Default Prevention

Default prevention efforts and activities are important for all participants in the student loan programs.

Good for schools! Successfully educating student loan borrowers can help reduce your institution's default rate and prevent potential sanctions against your institution, such as losing federal program eligibility for student loans and/or the Pell Grant.

Good for borrowers! Default prevention activities also improve the student loan borrowers' knowledge of their rights and responsibilities. Extending default prevention to implementing financial literacy and debt management programs on your campus also contributes to the overall financial health of Missouri's students, parents, borrowers, and citizens.

Top Ten "Best Practices" in Default Prevention

Brought to you by the MDHE's Default Prevention Grant Program team.

1. Organize a Default Prevention and/or Student Success Team. Help the team start strong by requesting training from the MDHE.

2. Profile your institution's defaulted borrowers, and put programs in place to specifically address at-risk populations at your school.

3. Make retention part of default prevention efforts. Focus on academics as well as providing personal or financial counseling for at-risk students.

4. Emphasize the benefits of paying interest on loans while still in school. Use the MDHE's free publication Planning for Financial Success to get freshmen borrowers off to a good financial start.

5. Develop a "loan reminder" presentation/counseling session for returning loan borrowers each year. Results of a 2009 MDHE survey of delinquent and defaulted borrowers indicated that more than 50% of borrowers borrowed more than they expected. Help future borrowers avoid this mistake!

6. Hold budget/financial management workshops in classes or include it in the new student orientation process. Seek and use outside resources, such as the MDHE, to help make these workshops as interactive and memorable as possible.

7. Provide a personalized calendar during exit counseling (mark dates such as 3 month grace period, end of grace period, first repayment due date) and include comprehensive student loan debt information (total amount owed, estimated monthly payment amounts, etc.) as well as loan holder and guarantor contact information.

8. Provide lifetime job placement assistance.

9. Include financial aid and retention staff in student withdrawal process.

10. Use creative, hand-written mail techniques to contact borrowers.
       - Reminder half-way through grace period
       - First payment verification