College Assist Extends Loan Savings to Students for 2009-2010

College Assist has announced that it will continue to subsidize 0.5 percent of the federal default fee on behalf of Federal Stafford and PLUS Loan borrowers through June 30, 2010. This will be the fourth consecutive year that College Assist has paid all or a portion of the mandated fee on behalf of students and parents.

“At College Assist, we are committed to helping families pay for higher education,” said Director Debra DeMuth. “Our mission is to assist students in pursuing their postsecondary education. Being able to help pay the default fee for students and parents means we can reduce their borrowing costs and ease their repayment responsibilities.”

In July 2006, federal legislation that aimed at reducing the overall cost of student loans required guarantors to deposit an amount equal to 1 percent of all Federal Stafford and PLUS Loans. The fee is intended to ensure that guarantors have adequate funding to support their efforts to help avert student loan delinquency and default.

“At a time when so many families are having a tough time paying for college, we’re delighted to be able to continue this program,” said DeMuth. “It’s important to us to offer meaningful services that meet their financial needs.”

College Assist expects this year’s subsidy to save student and parent borrowers more than $5 million on approximately 175,000 loans in the upcoming school year.

The Good News

Ready for some good news from our industry? I’ve found that if I look closely enough, it’s out there. Of course, there are plenty of sobering reports as well, but my goal here is to focus on the positives in our work and among current events.

If you think about all the federal student aid changes that went into effect on July 1, you see a lot of opportunities for students. In this issue we have a thorough summary, but here are just a few financial opportunities for borrowers:

1. Interest rates on subsidized Stafford loans for undergraduate students have decreased
2. Variable rates have also decreased
3. Origination fees have decreased
4. A new income-based repayment program lowers monthly payments

Other economic opportunities exist, too. I read in USA Today that many colleges and universities have stepped up in these tight times to find ways to employ students. That’s right—they actually created more jobs to help their students stay afloat and be able to return to college in the fall. That’s community, and loyalty, and worth writing about.

Here’s a big one for the economic opportunity column: In an effort to help higher education institutions support economic stimulus efforts and workforce development, Microsoft Corp. has committed up to $50 million in higher education resources, training, and certifications through the Microsoft Education Alliance Program agreement. Their plan is to provide resources and tools for short-term workforce training and higher education enhancements.

There you have it—a bit of good news to brighten your professional day. If you come across any positive industry reports to share with colleagues, we’d love to publish them in Outlook. Please send your news to me at teena.cooper@college-assist.com.

Free Entrance & Exit Counseling Help at College Assist Website

New requirements for entrance and exit counseling, and new rules about who can provide it, have prompted College Assist to create free online tools that will help schools meet federal requirements. At www.college-assist.com, you’ll find learning briefs that detail the latest changes, as well as a PowerPoint presentation ready for financial aid professionals to use in student counseling sessions.

Prior to the passing of the Higher Education Opportunity Act (HEOA), schools were required to provide one set of entrance counseling information to GradPLUS borrowers who also had Stafford loans, and a different set to GradPLUS borrowers who did not have Stafford loans. The counseling requirements are now consistent for both first-time Stafford borrowers and for all first-time GradPLUS borrowers. Exit counseling also is now required for both GradPLUS borrowers and Stafford borrowers.

Beginning July 1, 2009, a clarified law went into effect that allows lenders and guaranty agencies to provide both entrance counseling and exit counseling.

Our Learning Briefs—one for entrance, one for exit counseling—help financial aid professionals keep track of the new and modified counseling requirements. The briefs are, as their name suggests, concise and easy to read, with changes defined in bold text.

Our comprehensive PowerPoint counseling session includes slides, speaker notes, and a script. Presenters can be assured they’re complying with federal law and regulations simply by following the script and notes. The slides offer a streamlined design with professional graphics and no organizational logos.

To download the learning briefs and/or the PowerPoint presentation, go to the “Schools” link on the College Assist website and choose “Financial Aid Resources” and then “Tools” from the menu options.

New Repayment Plan, Rates, and Fees Lead Roster of Loan Program Changes

Each July marks a new academic year, and with it come changes and adjustments to federal financial aid programs. Beginning July 1, 2009, the rate for subsidized loans for undergraduate students decreased from 6 percent to 5.6 percent (see the spring issue of Outlook for other planned changes to interest rates). Other significant changes for students include:

Lower variable loan rates. For prior Stafford and PLUS loans with variable interest rates that are subject to change each July 1, rates that apply from July 1, 2009, through June 30, 2010, will decrease significantly. The fixed rates of 6.8 percent for Stafford and 8.5 percent for PLUS loans that went into effect last July are not subject to change.

For Stafford loans originated between July 1, 1998, and June 30, 2006, the variable interest rate is 1.88 percent during in-school, grace, and deferment periods. During repayment (including forbearance), the rate is 2.48 percent. PLUS loans originated during the same time frame will have a variable rate of 3.28 percent, a change from 5.01 percent.

