Bigger Can Be Better When It Comes To Default Management Services
Group buying has gained in popularity as a way for individual people or companies to reap the benefits of power in numbers. Known as “economies of scale”, some advantages include more purchasing power, lower costs, and reduced administrative workload. If you’ve ever wondered if group buying could work in higher-ed—specifically with default management services—keep reading. It’s an interesting thought we’ve explored.
Each year, millions of students rely on student loans. While many successfully repay them, others struggle and default, experiencing serious consequences. As schools are being held increasingly accountable for student success, finding innovative and cost-effective solutions remains on the to-do list for higher-ed leaders.
Taking Advantage of Group Buying Through Affiliation
The Wisconsin Technical College System (WTCS) has more than 300,000 individuals who annually access their 16 technical colleges. While programs are affordable, many students rely on loans to help finance their education and cover living expenses. When student need to repay their loans, the schools want to provide extra help to those who need it.
In late 2017, WTCS leadership discussed this need. But with tight budgets and limited resources, they needed a creative way to serve their students and reduce Cohort Default Rates (CDRs). They explored group buying. Individual campuses were offered the chance to evaluate and purchase default management services as part of a larger entity.
WTCS wanted their schools to maintain autonomy in choosing which services to use (e.g., financial wellness tools, default prevention or loan rehabilitation services, etc). But they also wanted schools to reap the benefits of group buying. In total 13 of the 16 schools participated. The positive, and significant, outcomes achieved (in < 12 months) are explored in a case study.
Group Buying Benefits
Multi-campus benefits can include:
- Cost effectiveness.Service providers’ fixed expenses become proportionally smaller with higher volumes, providing an opportunity to offer services at a proportionally lower fee.
- Measurable reduction in administrative time. One collective body goes through the purchase process to consider an offer. Instead of creating, scoring, and evaluating multiple RFPs or default prevention presentations, there’s one team to collaborate and share responsibility.
- Contract coordination.A unified group with similar legal requirements makes the oversight of establishing or evaluating a contract easier. From the vendor’s side, the ability to execute one verses multiple contracts brings positive financial gains, which subsequently benefits schools, too.
Make It Easier to Find a Default Prevention Company
Ways for Single Schools to Band Together
If you’re not part of a large school system there are ways to connect with an existing buying group or create your own.
- Reach out to schools in your state or region.
- Post on your favorite listserv.
- Make connections through state associations.
- Engage your state leadership to uncover interest in pursuing a state-based solution.
We discovered that group buying isn’t just for retailers and hospitals. There’s solid opportunity for the higher-ed industry to save time and money and grow their buying power.
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