Portfolio Risk Management

1
FSA Update

• Portfolio Risk Management
• Sybil Phillips
• Debt Collection Update
• Gary Hopkins
• Common Services for Borrowers
• Dan Hayward

2
Portfolio Risk Management_____

• Sybil Phillips, Director
• Portfolio Risk Management Group
• U.S. Department of Education
• Federal Student Aid

3
Big Changes in 25 Years

• Total Tuition includes fees, room and board
• Increased more than 290
• Annual Loan Volume (FFELP)
• Increased more than 750
• (does not include consolidations)
• Average Loan Size
• Increased more than 105

4
Big Changes in 25 Years

• Attendance
• Male attendance increased by 20
• Female attendance increased by 42
• Cohort Default Rate
• In 1988 (release date 1990) 17.2
• In 2001 (release date 2003) 5.4

5
Big Changes in 25 Years

• In 1980 credit bureau reporting commenced on
  defaulted loans
• In 1981 mandatory assignment of defaulted loans
  to the Secretary was authorized
• In 1984 IRS offset program was instituted

6
Big Changes in 25 Years

• In 1986 the definition of default was moved from
  120 days to 180 days delinquent
• In 1991 Administrative Wage Garnishment was
  implemented
• In 1998 the definition of default was moved from
  180 days to 270 days delinquent
• In 2001 the NDNH was implemented

7
Big Changes in 25 Years
Big Changes in 25 Years

• Skip tracing 25 years ago consisted of a
  telephone book, information via a telephone
  operator, and address forwarding
• Today skip tracing is conducted on the WEB,
  through NDNH, IRS and Treasury Offset Matching
  and numerous private automated matching services

8
Big Changes in 25 Years

• In 2003 the Portfolio Risk Management of Title IV
  Programs Group was created at the Department
• To mitigate risk of student aid obligations
  originated or insured by the Federal Government
  by providing information and proposing actions to
  facilitate Agency decisions
• The Group is comprised of individuals that bring
  over 80 years of varied experience and
  backgrounds
• Risk mitigation experience with the public and
  private sectors
• Expertise in data mining
• Significant program knowledge (FFEL, DL, Perkins
  and Campus Based)
• Development and implementation of risk models

9
List of Projects

• Develop a lifetime default rate
• Initial development of a Default Predictability
  Model
• Conduct Consolidation/Rehabilitation study
  ascertain the effectiveness of the tools to
  prevent default and re-default
• Create a roundtable on risk management comprised
  of schools, lenders, GAs, and Direct Loan
  participation
• Identify the Costs of Entitlements borrower and
  taxpayer focus on forbearance and deferment

10
Collections Update_____

• Gary Hopkins, Director
• Collections Group
• U.S. Department of Education
• Federal Student Aid

11
FY04 Initiatives

• Initial Phases of Transition to New CSB System
  Solution
• Update of Guarantor Write-off Compromise
  Procedures
• Complete Implementation of 15 Administrative
  Wage Garnishment

12
NDNH Program

• 429.2 Million in Recoveries on Matched Debts
• 32 Guarantors Now Signed On to Participate
• Still No Cost to Guaranty Agencies
• Delay in FY04 Matching Schedule with HHS

13
Private Collection Agencies

• Re-Compete of Agency Contracts
• Continue Balanced Use of Tools
• Best Performing Contract in ED History
• Small Business Awards Included

14
Collection Costs

• For FY04 ED Collection Costs Do Not
  Exceed 25.
• Fee Rates
• Regular AWG 20
• Loan Rehabilitations 15
• Loan Consolidations 10
• Administrative Resolutions - 100

15
CombinedDefault Recovery Totals

• FY99 - 3.7 Billion (1.35 Billion)
• FY00 - 4.8 Billion (1.81 Billion)
• FY01 - 5.1 Billion (2.67 Billion)
• FY02 - 5.2 Billion (2.66 Billion)
• FY03 - 5.4 Billion (2.22 Billion)
• (10.7 Billion in Consolidation since FY99)

16
FY03 ED GA Totals

• GA 3,846,600,176 15,135,000,000 (25.41)
• ED 1,617,038,392 13,975,000,000 (11.57)
• Total 5,463,638,568 29,110,000,000 (18.77)

17
FY04 ED GA Projected Totals

• GA 3,800,000,000 14,301,000,000
  (26.57)
• ED 1,751,000,000 15,920,000,000
  (11.00)
• Total 5,551,000,000 30,221,000,000
  (18.37)

