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New data show repayment distress is surging. Institutions that act early can turn a liability into a long-term success strategy.

Repayment has returned, and community colleges are feeling the impact. As of mid-2025, more than 18 million borrowers are in active federal student loan repayment, and the transition has been anything but smooth: the Federal Reserve Bank of New York reports that 12.9% of all student loan debt is seriously delinquent (90+ days late) – the highest level in more than two decades. Among borrowers required to make payments, nearly one in four fell behind in early 2025.

Why Community Colleges Are at Higher Risk

With the mission of serving large numbers of first-generation, Pell-eligible, and part-time students, community college student populations are disproportionately vulnerable to financial stress. The most recent federal Cohort Default Rate (CDR) data confirms this risk:

• Borrowers at public two- and three-year colleges defaulted at an average rate of 15.2%.
• At less-than-two-year institutions, the default rate averaged 13.1%.

These figures far outpace defaults at four-year institutions and highlight the urgent need for targeted repayment support in the community college sector. That’s where proactive support makes the difference.

The Case for Early Intervention

Community college students often juggle work, family, and financial obligations. Without clear guidance, many feel overwhelmed or simply disengage from their loans. A 2024 Trellis survey found that nearly 60% of struggling borrowers had not spoken to their servicer or school since repayment began again, often because they were embarrassed, confused, or unsure where to turn.

A Partner in Proactive Repayment Support

Community colleges don’t have to carry this burden alone. Inceptia partners with institutions to provide timely, tailored outreach during the most critical repayment windows – before repayment begins and when they have slipped into delinquency.

Early, personalized counseling works. Schools that have used Repayment Counseling Outreach have seen:

• An 83% average resolution rate
• 92% of the resolutions consisting of a warm transfer to the servicer
• Unlimited borrower consulting time

To help borrowers before their first payment is due, Grace Counseling Outreach offers:

• Up to a 50% decrease in delinquency
• Greater borrower confidence and engagement
• Fewer defaults, escalations, and loan rehabilitation cases

By serving as a bridge between students, institutions, and servicers, Inceptia helps borrowers navigate repayment options with empathy and clarity. For colleges, this means reduced default risk, preserved federal aid eligibility, and stronger student retention.

Change Moments into Movement

Repayment challenges aren’t going away. For schools committed to access and success, proactive counseling is no longer optional – it’s essential. With the right support, institutions can protect their students’ financial futures while strengthening their own compliance and reputational standing.

If you’re rethinking how your institution supports borrowers through repayment, we’d be glad to share what’s working and how others are scaling their efforts. Visit Inceptia.com or connect directly with one of our business development representatives.

Lincoln, Neb. (June 10, 2025) For decades, Inceptia has been a trusted leader in default management, successfully guiding borrowers back on track to repay their student loans. Their new service solutions Institutional Balance Outreach builds on their extensive experience working with borrowers to help student understand their financial responsibilities and habits with just the right nudges and counseling to keep balances paid off through personalized borrower engagement.

"We’ve been helping institutions lower Cohort Default Rates (CDRs) and improve student repayment success for more than 35 years, with proven strategies and personalized engagement that has had to change as payments and processes evolve. Now, we bring that same expertise and results-driven approach to our Institutional Balance Outreach product. Our highly trained counselors leverage meaningful methods to connect with students, understand their financial challenges, and help them take action to resolve their institutional balances,” said Sue Downing, Senior Vice President & Officer.

Why Inceptia?

• Decades of success in student loan repayment and default prevention
• A results-driven, student-centric approach that increases resolutions
• Skilled counselors who specialize in borrower engagement and financial education
• Seamless transfer of our default management expertise to institutional balance resolution

With Inceptia’s Institutional Balance Outreach, institutions can recover lost revenue, re-engage students, and improve financial stability – all while supporting students in achieving their educational goals.

Lincoln, Neb. (April 30, 2025) – Inceptia, a nonprofit organization committed to empowering students with financial knowledge, has announced the release of the newest edition in its acclaimed "Great Advice" series. Developed in collaboration with NerdWallet, Great Advice for Grads 2025 offers recent graduates practical strategies for managing money with confidence as they transition into life after college.

