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Default Prevention Plan: How to Make Yours a Living Document

An effective default prevention plan is one that’s not set in stone.

That’s because, in order to achieve the greatest success in preventing student loan default, you must regularly evaluate your efforts — and adjust them as necessary.

Whether you’re preparing to develop a default prevention plan after receiving your school’s official cohort default rate, or you’ve been following an established plan for years, be prepared to consider questions about your plan like:

  • Is your school sticking to the tasks outlined in its default prevention plan?
  • Are campus demographics described in the text still up to date?
  • Do the goals documented still make sense?

In this guide, we’ll walk you through the crucial steps to creating a living, breathing, default prevention plan that will drive results.

Ready? Let’s dive in.

Default Prevention Plan Benchmarks

Earlier this month, we polled webinar attendees to find out how their schools are doing on some of the best practices in default prevention planning. What we learned is that, in more cases than not, the school representatives said they are following those best practices.

Let’s take a look at what they had to say.
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More than half of those responding during the presentation said their schools have a goal for their cohort default rate.

Here’s why we recommend that every school have a stated CDR goal:

  • A specific goal focuses attention on achieving a desired outcome.
  • Everyone knows exactly what you’re trying to accomplish.
  • You have a standard to use in measuring the effectiveness of your work.

To find a good cohort default rate goal for your school, take a look at how your rate compares with:

  • The national rate for your institution type.
  • Schools in your state.
  • Schools you consider to be your competition.
  • Your own institution’s past CDR performance.

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More good news, this time on the default prevention plan front: A strong majority of schools responding to the presentation survey indicated that they have a plan in place.

Why should schools have a written default prevention plan?

  • It captures all activities, responsibilities and timelines related to default prevention in one place.
  • Having all that information together in writing facilitates a periodic review of your progress on each planned activity.
  • A written plan makes it easy to share with others how you specifically plan to manage your institution’s cohort default rate.

If your school doesn’t have a written plan, resources for help include the U.S. Department of Education’s sample default prevention plan.

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Introducing financial literacy programs is another top default prevention practice. The overwhelming majority of respondents at the presentation indicated that their schools make that programming mandatory for all their students.

Financial education is a best practice in default prevention because it works. Research has shown that repeated exposure to financial literacy topics leads to positive changes in behavior over time. And there are many ways to share messages about money management throughout campus.

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More than half of those responding indicated that their schools are making default prevention a campuswide effort — and that’s a critical component in successfully managing cohort default rates.

Among the reasons we recommend campus-wide participation:

  • Student retention is a key predictor of successful repayment, and keeping students in school must be a focus of everyone on campus.
  • Cohort default rates that are too high can result in sanctions — including removal from the federal Title IV aid program — that affect the success of the entire school.
  • Preventing borrowers from defaulting is one part of promoting overall student success.

If your school isn’t doing so already, communicate campuswide to get support for your default prevention efforts and encourage broad participation.

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The best practice here is to closely examine which approach — in-house or outsourced — fits for your school. Most surveyed at the presentation indicated that their schools currently perform borrower communication in-house.

If you haven’t considered whether your institution should outsource borrower communication, weigh the cost-effectiveness of in-house and outsourced approaches. These are among the factors to keep in mind:

  • Your cohort default rate goal.
  • Time spent on borrower communication.
  • Staff availability.
  • School technology.

Four Essential Elements of a Successful Default Prevention Plan

An action plan for default prevention success focuses on four main components. And college and university presidents play an important role in ensuring that those key components are at the heart of their schools’ plan.

The U.S. Department of Education has outlined the four overall components of a successful default prevention action plan. Here’s what they shared about those four key elements:

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Part 1: Analysis

Cohort data analysis is critical in default prevention. Evaluating borrower data allows you to catch and correct errors that can have implications for borrowers and your school.

But in analyzing data, you also should look for trends that can help you identify the characteristics of borrowers most at risk of not completing their degrees or repaying their student loans. Then develop a plan to target your default prevention work to address the issues you’ve identified.

Part 2: Planning

The ED recommends that each school develop a plan, which helps establish goals, serves as an institution-wide road map, and is evidence of a commitment to preventing student loan default.

Your plan should answer the questions of: why, who, what, how, where, and when/how much. The ED offers a sample default prevention and management plan to guide the development of your default prevention plan.

Part 3: Action and Evaluation

Once you’ve reviewed repayment data and established a plan to lower your default rate, you’re ready to take action. Here’s where college and university presidents should step up to ensure that staffing and resources are available to execute the plan.

