Tagged in student loan delinquency

student-collections-warning-signs

4 Student Collections Warning Signs You Shouldn’t Ignore

February 27, 2018

student-collections-warning-signs

In a perfect world, no account would go to collections. Students would pay off their debts on time and in full and graduate with a clean slate. Unfortunately, we don’t live in that perfect word, and student debt is one of the most pressing issues facing our nation. According to the Federal Reserve, Americans now have more than $1.4 trillion in unpaid education debt, and bursars’ offices are working to find ways to reverse that trend. Here are four student collections warning signs to look for in your students that can indicate they’re headed in the wrong direction.

  1. Consistently late payments

One of the first things that happens when a student starts to fall behind on their obligation is the payments they make are consistently late. While these students pay their bills, they do so well after the due date, often without realizing how much this can drain their resources. This can be an indicator that they are not prioritizing this bill in favor of other options. It’s important to reach out to these students to remind them that paying their bills on time will help them graduate with little to no debt as they start their new lives. Outsourcing early delinquencies, combined with offering financial literacy resources, could help your school and your students see both short- and long-term gains.

  1. Drop off in communication

Another warning sign that they’re sliding towards student collections is a drop in communication. Students stop answering phone calls, are unresponsive to letters, and are generally trying to avoid an increasingly uncomfortable situation. When this happens, it’s time to get creative. Text outreach programs allow schools to easily contact batches of students ahead of due dates. Email is another viable solution. Often, that personalized communication can make the difference between an account falling into delinquency and one that stays current.

  1. Contingent / broken promises

Make sure to watch out for contingent or broken promises. This usually comes from students who want to pay their bill but lack the immediate means to do so. Contingent promises – “I’ll pay you when I get paid next week” – often lead to broken promises, which lead to delinquency. When making payment arrangements with a student, deal in specifics—how much they’ll pay and when. Offer to call them when the contingency has passed. Stay in close communication to increase the chances they’ll keep their word.

  1. Weird excuses for non-payment

This is the billing equivalent of “the dog ate my homework!” While the unexpected can certainly delay a payment here or there, pay attention to students who make a habit of making excuses for paying their bill late time after time. Debt is a difficult thing to deal with and students – particularly younger students who are still getting the hang of adult responsibilities – may sometimes shy away from that uncomfortable obligation. Take a consultative approach. Help your students understand the seriousness of debt and why they should want to avoid being sent to collections.

Schools that include financial literacy resources, coupled with a personalized, multi-pronged outreach to their students, are not only helping them avoid collections but also are better equipping them to thrive in the real world. While there isn’t a magic bullet that will prevent every account delinquency, taking these proactive steps help guide a lot of students away from collections, allowing them to focus on their studies and ensure their long-term success.

student-loan-delinquency-factors

5 Factors that Contribute to Student Loan Delinquency

February 19, 2018

student-loan-delinquency-factors

When it comes to issues facing financial aid departments, the rapid increase in student loan delinquency is the top concern for most loan professionals. Analyzing data directly from the Department of Education, the Consumer Federation of America released a study in 2017 showing that a total of $137.4 billion in defaulted balances, a 14 percent increase from 2015. While there are many factors contributing to this growing crisis, five in particular should catch the attention of schools looking to decrease their Cohort Default Rates (CDR).

  1. Dropouts are more likely to default

According to a study initiated by the Consumer Reports National Research Center, college dropouts comprise 63 percent of defaulted student loans and are four times more likely to default on their loans when compared to their fellow students who finished their degree. Informing students about the rigors of university academics before they enter school can make a huge difference in ensuring students make the right choice of institution. Once on campus, providing an engaging environment in which students are both challenged and supported can also make a dramatic impact in the overall student retention rate.

  1. Defaulters often lack financial literacy

For more than 30 years, the federal government has required student loan borrowers to receive financial counseling prior to graduation. While this information can help a student avoid delinquency, the type of counseling a student receives can vary greatly from school to school. Some institutions provide in-depth assistance with money management, setting a budget, and understanding repayment options, while others provide just the bare minimum information as required by the Department of Education.

