So, you’re standing in the elevator next to your school’s president or chief executive. Suddenly, you realize your opportunity. You’ve been wondering just how you could persuade management to pour resources into lowering your school’s cohort default rate (CDR), which is getting uncomfortably high. Here’s your chance. To make your case, cover some of the pain points of default as they affect your campus. You’ll find a summary/cheat sheet below. Remember, you only have a few minutes.
1. Loan default could be a threat to our bottom line.
Federal financial aid makes up X percent of our funding. Normally, that wouldn’t be a problem, but a growing percentage of our students have borrowed federal loans and then defaulted. The federal government holds schools accountable for default, and here’s how they do that: If our CDR gets high enough ? 30 percent or more over three years or 40 percent in one year ? we could be barred from the federal financial aid our students rely on to pay tuition, including loans. We might have to cut staff to meet our financial obligations. We may even have to close our doors.
2. Default at the program level could be a liability.
Even if our overall CDR remains low enough, we could still have problems. In the future, new regulations relating to gainful employment may require us to disclose key performance information, including the percentage of students in default by campus program. If one or more of our more popular programs has high default, enrollment could be affected.
3. Negative publicity could hurt enrollment.
National news articles have put default under the microscope and even called out specific schools with high rates. Say we find ourselves the object of such attention. Our reputation could take a nosedive, and our students could turn elsewhere to earn the certifications and degrees we provide. On a related note, students who graduate and default may regret their experience with us and share their feelings through social media or in person with friends. Word of mouth is its own form of negative publicity that could damage or destroy our reputation and enrollment.
4. Investing in default management now could save us money down the road.
As they say: an ounce of prevention is worth a pound of cure. If we put money into preparing borrowers for repayment and managing default now, we could prevent a small default issue from ballooning into a larger one. If we wait and our CDR climbs too high or lots of borrowers in one program start to default, we could find ourselves working harder and spending a lot more money to manage the situation.
Bringing in extra help
Outside expertise can be one way to manage default. The advantage of looking outside for help is that default management service providers have the experience and infrastructure to diagnose and address default issues.
Andrés Cordero is a senior writer and editor for TG’s HigherEDGE® Default Management Solutions. TG's HigherEDGE is a comprehensive service designed to help schools manage federal student loan default. HigherEDGE offers support on multiple fronts to help you take control of your cohort default rate and lower your risk of losing eligibility for federal financial aid.