Why Contacting Student Loan Borrowers During the CARES Act Forbearance Is Critical to Your School’s Survival
Social distancing is necessary, but no contact with student loan borrowers during the pandemic is not the best plan!
Where has YOUR focus been?
Most school administrators have put all their energy into implementing online learning to survive and navigate the COVID-19 pandemic. That was a wise course of action because adapting to provide education while using social distancing to keep our students and staff safe were fundamental elements to the survival of our schools.
We have all worked hard to develop our reopening plans and modified our budgets to make room for unexpected purchases, including cleaning supplies, masks, plexiglass, and other safety gear. It’s been a rough few months, true? Adapting to a world where social distancing is the norm has challenged us in ways we could have never imagined!
But it is highly likely that CDRs have NOT been on your mind. The CARES Act pause has lulled many schools into a false sense of security.
The big question is what will happen to default rates when the student loan payments resume in January 2023?
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.”
Post CARES Act payments are an unknown factor for default prevention providers and schools. Many default prevention companies have traditionally focused on contacting borrowers who are in or on the edge of default, while full-service providers, like Champion College Solutions, reach out proactively to those who are not at risk of defaulting.
To respond to that unknown factor, Champion College Solutions, under the guidance of industry expert Mary Lyn Hammer, has adapted its borrower outreach.
Mary Lyn Hammer said, “Through the pandemic, we have NEVER stopped contacting borrowers. Our history of proactively reaching out to students was able to naturally evolve to allow us to counsel borrowers to take advantage of this unique opportunity. We encourage borrowers to use this time of forbearance with 0% interest to make monthly payments of what they can afford. This not only keeps them in the habit of making regular payments so they are less likely to become delinquent in the future but allows them to reduce their principal balance. In reducing their balance, they may be able to request their monthly payment be recalculated when this ends to give them a lower monthly payment. We also spend time counseling them if they are unable to make payments right now and anticipate they may not be able to afford them when the forbearance ends and start them on the paperwork now.”
Bottom Line? You need a stable default prevention provider and one who is actively contacting student loan borrowers during the CARES Act forbearance. That is critical to your school’s future and the continuation of your Title IV funding.
Champion can help your students NOW prepare to restart payments in JANUARY, which will help your school avoid the high delinquent rates that are inevitably coming when loan payments resume.