts to holding four ice cubes in your hand. The one you’ve held the longest is almost gone, but if you focus only on that one and ignore the others, then you’re just going to be faced with the same dilemma next year when that one has melted and new one takes its place. Focus on the cohorts on which you can have the most impact, but proactively reach out to borrowers in all cohorts.
Because each borrower is unique, you can’t expect to reach all of your borrowers in the same way. For example, we find that phone calls are best because you can have a conversation with the borrower to answer questions about their specific situation and, hopefully, assist the borrower in reaching out to their loan servicer and resolving any issues immediately. However, not all borrowers are going to be available via phone, and you may not have current phone numbers for some borrowers. In that case, emails or letters can be an effective way to reach out and encourage the borrower to call you to have that conversation.
The grace period is the 6-month period after most subsidized and unsubsidized loan borrowers are no longer enrolled in school. During this time, those borrowers don’t have to make any payments on their loans. Grace period outreach is a great time to start communicating with borrowers, especially those who have withdrawn from school, to establish yourself as a trusted advisor regarding their loan repayment. Use this opportunity to gather contact information for the borrower, so you can follow up closer to the start of repayment. Also, if the student has withdrawn from school, this is a good time to try to get them re-enrolled before the end of the grace period.
Anytime you are trying to contact someone, you need to consider the best time to reach out. We have found that mornings and evenings are the best time to reach borrowers on the phone. If you are not having luck reaching borrowers during a specific timeframe, try changing up the time of day that you make calls to see if that makes a difference. Also, be sure to call during times that the loan servicers’ offices are open. Once you get the borrower on the line, the goal is to come to a resolution for that individual and, often times, you need to get in contact with the servicer to accomplish that.
When communicating with borrowers, whether over the phone or through an email or letter, really try to make sure they understand what you are explaining to them. Sometimes repayment options, and even borrower resources, can be complicated if you aren’t familiar with the terminology. Don’t use industry jargon and check in during the conversation to see if the borrower is following what you are saying.
If possible, create a page on your school website with resources (or links to other organizations’ resources) on topics such as taking student loans and loan repayment options. You can also put information about your team and any activities your office wants to promote on that page. When counseling borrowers, you can direct them to that page to learn more. Having this resource page will also validate to the borrower that you are who you say you are. With so many companies trying to get students and former students to pay for repayment assistance, it is a good idea to let your borrowers know that you are legitimate.
Truly acting as a counselor for the borrower means listening to that individual’s situation, providing information on all of the options, connecting the borrower with the loan servicer and — last but not least — staying on the line with the borrower and servicer to make sure a plan for long-term repayment success is established. Once the call is finished, ensure the borrower understands what was agreed upon and has all of the relevant contact information. It may take a little more time, but this level of assistance will improve the borrower outcome.
One huge obstacle to effective borrower outreach is lack of quality contact information. Each time you speak with a borrower, verify all of the contact information you have for that individual. You can also keep your borrower contact database up to date by finding out which other departments on campus might also have contact information for those borrowers and compare that to what you have in your records.
Whether you are conducting your borrower outreach on your own, outsourcing it to a third-party or doing a little of both, having a tool that can provide transparency around which borrowers have been contacted and effectiveness of those communications can streamline your efforts. Consider Student Connections and Borrower Connect™ for this type of real-time monitoring.
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