October 06, 2014

Financial Education Default Prevention

FAME continues to maintain impressively low cohort default rates for Maine student loan borrowers. According to data recently released by the U.S. Department of Education, FAME’s federal Fiscal Year 2011 three-year cohort default rate was 7.1 percent of borrowers. This represents nearly a full percentage point decrease compared to last year’s rate of 8.0 percent. By comparison, the national three-year average was 13.7 percent, which represents a one-point drop from last year’s national average of 14.7 percent. The cumulative rate for other guaranty agencies like FAME was 9.4 percent. Maine’s official rate was 12.8 percent, but this represents the addition of federal direct loan borrowers to the cohort. Direct loan borrowers interact with the U.S. Department of Education regarding their loans, and not with FAME. Cohort Default Rates measure the percentage of all federal Stafford Loan borrowers entering repayment in a given federal fiscal year who default on their loans prior to the end of the second following fiscal year. This is the first year that only a three-year rate is being released by the U.S. Department of Education. A three-year cohort default rate is the percentage of a school’s borrowers who enter repayment on certain Federal Family Education Loan (FFEL) Program or William D. Ford Federal Direct Loan (Direct Loan) Program loans during a particular federal fiscal year, October 1 to September 30, and default or meet other specified conditions prior to the end of the second following fiscal year. “FAME’s ability to maintain a low default rate benefits lenders, schools, and, most importantly, Maine students,” stated FAME Board Chair Ray Nowak. “FAME’s default rate is the result of expanded college access, financial education and debt management services that support financial aid offices and educate borrowers.” “These results show the value of the personalized financial education and default prevention efforts of FAME and our lender partners. FAME’s emphasis on default prevention is the right one for Maine students and families,” stated FAME Chief Executive Officer Bruce Wagner. FAME believes that financial education is the cornerstone of debt management and default prevention. Two years ago, FAME launched SALT, a collaboration with American Student Assistance that delivers financial education and debt management services free-of-charge to Maine students and alumni. The vast majority of Maine college students now have access to SALT’s proactive debt management services, and FAME recently secured an agreement to expand SALT statewide. In 2015, FAME will continue its commitment to providing financial education in Maine by co-sponsoring “Fostering Financial Education in Maine Schools,” a financial literacy conference for Maine teachers, administrators, counselors and others.