Protecting Collegesand Students

Community College Strategies to Prevent

Default

Jee Hang LeeVP for Public Policy & External Relations,

ACCT

Matthew La RocqueResearch Analyst, TICAS

Michael CopenhaverDirector of Financial Aid, Grossmont College

Helen FaithDirector of Financial Aid, Lane Community

College

1

National Three-Year Cohort Default Rates

2009 2010 201110.0%

15.0%

20.0%

25.0%

CCs: 20.6 %

US: 13.7 %

Fiscal Year Borrowers Entered Repayment

2

3

Borrowing Rates by Sector

60%

Private 4-Year

71%

Private For-Profit

17%

Public 2-Year

48%

Public 4-Year

Student Borrowing atTwo-Year Public Institutions

1989-90 1992-93 1995-96 1999-00 2003-04 2007-08 2011-120%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$1,000

$2,000

$3,000

$4,000

$5,000 16.7%

$4,700

Percentage Borrowing Average Amount Borrowed

4

Data From NPSAS:12

Identify the problem:Analyze Cohort Data

Develop the solution:Design, Implement, & EvaluateDefault Reduction Strategies

Improved outcomes:Reduced Default Rates

Report Theory of Action

5

Report Overview

• 9 diverse colleges selected

• FY 2010 3-year CDR

• Data analysis & interviews

• Institutional profiles

• College practices & policies

• Federal policy

recommendations

6

Summary of Findings• Clear and strong link between NON-completion and default

• Across all colleges in survey:

– 9% of program completers defaulted, compared to 27% of those

who did not complete

– 16% of borrowers who completed at least 15 credits defaulted,

compared to 38% of those who did not complete 15 credits

Efforts to promote student success & completion

are default prevention efforts

7

Summary of Findings, Cont’d

• Apart from completion, more differences than similarities: in default rates and the make-up of borrowers

• At some colleges, “higher risk” borrowers defaulted at rates similar to lower risk borrowers

• Distribution matters: for example, program completers comprised 13% to 41% of borrowers entering repayment

Default prevention strategies are not one-size-fits all

8

9

• El Cajon, California; Grossmont-Cuyamaca CCD

• Fall 2013 enrollment: 18,618 undergrads

• 2014-15 In-State Tuition & Fees: $1,387

• 2012-13 Average Net Price: $3,784

• Receive Pell grants: 23% ($14.2M)

• Receive federal student loans: 3% ($1.5M)

• Students of color: 56%

College Navigator data as of March 2015

Grossmont College’s 3-Year CDR

FY 2011 FY 2010 FY 2009

CDR 14.2% 20.7% 19.8%

Defaulters 60 72 74

Borrowers 422 347 373

11

Grossmont’s Data• Nearly three-quarters (72%) of borrowers

entering repayment failed to complete their program– Completer CDR: 7.8% | Non-Completer CDR: 25.0%

• Diving deeper on non-completion– Half of non-completers left mid-term (CDR: 30.1%)– Suggests need for early-warning indicators

• High rates of remediation: 7 in 10 borrowers were in remediation at some point– College-ready CDR: 13.6% | Remedial CDR: 23.0%

12

Reducing Default at Grossmont Existing Strategies:

Federal loan request form (no auto-packaging) Supplemental counseling and budget worksheets

for borrowers with high debt loads ($10,500+) Institutional surveys and focus groups to

understand students’ financial challenges Consider:

Focus on exit counseling completion Use analytics to inform targeting Coordinate with & implement statewide efforts

• Eugene, Oregon

• Fall 2013 enrollment: 11,002 undergraduates

• 2014-15 In-State Tuition & Fees: $3,988

• 2012-13 Average Net Price: $8,505

• Receive Pell grants: 59% ($32.8M)

• Receive federal student loans: 71% ($46.1M)

• Students of color: 22%

College Navigator data as of March 2015

13

Lane College’s 3-Year CDR

FY 2011 FY 2010 FY 2009

CDR 30.2% 30.6% 19.5%

Defaulters 1,202 952 461

Borrowers 3,973 3,105 2,357

14

Lane’s Data• Most borrowers (87%) and even more defaulters (96%)

failed to complete their program– Completer CDR: 9.8% | Non-Completer CDR: 33.7%

• 65% of borrowers were independent and they had a higher default rate than dependent students– Dependent CDR: 22.2% | Independent CDR: 35.3%

• Cohort represents enrollments spanning several years

• Relatively large gap in default rates for Pell recipients

15

Reducing Default at Lane Existing Strategies

Mandatory orientation advising Unsubsidized loan requests Credit limit appeals Academic progress monitoring Transcript holds for exit counseling Analysis of borrowing trends Default aversion tools and platforms CDR appeals

16

Reducing Default at Lane Pending Strategies:

Considering additional vendor services New default prevention coordinator position Integrating default prevention into campus

advising

Strategies to Consider (from CDR report): Default prevention & outreach for non-

completers Expand use of student budgeting exercises Analyze exit counseling completion

17

Institutional Policy Recommendations

• Direct Loan participation is important

• Routine analysis of CDRs, tailored to college

• Default reduction as a campus-wide endeavor

• Consider and evaluate third-party partnerships

• Reexamine loan packaging policy

• College-driven borrower outreach strategies

• CDR appeals when necessary18

Federal Policy Recommendations

• Make data sources (NSLDS) more user-friendly

• Improve CDR appeals

• Enhance entrance & exit counseling resources

• Streamline and simplify student loan servicing

• Study pro-rating federal loans by enrollment

intensity

• Auto-enroll severely delinquent borrowers in IBR

• Student Default Risk Index

19

Thank You!

• Download the report at www.acct.org

• For more information, contact:

jhlee@acct.org mlarocque@ticas.org202.775.4667 510.318.7900