July 31, 2017 / Posted in: Education by Alec Reinstadtler
Student Loan Default Prevention in the Modern Era
The challenges facing student loan borrowers have not changed over time. However, the solutions designed to help these borrowers have changed dramatically. The rules have changed also. Back in the day, deferments and forbearance were the primary tools used to help borrowers resolve their delinquency and avoid defaulting (temporarily at least). Those days are long gone.
The primary difference between then and now is that there are income-based payment plan options that didn’t exist before 2012. Today, borrowers can actually qualify for a payment plan as low as $0 per month! There is really no reason for a borrower to default on a student loan and you can no longer use forbearance to just push the problem down the road.
I can’t speak for all default prevention companies but I have a theory. My theory is that most of us apply a similar approach to helping students. The Loan Science approach is simple. We take time with each borrower and listen to understand their situation, discuss payment plan options, get the loan servicer on the phone to resolve the delinquency and work together on a long term strategy that is in the borrower’s best interest. We intentionally do not measure counselor’s average time per call because we want to encourage them to invest as much time as the borrower needs to get their delinquency resolved and ensure a long term solution is in place. I believe other default prevention companies also want what’s in the best long term interests of the borrower.
So, if my theory is correct…if we’re all focused on what’s in the best interest of the borrower then how can you differentiate between average and exceptional default prevention companies? The answer is simple: it’s all about right party contacts. You can’t counsel a borrower that you can’t reach. It is much tougher than people think to get a borrower on the phone and engaged in a productive discussion about loan repayment. The failures we see in this business come from companies that use rudimentary tools to both identify high risk borrowers and attempt to contact them. You can’t call a borrower 3 times a week and expect to reach anyone but the “easy fixes”. The fact that you spend time to properly counsel borrowers that you reach is critically important, but you’re not solving the school’s problem if you don’t have the tools and the mindset to reach more of them.
Student loan default prevention work isn’t easy. You can’t put on your white gloves every morning and take a sip of tea before you make the next call. You have to roll up your sleeves and work relentlessly to get results. Success is measured by how effectively you help borrowers AND by how many you help.