In figures recently released by the U.S. Department of Education (ED), the Louisiana Office of Student Financial Assistance (LOSFA) has achieved a 33-percent drop in its cohort default rate in one year, reducing its rate from 9 percent to 6 percent – an all-time low for the agency.
The cohort default rate is defined as the percentage of borrowers in the Federal Family Education Loan Program (FFELP) who enter into loan repayment status during a certain year, but default on their loan before the end of the following year.
Though LOSFA now boasts a 6-percent cohort default rate for schools using the state guarantee as collateral for student loans, the average default rate for all Louisiana schools is slightly higher, weighing in at 6.6 percent. According to LOSFA Loan Division Director Pat Shannon, "The rate differs because some Louisiana schools are choosing to use other, out-of-state guarantors that have higher cohort default rates in this state."
Shannon attributes LOSFA's recent gains to two contributing factors: a growing customer base of college students who are repaying their loan debt and aggressive default aversion efforts by the agency's Default Prevention Section.
"About 90 percent of our customers are students attending a Louisiana college or university, and there has been a marked improvement in the rate at which they are repaying their debt," Shannon said.
Shannon also commended LOSFA's Default Prevention staff, headed by Lynda Downing, for its effectiveness in working with delinquent borrowers to help them avoid default.
According to Downing, many borrowers default on their student loans because of an incorrect assumption that their inability to make scheduled payments leaves them with no other option, when they might have qualified for a deferment or forbearance that would have delayed repayment of the loan.
"Default is an ill-advised action that can destroy a credit rating and create a larger debt that will continue to accrue interest until paid off," Downing said. "It is so important that delinquent borrowers stay in touch with their lender and guarantor in order to stay informed of the many options available to help keep their loans in good standing."
Shannon and Downing noted that LOSFA is the home-state guarantor and anxious to go the extra mile in working with Louisiana borrowers to help them avoid default. "What's good for our borrowers is good for our schools, and ultimately, good for our state," Downing said.
LOSFA's cohort default rate is lower than that of neighboring and other southern states. Georgia's rate is 6.4 percent; Tennessee's rate is 6.8 percent; Texas shows a 6.9 percent rate; Arkansas' rate is 7.3 percent; and Florida's rate is 8.1 percent. The states of Mississippi and Alabama use national guarantors whose cohort rate reflects their activities in all of the states they service, therefore, individual cohort rates for their success in Mississippi and Alabama are not available.
For more information on the options which are available to resolve delinquency, borrowers with student loans that have been guaranteed by LOSFA are encouraged to contact the Default Prevention staff at (800) 256-3137 or (225) 922-1976.