Community College Strategies to Prevent Default

Bryce McKibben Policy Analyst, ACCT

Debbie Cochrane Research Director, TICAS

Dr. Sheila Ruhland President, Moraine Park Technical College

Dr. Dan Kinney President, Iowa Western Community College

National Three-Year Cohort Default Rates

Community Colleges 20.6 %

National Average 13.7 %

10.0%

15.0%

20.0%

25.0%

2009 2010 2011

Fiscal Year Borrowers Entered Repayment

Identify the problem: Analyze Cohort Data

Develop the solution: Design, Implement, & Evaluate Default Reduction Strategies

Improved outcomes: Reduced Default Rates

Report Theory of Action

Report Overview

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•  9 diverse colleges selected

•  FY 2010 3-year CDR

•  Data analysis & interviews

•  Institutional profiles

•  College practices & policies

•  Federal policy recommendations

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

Summary of Findings, Cont’d •  Apart from completion, more differences than similarities:

in default rates, gaps, and the make-up of borrowers

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

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

Default prevention strategies are not one-size-fits all

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Moraine Park TC: 3-Year CDR

FY 2011 FY 2010 FY 2009

CDR 13.3% 14.6% 8.2%

Defaulters 110 94 46

Borrowers 822 642 559

Moraine Park’s Data •  Just over one-third (37%) of borrowers entering

repayment completed their program of study –  Completer CDR: 7% | Non-Completer CDR: 19 %

•  Students aren’t borrowing until they have earned credits or borrowers persist until they have more –  But of the 1 in 10 of borrowers who did not attain 15

credits, default rate was 52% !

•  Only 13% of borrowers entering repayment completed their required loan exit counseling

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Reducing Default at MPTC

!  Existing Strategies: !  Third-party partnership !  Supplemental unsubsidized loan request !  Outreach to delinquent borrowers

! Consider: !  Budgeting worksheets with loan forms !  Targeted in-person advising to at-risk borrowers

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Iowa Western CC: 3-Year CDR

FY 2011 FY 2010 FY 2009

CDR 20.1% 23.6% 16.6%

Defaulters 342 345 218

Borrowers 1699 1499 1307

Iowa Western’s Data •  Although most borrowers (63%) complete their

program of study, large divide on default – Completer CDR: 10% | Non-Completer CDR: 32 %

•  High rates of remediation (58% of borrowers) – Non-remedial CDR: 16% | Remedial CDR: 29 %

•  Pell Grant students at-risk – Non-Pell CDR: 13% | Pell CDR: 30 %

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Reducing Default at IWCC

!  Existing Strategies: !  Assembling campus-wide team !  Federal loan request form !  Tiered outreach to delinquent borrowers !  Labor market analysis at program-level

!  Consider: !  Emphasizing repayment options !  Contact non-completers before delinquency !  Target foundation scholarship funds

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Institutional Policy Rec’s •  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 necessary

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Trustees Can:

•  Ask for updates on annual CDR releases

•  Request staff presentation, analysis of available federal loan data

•  Review third-party contract rec’s to board

•  Encourage a diversity of options from admin

Federal Policy Recommendations Congressional Action Needed

•  Streamline and simplify student loan servicing

–  Single point-of-contact

•  Auto-enroll severely delinquent borrowers in IBR

•  Student Default Risk Index

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Federal Policy Recommendations U.S. Department of Education Action Needed:

•  Improve CDR appeals

•  Enhance & exit counseling resources

•  Make data sources (NSLDS) more user-friendly

•  Study pro-rating federal loans based on

enrollment intensity

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Thank You!

•  Download the report at www.acct.org

•  For more information, contact:

bmckibben@acct.org dcochrane@ticas.org 202.775.4667 510.318.7900