Request a QUICK QUOTE to get our program details and customized fees.
With the end of the payment pause and borrower protections on missed payments, colleges and universities face renewed urgency in preventing student loan default among their former students. Millions of student loan borrowers who’ve reentered repayment are navigating changing policies — including ongoing legal and political uncertainties with income-driven repayment plans. Schools must take proactive steps to support successful student loan repayment outcomes. Default harms students’ financial futures as well as affects school accountability metrics like Cohort Default Rate (CDR). As a result, default prevention has become a strategic imperative, requiring coordinated financial literacy efforts, targeted borrower outreach, and enhanced data tracking to identify vulnerable current and former students.
The Current Federal Student Loan Situation
- 42.7 million borrowers have federal loan debt. (Source: Education Data Initiative)
- Less than 40% are current on their payments. (Source: PBS)
- 4 million are between 91 to 180 days late on their payments (Source: PBS)
- 5.3 million are in default. (Source: Federal Reserve Bank of New York)
TABLE OF CONTENTS
What Is Student Loan Default Prevention for Colleges and Universities?
Student loan default prevention programs provided by higher education institutions refer to the strategies, policies, and practices that colleges and universities implement to help former students successfully repay their federal student loans and avoid default. Through activities like outreach, counseling, and data analysis, schools can show their support for student loan borrowers’ financial success and also secure participation in the federal government’s student loan program.
Why Does Default Prevention Matter?
The landscape of student loan repayment is in a state of constant flux, leaving millions of borrowers adrift in a sea of uncertainty. Changes to repayment rules, legal challenges, and the ongoing saga of potential loan forgiveness have created a perfect storm of confusion and financial hardship.
Borrower default typically occurs when borrowers miss making student loan payments for 270 days.
73% of workers struggle to afford anything beyond their basic living expenses. (Source: Resume Now)
- Student Impact: Student loan default can result in damaged credit, wage garnishment, tax offsets, and loss of eligibility for future financial aid.
- School Impact: The U.S. Department of Education (ED) tracks default rates through CDRs. High default rates can lead to penalties, including loss of eligibility to offer federal financial aid. Under these unprecedented circumstances, colleges and universities that have never had a CDR problem cannot rely on that history as an indicator of future performance. Consequently, high CDRs can harm a school’s reputation.
ED has clearly expressed its expectation for schools to be more proactive in reaching out to former students to guide them in making student loan payments and fulfill their responsibility to pay back their student loans.
But it’s not all bad news! The good news is that key solutions, like proactive communications, early intervention, personalized support, and tracking and analysis provided by colleges and universities can help vulnerable borrowers avoid drowning in delinquency and default.
Key Strategies for Colleges and Universities
There are multiple strategies that colleges and universities can implement to support former students and prevent student loan default.
1 Recognize the ROI of Supporting Former Students
Colleges and universities play a transformative role in supporting former students burdened by student loan debt. When they provide trusted repayment support to help students navigate tough times, the school benefits as well.
Accountability and Compliance: Schools are held accountable for their former students’ loan repayment performance. ED monitors repayment rates and can impose sanctions on schools with high default rates. Providing support can ensure compliance with federal standards.
Competitive Advantage: Repayment support can differentiate your school from others, making it more attractive to students who are concerned about post-graduation debt.
Retention and Graduation Rates: For current students, knowing that their school offers post-graduation loan support can improve retention and graduation rates, as students feel more secure about their financial future.
Social Responsibility: Demonstrating a commitment to helping former students manage their debt aligns with broader social responsibility goals and can enhance your school’s public image.
Increased Donations: Alums who feel supported by their alma mater are more likely to give back financially, potentially increasing donations and endowments.
Access to Federal Funding: Schools with poor repayment performance may see restrictions on access to federal student aid programs. By helping former students repay their loans, you can maintain eligibility for these crucial funding sources.
2 Outsource Student Loan Support
Hiring a vendor to provide student loan repayment support offers many advantages over managing it internally.
Expertise and Experience: Vendors specialize in student loan repayment support and have extensive experience and knowledge in this area. They can provide tailored solutions and best practices that you might not have in-house.
Cost-Effectiveness: Setting up and maintaining an internal support system can be costly and resource intensive. Vendors can offer scalable solutions that might be more cost-effective in the long run.
Time Savings: Implementing and managing a student loan repayment support program requires significant time and effort. By outsourcing, you can focus on your core mission and activities while the vendor handles the complexities of the program.