18
ED Use of Recovery Options FY03

• Regular 410,487,700 (25.4)
• Garnishments 150,169,138 ( 9.3)
• Treasury Offsets 397,680,785 (24.6)
• Rehabilitations 368,790,342 (22.8)
• Consolidations 289,908,428 (17.9)

19
ED Use of Recovery Options FY04 (Projections)

• Regular 450,000,000 (25.7)
• Garnishments 200,000,000 ( 11.4)
• Treasury Offsets 375,000,000 (21.4)
• Rehabilitations 490,000,000 (28.0)
• Consolidations 236,000,000 (13.5)

20
GA Use of Recovery Options FY03

• Regular 570,452,994 (14.8)
• Garnishments 327,001,157 ( 8.5)
• Treasury Offsets 367,438,049 ( 9.6)
• Rehabilitations 604,147,095 (15.7)
• Consolidations 1,977,560,880 (51.4)

21
GA Use of Recovery OptionsFY04 (projections)

• Regular 610,000,000 (16.8)
• Garnishments 320,000,000 ( 8.8)
• Treasury Offsets 300,000,000 ( 8.3)
• Rehabilitations 600,000,000 (16.5)
• Consolidations 1,800,000,000 (49.6)

22
Treasury Offset Participation

• OF ACCOUNTS TOTAL
• 2002 PROCESSING YEAR CERTIFIED VALUE
• EDUCATION 1,511,665
• GUARANTY AGENCIES 1,129,959
• TOTAL 2,641,624 17,302,670,109
•  
• 2003 PROCESSING YEAR
•  
• EDUCATION 1,504,911
• GUARANTY AGENCIES 1,128,471
• TOTAL 2,633,382 19,235,738,062
•  
• 2004 PROCESSING YEAR
•  
• EDUCATION 1,613,747
• GUARANTY AGENCIES 959,705
• TOTAL 2,573,452 20,086,075,948

23
Mandatory Assignment Totals

• Assigned Value of Debts
• FY99 255,801 894,018,425
• FY00 275,451 958,314,622
• FY01 137,176 451,761,568
• FY02 89,357 340,636,648
• FY03 278,847 1,153,347,840

24
(No Transcript)
25
Questions?

• Support Website
• collections.sfa.ed.gov

26
Common Servicesfor Borrowers (CSB)_____

• Dan Hayward, Director
• CSB Transition
• U.S. Department of Education
• Federal Student Aid

27
CSB Goals

• New initiative to transform FSAs Borrower
  Services by modernizing and combining
• Direct Loan Servicing (DLSS)
• Loan Consolidation (LC)
• Debt Collection (DMCS)
• Conditional Disability Discharge Tracking (CDDTS)
• Resulting in a single, integrated solution
• CSB solution establishes a single Data Mart,
  replacing FSAs Credit Management Data Mart and
  Delinquent Loan Data Mart

28
CSB Benefits

• FSA gains many improvements
• A single integrated system and database
• One point of contact for borrowers (Universal
  Agents)
• A single view of borrower account information
• Increased Self-Service Capabilities
• Improved Web access for customers, partners, and
  FSA
• IVR access to borrower accounts for schools
• Web-based account access for defaulted borrowers
• Real-time loan consolidation
• Team brings 30 years of experience and expertise
• ACS, Prime Contractor (DLSS, CDDTS)
• EDS (LC), Raytheon (DMCS), Pearson Government
  Solutions (DMCS PIC)
• 1 Billion in Savings

29
Contract Highlights

• Simplified Contract Management
• Combines five contracts into one
• Single point of contact
• Number of deliverables reduced from over 150 to
  11
• Performance-based Pricing and Shared Risk
• Incentives to move borrowers into current repay
  status
• Incentives for superior performance
• Default aversion (2 year CDR)
• Customer Satisfaction (Borrowers, schools and
  FSA)
• Optional Incentives for 3 and/or 4 year cohort
  default rates
• Disincentives for poor operations
• Call center, financial transactions, processing
  and IT

30
Implementation Approach

• Integrate Systems and Data
• Leverages legacy assets and FSA investments
• Uses a phased integration approach
• Implements a single system and database
• Hosted at the VDC
• Compliant with FSA technology standards
• Complements FSA data strategy initiatives
• Eliminates data redundancy and reconciliation
  issues
• Provides single system of record
• CMMi Level 3 procedures being followed

