KCTCS BOARD OF REGENTS STUDENT FINANCIAL AID LOAN COHORT

DEFAULT RATE UPDATE

THE MISSION OF KCTCS IS TO PROVIDE AN ACCESSIBLE, AFFORDABLE, QUALITY EDUCATION FOR ALL STUDENTS…

December 5, 2014

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PRESENTATION OUTLINE

Federal Student Loan Background

Cohort Default Rate Defined/New Federal Guidelines

National Cohort Default Rate Comparison

KCTCS Financial Aid Student Profile

Strategies and Actions to Date

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1950s - wealthy families created a scholarship fund to defray cost of elite colleges. • Banks held funds - awarded low-interest loans. (model for

policy makers)• National Defense Education Act 1958 - included fed. loans.• National Education Act 1965 - college affordability.

Intent – • To increase access to higher education.• Bridge the financial gap for middle income students. • Increased usage by affluent and low income students.

FEDERAL STUDENT LOANS BACKGROUND

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THE SPREAD OF STUDENT LOANS WITH COMPLICATIONS

Rising cost of education created barriers in the 80’s and 90’s.

Loans - leading type of aid to fulfill financial need/gap.

Colleges - limited options to restrict access of loans.

Federal Government:• Multiple repayment options. • Lack of understanding of students’ financial obligations.• Federal exit counseling challenging for students.• Standard repayment plans assigned (highest monthly payments).

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KCTCS ALLOWABLE COST OF ATTENDANCE

Estimated student educational expenses

Allowable Cost Per Term Dependent Independent

Tuition $1,764 $1,764

Books and Supplies $500 $500

Housing $2,095 $3,488

Personal $400 $400

Transportation $1,025 $1,025

Build Smart Fee $48 $48

Total $5,832 $7,225

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Late 70’s – creation of proprietary schools created a different environment.

United States Congress Enacted a law in the 1980s • To draw attention to institutions targeting low-income

students. • To hold colleges accountable for their students loan default

rates.• To potentially risk access to federal funds.

COHORT DEFAULT RATES (CDR) INITIATED

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FEDERAL STUDENT LOAN COHORT DEFAULT RATESCDR Definition: The percentage of a school’s borrowers who enter repayment on a loan during a fiscal year and defaulted within the next three years.

Cohort default period - October 1st of the fiscal year when the borrower entered repayment and ends on September 30th of the next fiscal year.

Department of Education annual CDR notifications to colleges.• Draft CDR letter - February• Official CDR letter - September

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NEW FEDERAL CDR GUIDELINES

Higher Education Opportunity Act of 2008

Assessed institutional eligibility for financial aid based on the percentage of a school’s borrowers who defaulted within the first three years of repayment.

• 2009- first year cohort subjected to a 3-year calculation.

• 2012- first year official 3-year CDR reported.

• 2014- first year sanctions issued for 3-year CDR reporting.

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COHORT DEFAULT RATE COMPARISON

National 13.7% Public Colleges & Univ. 8.9% Private Colleges & Univ. 7.2% For Profit 19.1% Community Colleges 20.6% KCTCS 27% (Approx. 5,100 of 18,500)

KCTCS- Average loan amount $9,700 Maximum loan amount disbursed $10,500

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KCTCS FINANCIAL AID STUDENT PROFILE

PROFILE• First generation • Under-prepared• Low-income • First time borrowers • Under-represented • Age range 18-78

24,736 students awarded loans Fall 2014. Approx. $98 million awarded- 2013 vs. $72 million awarded - 2014 as

of Nov. 30. 26% decreased in loans award from 2013-2014.

This profile puts KCTCS students at a greater risk for loan default.

90% of KCTCS students receive

some form of financial aid

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KCTCS COLLEGES 3-YEAR CDR

2009 Cohort

Rate

2010 Cohort

Rate

2011 Cohort

Rate

Ashland Community and Technical College 28.1 30.3 28.3Big Sandy Community and Technical College 23.2 31 29.6Bluegrass Community & Technical College 21.2 25.5 25.2Bowling Green Technical College 23.2 25.2 32.1Elizabethtown Community and Technical College 20.9 26.9 28.3

Gateway Community and Technical College 27.7 29.5 32.5HAZARD COMMUNITY AND TECHNICAL COLLEGE 23.7 34.4 31.6Henderson Community College 19.4 20 22.5Hopkinsville Community College 22 21.8 17.7Jefferson Community and Technical College 21.2 23.2 24.7Madisonville Community College 15 20.2 18.9Maysville Community and Technical College 24.5 26.4 30.9Owensboro Community & Technical College 20.3 25.1 25.6SOMERSET COMMUNITY COLLEGE 28.4 33.4 33.3Southeast Kentucky Community and Technical College 27 25.8 28.4West Kentucky Community and Technical College 16.7 18.8 22.8

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KCTCS APPEALS TO FEDERAL DEPT. OF EDUCATION

Appeal categories for qualifying colleges:

• Uncorrected data

• New data adjustment

• Loan servicing

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Assist students with the completion of the FASFA.

Verify student data.

Certify eligibility, award aid, and ensure accurate disbursement.

Financial literacy, counseling, and advising.

Loan entrance and exit counseling online and in-person.

Offer cross-functional support for the financial aid life cycle of

the student.

THE ROLE OF KCTCS COLLEGES

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KCTCS LOAN DEFAULT PREVENTION STRATEGIES

Implemented default prevention management plans.

Established default prevention/management teams.

Early intervention strategies to educate & assist students.

Online/in-person financial literacy tools & advising resources available to promote responsible borrowing and repayment.

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ACTIONS TAKEN TO DATE Sought expert advice and support from:

• American Association of Community Colleges.• Kentucky Higher Education Assistance Authority.

Summer 2014 - consulting firm contracted - operational review of Financial Aid at four colleges and the System Office.

Fall 2014 - consulting firm assisting colleges with operational improvements and compliances and to provide a comprehensive re-design of Financial Aid operations.

Issued request for proposal (RFP) for student loan default management and prevention services. Three companies awarded contracts to assist colleges.

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ACTIONS TAKEN TO DATE Created new online form for students to request loan amounts.

• Resulted in a 26% decrease in loan disbursements.

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Without financial aid, many KCTCS students would not be able to pursue

higher education.

QUESTIONS?