A 32% Reduction in Student Loan Default. How One School Did It.

Posted by Joe Crosby

10/7/15 8:00 PM

Set right between the commerce and industry of downtown Minneapolis and a leafy, historic neighborhood of beautiful homes, museums, lakes, and parks, Dunwoody College of Technology knows what it's like to be in a unique position.

As one of only a handful of private, non-profit technical colleges in the country it has a special place in the world of higher education. While mission-driven and focused on developing leaders and entrepreneurs, Dunwoody also works tirelessly on the nuts and bolts of solid career training.

Private post-secondary schools regularly see close to 70% of their students taking federal financial aid. Yet, technical schools that mostly grant associates degrees  generally only see borrower rates around 40%. As a private, technical school, the majority of Dunwoody students use loans to finance their education.

Dunwoody is innovative and unique in the sector, but shares a similar challenge to other schools.

Cohort Default Rates Climb

Fiscal Year (FY) 2010 was the first year that a "3-year" Cohort Default Rate (CDR) would be the official measuring stick of how well student loan borrowers were progressing with repayment of their loans. All post-secondary schools that accepted federal student loans would be measured by the Department of Education on this now longer scale measurement that calculated the percentage of students defaulting on their loans within 3-years of repayment.

In September, 2013,  the national CDR for FY2010 was announced at 14.7% and many wondered if student loans were going to be the newest bubble to burst our economy. Dunwoody, like many other schools, was not happy with its rate. 

But that is when schools like Dunwoody stepped up to face default head-on. Kimberly Helm, Dunwoody’s Bursar, explains that lowering default is not easy, but by showing some additional care, they've been able to realize a 32% drop in their CDR. Here's how they did it and how they plan to keep it down:

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Offer a Straight – Forward Message of Help

Student borrowers who are struggling with repayment after their Dunwoody experience, get an email from Dunwoody with a clear subject line –

“DO NOT DEFAULT - Dunwoody is here to help”

Ms. Helm says the simple message of support is something she borrowed from a colleague who reported success in simplicity. With the typical defaulting student across the country carrying less than $9,000 in debt, the issue isn't always a simple matter of finances. Supportive messages can spur action. 

Dunwoody communicates a similar message of help over the phone to struggling borrowers. 

This direct, targeted, and plain as day messaging is paired with their use of Cohort Management Essentials (CME) which is delivering a similar and consistent message. The combination of outreach means roughly 60 fewer student borrowers will succumb to default.

And Dunwoody plans to continue default reduction with proactive financial literacy.

Entrench Financial Literacy from the Start

Student loan entrance counseling is important at Dunwoody and is supplemented with:

  • Orientation programming that offers students and families the knowledge to plan for the cost of their education
  • A 3-week, no-cost personal finance course taught by Ms. Helm (who earned the Accredited Financial Counselor designation so she could personally provide quality financial counseling to Dunwoody students)
  • Promotion of GradReady in acceptance packages, on school websites, and near important offices

And Continue Financial Education Throughout

Financial education continues while students are enrolled and repayment information is presented in exit counseling and in the following formats: 

  • Games that energize students like Financial Jeopardy. Competing academic programs challenge each other to see who has more personal finance smarts.
  • Countdown to Commencement, an event where soon-to-be graduates can have open conversations about loan repayment
  • The promotion of GradReady's Electronic Loan Counselor

Pay Special Attention to Reports

Although it can be tedious and time-consuming, paying attention to available reports helped Dunwoody find students listed in their cohort who were currently in-school or otherwise should not be included in the cohort calculations. 

Dunwoody makes a point to frequently review the Delinquent Borrower Report (part of Cohort Management Essentials). The report's data has become the basis for their student loan outreach.

This full lifecycle approach to supporting student borrowers combines education and outreach and shows that Dunwoody is doing everything they can to help their students finance their education. The result is a 32% reduction in default. 

Topics: cohort default rates