31
Implementation Approach

• Supports Operational Efficiencies
• Consolidates 6 call centers into a Virtual
  Service Center
• 4 physical locations with a common IVR, screen
  pops, etc
• Collections will maintain a separate telephone
  number
• Consolidates 6 inbound mailrooms into 1
• Imaging and workflow processing, Archiving, etc.
• Consolidates 7 fulfillment (print and mail)
  centers into 4
• Consolidates 3 lockboxes into 1
• Electronic and paper
• Centralizes 5 legacy project management functions
  into 1

32
Transition Schedule
1.5 months
7 months
Phase 1
15 months
Phase 2
9 months
Phase 3
33
Legacy Systems
34
Common Services for Borrowers Phase 1
EAI/Interfaces
CRM

• Create CSB Framework
• Loan Consolidation
• Develop functionality in CSB
• Incorporate into an upgraded
• Siebel CRM
• Common Database
• Move all LC data and DLSS demographic data to
  CSB
• Data Mart
• Establish CSB Data Mart and move existing
  Servicing data from legacy data marts
• Add data from DMCS and
• CDDTS

Application Layer
Loan Consolida- tion
Common Services
Common Database
Demographic
Demographic
DataMart
DLSS
LC
DMCS
CDDTS
Application
Application
Application
Application
CRM
CRM
CRM
CRM
Interfaces
Interfaces
Interfaces
Data
Data
Interfaces
Data
Data
Data
35
Common Services for Borrowers Phase 2

• Servicing
• Convert DLSS software to
• new hardware and
• operating system
• Debt Collection
• Develop functionality in
• CSB using Quester as the
• base product
• Discharge Tracking
• Develop functionality in
• CSB
• Common Database
• Move remaining legacy
• data to CSB

EAI/Interfaces
CRM
Application Layer
Loan Consolida- tion
Loan Servicing
Debt Collection
Disability Discharge Tracking
Common Services
Common Database
Demographic
Demographic
Contact
Financial
DataMart
CDDTS
DLSS
DMCS
Application
Application
Application
CRM
CRM
CRM
Interfaces
Interfaces
Data
Interfaces
Data
Data
36
Common Services for Borrowers Phase 3
EAI/Interfaces
CRM
Application Layer
Loan Consolida- tion
Loan Servicing
Debt Collection
Disability Discharge Tracking

• Additional eCRM (Siebel) Integration
• Web-based imaging
• Web Chat
• Email
• Phase 3 ends with CSB hosted at the VDC

Common Services
Common Database
Demographic
Demographic
Contact
Financial
DataMart
37
Summary

• CSB integrates processes, data and systems for
  Servicing, Consolidation, Collections, and
  Disability Discharge
• CSB Contract Team comprised of familiar faces
  that have been supporting FSA for a combined
  total of over 30 years
• CSB Solution supports FSAs Performance
  Objectives
• CSB implements a Performance-base contract
  ensuring optimum results

38
CSB Web Site Views
We Help Put America Through School
39
CSB Web Site - Borrowers
Provides (rule-based) access

• Account Balances
• Demographic Updates
• ACH Enrollment
• Online Payments
• Online Bills and Mailbox
• 1098-E Tax Forms
• Real-time Loan Consol
• Repayment Calculators
• Budget Calculators
• Online Pay Plan Change
• Online Due Date Change
• PCA Contact Information

40
CSB Web Site - Schools
Provides (rule-based) access

• Borrower Account Information
• Repayment Calcs
• Loan Consol Calcr
• Entrance and Exit Counseling Material and Reports
• Late Stage Delinq Rpts and Tools
• Electronic Report Delivery
• NSLDS Data Retrieval
• Email Comm with CSRs

41
Financial Community Web Access
Provides (rule-based) access

• Loan Holders
• EFT
• Web Pmt Manifest
• PCAs
• Electronic Fund Xfer
• Web Pmt Manifest
• Guaranty Agencies
• Status of Subrogated Loans
• Online Status of Files Submitted
• Online Error Resolution

42
CSB PCA Web Access
Provides (rule-based) access

• Intuitive Screens
• Existing PCA Reports Online
• Drill Down Capabilities
• Electronic Report Delivery
• Alert Subscriptions
• Balances Histories
• NSLDS Data Retrieval
• Online Borrower Payments
• Payment History
• Financial Transaction History
• Correspondence History
• AWG Information
• Repayment Plan Calculators

43
Thank You! _____

• PresentersSybil Phillips [phone]
• sybil.phillips_at_ed.gov
• Gary Hopkins [phone]
• gary.hopkins_at_ed.gov
• Dan Hayward [phone]
• dan.hayward_at_ed.gov

44
Questions?