Schools should strive to provide comprehensive, personalized data to their students and help them understand strategies that lead to financial success. Dedicated student outreach initiatives can play a valuable role in this effort. Many institutions are choosing to outsource their student contact centers, allowing their staff to focus on more pressing duties.

  1. Salary expectations are outpaced by reality

Many students who fall behind on their loans do so because their dreams of grabbing a high-salary job right out of college do not match the current reality of the job market. After two or four years living in the relative quiet of a university, graduates are often surprised at the challenges of landing a job that matches their degree and managing their own household expenses. Schools that are committed to guiding their students to the right path from the start – rather than waiting for the exit interview – are helping their future alums increase their chances of success.

  1. Underemployed, unemployed, and giving up

Closely tied to the factor of unrealistic salary expectations is unemployment. While the official national unemployment rate has held steady recently at 4.1 percent, the U-6 rate, or the rate that also includes individuals who are underemployed and those who have abandoned their hopes for obtaining a job, is double that at 8.2 percent. This means that many students are working, but in a position well below what their degree qualifies them for. Underemployed individuals have much greater difficulty meeting their financial obligations, and undoubtedly prioritize necessities such as rent, food, and utilities above their student loan payments.

  1. Decrease in state funds

States have been steadily reducing their funding for higher education, which not only contributes to delinquency, but also to the overall rise in college costs. While the jury is still out on just how much state divestment affects tuition, there’s little debate that decreasing financial support at the state level means an institution must find funding elsewhere – and that often means increasing tuition for students. According to one recent study, for every $1,000 cut from per-student state and local appropriations, the average student can be expected to pay $257 more per year in tuition and fees.

While there’s not a lot schools can do to affect the national unemployment rate or declining funds from the state level, focusing on factors that are within your institution’s control. Managing dropout rates and increasing student financial literacy can help your students avoid student loan delinquency.

university-accounts-receivable strategies

4 Strategies to Proactively Decrease Your University’s Accounts Receivable in 2017

May 20, 2017

university-accounts-receivable-strategies

The end of the 2016-2017 school year is here. Now come the caps and gowns and celebrations of a job well done—at least for the students. For financial aid directors and bursars, this can be a stressful time as they start sending out repayment notices for their campus-based charges and loans. With national student debt hitting $1.3 trillion and growing, help decrease your students’ debt footprints with these proactive tips.

  1. Communicate More Frequently with Current Students

Your recovery process should begin as soon as loans are disbursed. Communication about loans and repayment while a student is in school encourages them to ask questions before they take out additional loans and empowers them to take ownership and responsibility sooner for their accounts.

Pro Tip: Get student permission to use text and email to communicate. These electronic methods are the most immediate ways to share information and are much harder to ignore than snail mail.

  1. Invest in a One-Stop Student Contact Center

Contact centers enable long-term student success by providing the resources to assist early on with concerns like returning enrollment paperwork on time or explaining the penalties of dropping a class too late. Left unaddressed, these common problems can become new charges that snowball into delinquency just because of a lack of information.

Sound like a lot of overhead and staff time? Consider outsourcing. For a fraction of the cost of self-operation, a good partner for inbound calling can mirror your school’s culture and assist with FAQ callers, leaving your staff to focus on matters that demand more specialized attention and time.

  1. Identify Root Causes of Delinquency and Common Pain Points

Talk to your staff members and identify where in your process your students are struggling and why. Are notifications with action items sent in a timely manner? Are directions for submitting financial aid paperwork confusing? The best plans of action are informed ones created from hard data, not conjecture. You could even host a town hall style forum or suggestion drive to hear directly from students what changes would help them.

  1. Update Your Student Financial Agreement

Student financial agreements are becoming increasingly popular and for good reason. Like tip #1, student financial agreements allow schools to be proactive in informing students early on about what they are responsible for financially. They outline potential penalties and fees in the case an account goes delinquent.

By harnessing these strategies, you can eliminate some of the most common and easily avoidable delinquency issues, and become a leader in proactive campus-based account receivable management.