Federal Student Loan Program
Author: Henry George
Posted: December 12, 2014

The Office of Student Financial Aid and Scholarships has focused on student success efforts to increase financial literacy and student loan borrower communication and it is beginning to pay off. This long term project began during the 2009/2010 academic year by asking the question: What steps can we take, and what resources do we have to teach and inform student loan borrowers about financial literacy to help prevent future issues? 

Measuring success: Our strategic efforts have resulted in a change in two important areas of PSU’s Federal Student Loan borrower portfolios: Student loan repayment counseling and activities related to averting loan defaults. 

Student Loan Repayment Counseling: PSU’s enhanced efforts to educate our borrowers about their repayment options before, during and after borrowing has resulted in an increase in student loan borrower participation in the Federal Student Loan Income Driven Repayment (IDR) plans and a decrease in account delinquency. These repayment plans offer relief to borrowers at risk of defaulting on their student loans because of a partial financial hardship.

Recently the Financial Aid Office was contacted by one of the Federal Student Loan Servicing Agencies and was asked to share our Federal Student Loan program practices for a national presentation for school administrators specifically because of PSU’s high participation rate of our borrowers in Income Driven Repayment plans. 

  • 3% of borrowers nationally are successful in learning about and applying for Income Driven Repayment (IDR) plans. This low borrower participation rate in the IDR plans recently prompted the White House to launch an information campaign directed toward borrowers in financial distress. 
  • 33% of PSU borrowers successfully learn about and apply for Income Driven Repayment plans.

Default Aversion Activities: PSU’s dedication to assisting our borrowers in distress has resulted in a decrease in Portland State University’s 3 Year Cohort Default Rate (CDR).  The CDR is the U.S. Department of Education’s official measurement of how administratively capable a school is in assisting their borrowers to successfully enter repayment on their federal student loans and to provide default aversion assistance to borrowers experiencing a financial crisis within the first 3 years of repayment. 

This is an important measurement of performance because the school’s authorization to participate in the Federal Student Aid programs depends on how successful a school is in managing their CDR. 

Here are the numbers showing how PSU is performing compared to our peers:

  • Portland State reduced our official 3 year Cohort Default Rate by 1.6% compared to last year.

Compared to the CDR measurements of:

  • All National Higher Education institutions had a reduction in their CDR of 1.0%
  • All Public 4 Year Higher Education institutions had a reduction in their CDR of 0.5%
  • All Higher Education institutions in Oregon had a reduction in their CDR of 0.7%
  • All Public 4 Year Higher Education institutions in Oregon had a reduction in their CDR of 0.8%

Key elements to our success are:

A Data Driven Approach:  We are analyzing the characteristics of our defaulted borrowers to inform our strategies and measure our success each year. 

Communication: We recognized that we are competing for students’ screen-time in order to get our key messages in front of them in a manner that is timely, effective and relevant. We focused on developing our plain language, supplemental communication efforts which feed into the official sources (U.S. Department of Education and the Federal Student Loan Servicing Agencies).

Collaboration and Partnerships: The Financial Aid Office participated in the OUS advisory board which focused on Student Debt and Affordability. This advisory board coordinated a statewide symposium which was hosted by Portland State University. We then launched a Default Prevention list serve in partnership with Oregon State University for school Financial Aid Administrators where we share resources and ideas. We have also partnered with the Federal Student Loan Servicing Agencies who have agreed to assist us by providing graphics which increase the quality of our information campaigns.

Training: We are continually enhancing our training for our campus partners who assist us with getting timely information into the hands of our students. We began to provide customized presentations at the request of our academic partners specifically for their students (Teacher Loan Forgiveness & Public Service Loan Forgiveness presented to Graduate School of Education cohort etc.)

We are listening: Our student loan borrower experience is informing our strategies. A few of the top challenges that we hear and see when it comes to our borrowers entering repayment are:

  • Loan Servicing Agency introduction/distrust of communication not initiated by the borrower
  • Overwhelming amounts of official language and options
  • Decentralized information distribution hubs
  • Repayment plan complexity
  • Anxiety about employment which disempowers borrowers from setting up “repayment”
  • Competition for screen time that Servicing Agencies and the Financial Aid Office face: competing in a social media and high quality graphic world