Campus leaders also should make it clear that default prevention is an institutional priority that’s a campus-wide responsibility. And evaluation goes hand in hand with action, encouraging school leaders to ask for periodic progress reports.

Remember this phrase: “What doesn’t get measured doesn’t get done.”

Part 4: Collaboration

As you’re tackling student loan default at your school, don’t hesitate to consider who can help with your work — and ask for that help.

Institutional leaders to reach out to federal loan servicers, the ED and organizations like Student Connections, to take advantage of products and services that can assist in efforts to lower cohort default rates.

» Free Bonus: See How Many Days Are Left in The Cohort Year Using Our Interactive Countdown Graph

 

Getting The Entire Campus On Board With Your Plan

Student loan default prevention should be a campus-wide endeavor, and efforts to begin this all-encompassing approach should start at the top.

But getting the support of your institution’s leadership and others may take some work. When we help schools with default prevention, we suggest that they lay out the importance of stopping student loan default by using the “Triple-A” approach with administrators and other groups across campus.

Here are those “A’s” and how to put them to work to change the culture surrounding your plan at your school:

Awareness

Historically school personnel have seen default prevention as an issue of the financial aid office alone. But it’s important that campus officials understand that default prevention actually is the responsibility of the entire school. Help them with that understanding by educating them about the institution-wide impact of the cohort default rate.

If more than 80 percent of your institution’s funding came from federal Title IV programs — and that this Title IV funding could be in jeopardy if your cohort default rate continued to rise — challenge them to imagine if that funding no longer were available.

That explanation can help faculty and staff to understand the seriousness of the situation facing their school. Being clear about the implications of a high cohort default rate can help administrators, faculty and staff to see the importance of default prevention at your school as well.

Accountability

The cohort default rate is a measurement of how well a school manages its federal financial aid programs, so each school is held accountable for its rate. Most financial aid offices alone do not have the capacity to effectively and consistently provide students with the breadth of default prevention and debt management information necessary to keep those all-important default rates low.

So, once you have school administrators on board, ask that they lead the way in spreading the word about the importance of default prevention. Again, challenging everyone on campus to consider the consequences of student loan default can help in encouraging them to step up to the plate.

For example, when your faculty think of their former students who later defaulted on their loans, do they think they could have done more in the classroom to prevent those students from defaulting? Would those faculty members be willing to offer extra class credit to those who take part in financial literacy and student success training?

Action

There are many default prevention tactics that your school can include in its current processes. But you also need a broad strategy, and that should begin with the formation of a default prevention task force and creation of a debt management plan — regardless of whether the U.S. Department of Education requires those actions from your institution.

Include representatives from a variety of areas on your task force, including student leaders and information technology staff. Build in ways to analyze trends in your school’s student loan data that can inform your default prevention planning.

And don’t forget one of the most crucial parts of implementing a default prevention plan: tracking those efforts to lower your cohort default rate. Too often schools believe that if they have a default prevention plan in place, that alone will reduce their default rates. But there is a difference between simply having a default prevention plan and actually conducting cohort management activities that are data-driven and measurable.

» Get The Guide: Creating a Student Loan Repayment Strategy for Financial Aid Teams

 

Always Review Your Default Prevention Plan

It’s important that you review the document regularly because, when it comes to successful default prevention, establishing a plan is a first step. But it can’t be the only step.

Regular reviews of your plan allow you to:

Be informed. As you’re delving into the information you’ll need to update your default prevention plan, you’ll be gathering key data that can help you target your default prevention efforts.

Be accountable. Knowing that your progress toward your goals is being tracked will help keep your efforts moving forward. Carefully note what’s working — and what’s not — when you review your default prevention plan.

Be adaptable. Adjust any of your efforts that aren’t producing the results you’d like, and add tasks that would better address your needs. Regular checks of your default prevention plan help you determine when it might be time to make a change.

Be prepared. Keeping your default prevention plan up to date means that anytime you need to share the plan — if you’re keeping another department posted on your work, or your school’s president requests the document, for example — you’ll be ready.

Be timely. Many schools include in their plans timelines for specific default prevention activities. Select an interval for reviewing your default prevention plan that allows you to keep tabs on those deadlines.

Be consistent. Scheduling your default prevention plan reviews around regular, specific events can help you remember to keep the plan up to date. I recommend updating the plan at least once a year, so, for example, the group that created your plan could schedule a retreat timed to the end of a semester.

Are your school’s default prevention efforts strong enough?

Learn how you can get a free school portfolio risk assessment started today!