Reduced loan fees.  Stafford loans disbursed July 1, 2009, through June 30, 2010, will have a maximum allowable loan fee of 1.5 percent.  That includes the 1.0 percent default fee, and the 0.5 percent origination fee.  The origination fee was reduced by 0.5 percent.

Income-based repayment. A new income-based repayment program now caps monthly payments at 15 percent of a borrower’s discretionary income. Both current and future borrowers are eligible. The new program also forgives any remaining debt after 25 years. Borrowers must qualify for this repayment plan on the basis of income and loan debt.

Other changes that went into effect July 1 include Pell Grant minimum and maximum amounts, ACG/SMART Grant eligibility, financial aid to children of soldiers, and more.

For more information or questions about the July 1 changes, visit College Assist’s website at www.college-assist.com.

What to do if Your Wallet is Stolen

Students should know that their wallet is a gateway to their personal identity. If it’s lost or stolen, they should immediately notify banks and other companies like auto and health insurance companies, cancel current accounts, and activate new account numbers.

Anyone who loses a wallet can protect themselves, their credit, and their financial future with these simple steps:

1. If you’ve made a copy of every card in your wallet, get those copies and start calling the numbers listed.
2. If you don’t have a copy of everything, stay calm and try to remember everything in your wallet. Think about things like:
• ATM card
• Visa/MasterCard/American Express and department store credit cards
• Gas
• Insurance—auto and health
• Driver’s license
3. Check monthly statements for customer service numbers to call for each of those cards or services.
4. Call any of the three credit reporting agencies. They’ll flag your credit history to notify you before any new accounts can be opened under your name.
• Equifax: 1.800.525.6285
• TransUnion: 1.800.680.7289
• Experian: 1.888.397.3742
5. Call the police and file a report if the wallet was stolen.
6. Check all of your statements closely for the next couple of months and continue to report any charges that you didn’t make.
7. Find out how and when to get a new driver’s license issued as soon as possible.

Default Aversion Counselors on the Cutting Edge of Borrower Communications

For Dave Clark, College Assist’s Manager of Default Aversions, work is about balancing communication techniques in a technology-centered world.

Dave’s department uses a combination of technology innovation and real-time personal interaction to help borrowers stay out of loan default. Between automated dialers, sophisticated e-mail systems, and text messaging, they can tailor contact campaigns for maximum efficiency—but they also understand the value of person-to-person contact.

“Our goal is to find new and efficient ways to counsel borrowers and cure delinquencies,” says Dave. “We call our Default Aversion associates ‘counselors’ because that is exactly what they do—counsel borrowers. They are trained to listen to the caller, ask pertinent questions, and present a list of the best options for each situation.” 

On the other hand, the Default Aversion Department understands reaching people in a 21st century way: Most people want the flexibility that comes with e-mail and text messages. Counselors have the ability to create their own e-mails, or they can select from a list of brief messages that encourage the borrower to contact their lender via the lender’s website. 

“We also are currently looking at vendors to help us get text messaging campaigns in place by the end of the year,” says Dave.

Dave recently transitioned the department to a new supplemental servicing system that allows them to modify automated calling campaigns to target specific groups of delinquent borrowers on an as-needed basis. 

“The system eliminates a lot of manual work for our counselors and allows them to do what they do best, which is talk to our borrowers and help them resolve their delinquencies.”

Dave is a 16-year veteran in student lending, having served as a default prevention counselor and then an assistant manager in a loan servicing center. He’s proud of his department’s ability to keep College Assist’s cohort default rate well below the national average.

“Ultimately it’s the borrower’s decision to make, but we want them to be aware of what they are getting into. In some cases we have easy fixes to their problem, such as a deferment or special repayment plan that they may qualify for,” says Dave. “For others it may take some gentle lifestyle counseling such as recommending that they stop eating out at restaurants or maybe get a second job to help them out for a while.”

Nearly 4 Million Now Enrolled in Online Courses

The 2008 Sloan Survey of Online Learning, published late spring of 2009, shows that online enrollment rose by more than 12 percent from a year earlier. The survey of more than 2,500 colleges and universities nationwide found that approximately 3.94 million students were enrolled in at least one online course in fall 2007, the most recent term for which figures are available.

“We are still seeing double-digit growth,” said study co-author Elaine Allen, Research Director of the Arthur M. Blank Center for Entrepreneurship at Babson College. “Yet schools report they are competing for students as online options expand.”

“Chief academic officers also say increasing fuel costs, unemployment, and the downturn in the economy are expected to drive further increases in online student enrollment over the next year,” she said.

The complete survey report, “Staying the Course: Online Education in the United States, 2008” is available on the Sloan Consortium website, www.sloanconsortium.org. The Sloan Consortium is a nationwide association of institutions and organizations offering online education. The Consortium is administered through Babson College and Franklin W. Olin College of Engineering.