Default Prevention
Default prevention efforts and activities are important for all student loan participants.
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.
- Organize a Default Prevention and/or Student Success Team. Help the team start strong by requesting default prevention training from the MDHE. Missouri institutions may also attend the MDHE's free Default Prevention Day offered in May.
- Profile your institution's defaulted borrowers, and put programs in place to specifically address at-risk populations at your school.
- Make retention part of default prevention efforts. Focus on academics as well as providing personal or financial counseling for at-risk students.
- 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. To order MDHE publications, visit our online order form.
- 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!
- Conduct budget and 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. Complete our new online speaking and event request form to arrange for a financial literacy workshop for your students.
- Provide a personalized calendar during exit counseling (mark dates such as the half-way point of the 6-month grace period, end of grace period, and first repayment due date). Include comprehensive student loan debt information (total amount owed, estimated monthly payment amounts, etc.) as well as loan holder and guarantor contact information.
- Provide lifetime job placement assistance.
- Include financial aid and retention staff in student withdrawal process.
- Use creative, hand-written mail techniques to contact borrowers.
- Reminder half-way through grace period
- First payment verification
*Note: On March 30, 2010, federal legislation was signed into law removing the authority of FFELP guarantors like the MDHE to guarantee new loans after June 30, 2010. All federal student loans first disbursed on or after July 1, 2010 must be made by the federal government through the Federal Direct Loan Program.
