Default Prevention Best Practices
Lender Services to Students
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• Customer Service
• Security of Borrower Information
• The Life of the Loan
• Proactive Borrower Communication
• Ongoing Counseling for Continuing Students
• Easy Access to Essential Information
• Financial Literacy Resources and Programs
• Default Prevention and Debt Counseling
The information provided in these pages doesn't represent an exhaustive list of requirements. It's designed to enhance communication with students and maximize the effectiveness of default prevention efforts. Complete lists of required and suggested counseling elements can be found in our Entrance Counseling Checklist (PDF) and Exit Counseling Checklist (PDF).
Customer Service
Customer service plays an important role in preventing default. How and when we interact with students can make a significant difference in outcomes. Below are some suggested approaches to ensure your students are getting the right message at the right time.
- Provide Web-based applications and services
- Offer a toll-free number for borrower information and advice
- Adequate staffing to ensure minimal time on hold
- Make your mailing address, physical address (so payments can be made in person) and information about electronic payment options easy to find, and publicize it well
- Ensure you have adequate staffing to handle phone inquiries quickly and provide customized account management to meet individual borrower needs
- Use combined billing for multiple educational loans (e.g. private and federal)
- Offer flexible forbearance options
- Length of forbearance can be up to twelve months
- Cover any hardship needs
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Security of Borrower Information
Customers who are confident in our ability to handle confidential data are more likely to feel comfortable interacting with us in a variety of ways. Interaction is key to resolving delinquencies.
- Avoid use of a borrower's Social Security number in correspondence and other open forums
- Ensure Web site encryption to protect borrower data
- Offer your privacy policy for review
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The Life of the Loan: Educate Borrowers about the Process
A well-informed borrower is more likely to understand whom to contact, and when.
- Educate borrowers about the players and their roles
- Advise the borrower of the potential for loan sale
- Impact on borrower benefits
- Change in servicer relationship
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Proactive Borrower Communication
One size does not fit all when it comes to effectively communicating with borrowers. Try to apply a variety of techniques and methods in your borrower communications, and communicate often!
- Use a variety of communication methods
- Standard mail and phone calls
- Multimedia materials (e.g. PowerPoint presentations, videos, flash animation, TV spots) designed to educate borrowers
- Creative techniques to grab borrowers' attention (e.g. e-mails, podcasts and e-cards)
- Target the message to students' specific needs for deferment and forbearance
- Identify and focus special efforts on high-risk borrowers, such as freshmen and withdrawn students
- Schedule communications (such as letters, inserts or additional text with routine account statements) during periods when payments are not required
- Communicate with borrowers who are graduating or withdrawing from school
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Ongoing Counseling for Continuing Students
- Advise students to minimize borrowing and borrow wisely every time the opportunity arises
- Assist with money management workshops on campus
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Easy Access to Essential Information
Provide links and printed materials about critical repayment information
- Repayment schedule options, including consolidation
- Deferment
- Forbearance
- Electronic Funds Transfer payments (EFT)
- EFT is a convenient service that deducts a borrower's monthly payment from a checking or savings account
- Setting up EFT ensures that monthly payments arrive on time and are never lost or delayed in the mail
- EFT options vary by lender; many offer lower interest rates or other incentives for students who choose to use the service
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Financial Literacy Resources and Programs
A student loan is the first consumer credit experience for many students. We know that many students aren't prepared to manage money and credit debt, and have unrealistic expectations of future income. We also know that students who understand basic financial principles are less likely to borrow more than they need and more likely to repay their loans. Oklahoma Money Matters (OKMM), OGSLP's financial literacy initiative, can help you give students a solid foundation for financial success! OKMM's Web site offers information and tools in a number of financial education topics.
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Default Prevention and Debt Counseling
Internet tools and face-to-face interaction are both powerful methods to educate students about debt. Consider which is best for your students; perhaps a combination of both?
- Link to Web-based debt counseling
- Train staff in financial literacy and default management
- Money management principles, including realistic budgeting techniques, responsible use of credit and identity theft prevention
- Student loan repayment plans, as well as deferment and forbearance options
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Contact OGSLP's Early Assistance/Default Prevention team at 405.234.4328 or 800.833.4973
(toll-free) or OKMM team at 405.234.4457 or 800.970.6566 (toll-free) to learn about all available default prevention and financial literacy tools. We're here to help!
