5 Reasons to Engage with Borrowers About Their Student Loans During COVID
Do you believe there is no need to contact your students about their loans until 2021 when the CARES Act pause ends?
The CARES Act pause has given many school administrators a false sense of security with what seems to be a logical conclusion—why worry about default rates when no payments are due?
Contacting borrowers is not likely to be on the top of your school’s priority list. We understand you have pandemic-related concerns to resolve, like classroom changes, online learning, buying loads of plexiglass, implementing cleaning procedures, and how to fund all of that with lower enrollment rates. Yes, all those items are necessary, but please realize that student loan repayment should be a priority, even during the pause. If post-pandemic high cohort default rates become an epidemic, your school will be at risk for sanctions and the potential loss of Title IV funding.
Take a moment to consider:
- When payments restart, will students have money to pay?
- How will borrowers adjust to getting back into the habit of paying on student loans?
- Could we possibly see the highest default rates in history when payments resume?
- Could things possibly get stranger?
These borrowers have experienced something no other cohort has—NINE long months with adjustments to their budgets to include many other things.
Mary Lyn Hammer, Champion College Solutions CEO, warns, “Delayed payments are NOT good for schools. When borrowers get out of the habit of making regular payments, delinquent rates will go up.”
She continued, “I believe people will be shocked by how high default rates will be. We have never experienced a time when the ‘most likely to repay’ group of borrowers had the opportunity to take nine months off from payments. When those borrowers have to resume payments, they will be out of the good payment habits they formed and are more likely to fall behind. We must stay in contact with borrowers—even those who historically pay on time to encourage good payment habits.”
Our budgets have adapted to absorb price increases for necessary items. For example, grocery bills are higher, as evidenced by the price of ground beef alone rising by 25%. Other costs have increased; our electricity bill went up because we were home all the time. Upgrading your WIFI service to have the bandwidth to attend all those fun zoom calls might have been a priority. And we all did see a need to spend more on cleaning supplies for our homes. However, the biggest issue for loan repayment is that borrowers have gotten out of the habit of payments, so getting back in the grove of repayment will be a major adjustment!
Many default management companies paused their services during COVID. Champion College Solutions took a different path by continuing to actively contact borrowers. Instead of notifying them where they are in the repayment cycle, Champion adapted their tactics. We hope these five points will inspire you to follow our lead!
5 Reasons to Engage with Students
- The CARES Act pause is a financial teaching opportunity. We can use this crisis to teach borrowers how to pay down the principal on their student loans. When students pay down their principal, they see their loan balances decrease. When they can see this kind of progress, this cohort will be less likely to default in the future.
- To protect the future of your school. Staying in contact with this cohort keeps their promise to repay their loans on your student’s minds. Keeping borrowers informed on their rights, responsibilities, and options post CARES Act keeps those accounts in good standing, which protect your school’s Title IV funding and eliminates the possibility of sanctions.
- To foster a “we are in this together” type of bonding with students. Building relationships increases the intrinsic value of your school. Just reaching out to your students, not to collect but to check-in, shows that you care about their wellbeing. This contact style will give them good feelings about your school, and they will likely tell their friends, which could help increase future enrollments.
- To ask their opinions. In addition to keeping them informed about payment obligations, ask their ideas about ways you can improve, for example, how do they rate your distance learning curriculum? These students may surprise you with their questions and concerns and be very willing to share input, which can help you better formulate plans.
- To eliminate the problems that assumptions can cause. When you contact students, they may make you aware of things you have not considered. We can assume we know what students need; however, COVID life is new for all of us, and we learn new things every day. What you think students need may not be what they need or want. Getting feedback will help you gain clarity.
Actively contacting student loan borrowers during the CARES Act forbearance is a beneficial and wise use of your time. This communication is critical to your school’s reputation, future, and continuation of your Title IV funding.
Champion College Solutions can help you stay in contact with your students. We can help them NOW to prepare to restart payments in JANUARY, which will help your school avoid the high delinquent rates that may come when loan payments resume.