Access to Advanced Tools and Technology: Vendors often have access to the latest tools and technology to manage student loans efficiently. This can include sophisticated software for analyzing student loan data, providing personalized advice, and ensuring compliance with policies.
Compliance and Regulation: Student loan repayment involves navigating complex regulations and compliance requirements. Vendors are well-versed in these areas and can help ensure that you remain compliant with all relevant laws and regulations.
Enhanced Support Services: Vendors can offer a range of support services, such as financial education, personalized guidance, and repayment plan enrollment, which might be challenging for you to provide internally.
Scalability: As the number of alums grows, the demand for student loan repayment support may increase. Vendors can easily scale their services to meet this growing demand without you needing to invest in additional resources.
Data Security: Vendors typically have robust data security measures in place to protect sensitive financial information, which can be a significant concern when managing this data internally.
Improved Outcomes: With their specialized knowledge and resources, vendors can often achieve better outcomes for alums, such as lower default rates and more efficient repayment plans.
Focus on Core Competencies: By outsourcing student loan repayment support, you can focus on your core competencies, such as providing quality education and enhancing student experiences, rather than diverting resources to manage loan repayment programs.
If your school has decided to outsource repayment support, these 6 Steps to Choosing a Default Prevention Provider can help lead you to the provider that best meets your needs and delivers the results your desire.
In general, a Request for Proposal can help facilitate your search. Or maybe you simply pose questions through phone conversations. Either way, having clear goals helps you determine which solution is best. Knowing your requirements and identifying “nice-to-haves” are critical in helping to find the best option for you and your students. Our handy Checklist to Compare Default Prevention Providers can get you started.
3Understand the Pros and Cons of Different Pricing Methods
Just like there are multiple ways to engage and counsel student loan borrowers, there are multiple pricing models for default prevention services.
Our Default Prevention Pricing Guide compares the top methods, including their pros and cons.
Fee Per Borrower
Per Month
A set fee is charged per borrower for each month of outreach and counseling activities directed to the borrower.
Flat Annual Fee
A flat fee is charged for identified services regardless of the number of borrowers receiving the services or the outcome achieved.
Performance-based
Fees are tied to achieving the school’s desired outcome. While a small fee may be charged to initiate outreach no other fee is typically billed until the borrower is cured.
Don’t have time to compare and contrast plans? Request a QUICK QUOTE to get our program details and customized fees.
4Become a CDR Expert
The U.S. government’s main metric for college and university accountability in keeping student loan borrowers out of default is the three-year CDR. A CDR is the percentage of a school’s U.S. Federal Stafford loan borrowers (Direct/Federal Family Education Loan Program) who enter repayment during a federal fiscal year and default within the cohort default period. The monitoring period begins on October 1 of the fiscal year when the borrower enters repayment and ends on September 30 of the following two fiscal years. Some schools have never experienced an elevated CDR. But in this new and challenging environment, past results are not a guarantee for success. And, schools should not be lulled by a 0% CDR.
Ready to learn more? Download our Insider’s Guide to Cohort Default Rate.
How Attigo Supports Colleges and Universities with Default Prevention
Schools have different needs when it comes to student loan repayment support. That’s why we provide multiple options and can customize our programs to meet your unique situation and goals.
Data-driven outreach and engagement. Using a holistic and data-driven approach to outreach, we locate and assist borrowers who are struggling with student loan repayment. We provide continuous communication and support, expert counseling, and default rehabilitation.
Data analysis to drive action. Our innovative solution compares data from multiple sources and highlights borrower-specific discrepancies you’ll want to address. It also gathers program of study insights, including borrower outcomes, to more easily evaluate and make decisions about specific programs.
Inbound helpline and resources. Your former students can contact us for trustworthy, personalized student loan repayment support.
Attigo Success Stories and Case Studies
It’s one thing to claim an organization is an expert at something, and another to prove it. Our customers are our best advocates. Check out these success stories.
Wabash College Stands Behind Every Student
Wabash College’s default prevention challenge isn’t about needing to reduce their CDR, which is low. Rather, it’s about being a responsible corporate citizen by helping a small number of students who need a little extra help to find repayment success and doing it in a smart and cost-effective way.
WTCS Achieves Repayment Success in One Year and the Future Looks Bright
Defaulting on a loan has serious consequences, and colleges and universities are increasingly being held accountable to do as much as they can to support their students. Wisconsin Technical College System (WTCS) wanted a cost-effective strategy to improve cohort default rate and help alumni avoid student loan default after graduation.