Recognizing that the leap from campus to career comes with first jobs, first paychecks, and first major financial decisions, Inceptia and NerdWallet teamed up to help graduates find balance and reduce financial stress. This year’s guide includes:

• The Do’s and Don’ts of Using AI to Manage Your Finances: Tips on using technology wisely without losing the
  human touch.
• When to Splurge and When to Save: How to recognize smart splurges that align with your values and long-term goals.
• How to Create a Spending Plan: Building a spending system that supports both saving and living fully.
• Low Buy, Big Impact: How I Cut Spending and Stress: A personal look at using low-buy strategies to create more freedom and less financial anxiety.

"Financial success after graduation isn’t about rigid rules — it’s about building smart habits that evolve with you," said Michelle Lisec-Talarico, Director of Marketing at Inceptia. "Providing students with tools to help them move forward with the knowledge, balance, and confidence they need to master their financial future is the core of our mission. The Great Advice series is another avenue to spread the word."

Great Advice for Grads 2025 is available as a complimentary download, providing a concise and approachable resource for graduates seeking to navigate their next chapter with greater financial clarity.

ABOUT INCEPTIA

Inceptia enables colleges and universities to strengthen relationships and boost enrollment using dynamic tools and personal outreach programs that empower students to successfully navigate admissions and financial aid. With tailored solutions and a nonprofit’s commitment to service, we remove barriers for students so schools can focus on what matters most – guiding them toward a rich and rewarding life through higher education.

ABOUT NERDWALLET

NerdWallet (Nasdaq: NRDS) is on a mission to provide clarity for all of life’s financial decisions. As a personal finance website and app, NerdWallet provides consumers with trustworthy and knowledgeable financial information so they can make smart money moves. From finding the best credit card to buying a house, NerdWallet is there to help consumers make financial decisions with confidence. Consumers have free access to our expert content and comparison shopping marketplaces, plus a data-driven app, which helps them stay on top of their finances and save time and money, giving them the freedom to do more. NerdWallet is available for consumers in the U.S., UK, Canada and Australia.

For many students, higher education represents a path to opportunity, but financial obstacles can quickly derail that journey. Unpaid balances – whether from tuition, fees, or other institutional charges – are a leading cause of student attrition, often forcing students to pause or abandon their education altogether. While financial aid helps many, gaps remain, leaving students in a precarious position when they cannot meet their financial obligations.

Institutions face a dual challenge: ensuring financial stability while keeping students on track to complete their degrees. That’s why proactive balance management is essential – not just for protecting revenue, but for safeguarding student success.

The Link Between Outstanding Balances and Retention

A student who owes even a small balance may be prevented from registering for future courses, accessing transcripts, or continuing their academic progress. Without intervention, what starts as a minor financial setback can become an insurmountable roadblock.

Research shows that financial stress is one of the primary reasons students stop out of college. In many cases, these students intend to return but struggle to navigate the process of resolving their financial obligations. Without structured support, their likelihood of completing a degree diminishes significantly.

Why Institutions Need a Proactive Approach

Many schools rely on reactive strategies, such as placing holds or sending final notices, but these methods often come too late. A proactive outreach approach – one that engages students early, provides clear resolution pathways, and connects them to institutional resources – can significantly increase balance resolution rates and retention.

A successful balance outreach strategy includes:

• Personalized Communication – Engaging students with clear, actionable steps through email, phone, and letter outreach.
• Guided Support – Connecting students with financial aid, payment plans, and other resources before balances become unmanageable.
• Warm Transfers – Ensuring students don’t just receive information but are actively supported in taking next steps.

A Win-Win for Students and Institutions

When students receive timely support, they are more likely to stay enrolled, re-enroll, and persist toward graduation. For institutions, this means higher retention rates, improved student success outcomes, and better financial stability. Addressing outstanding balances isn’t just about collections – it’s about ensuring that financial barriers don’t stand in the way of education.

By implementing a structured, student-centered outreach approach, institutions can turn financial challenges into opportunities for engagement and support. The result? More students completing their education and a stronger, more financially stable institution.

Explore Inceptia strategies to enhance your student retention efforts with proactive outreach solutions, including institutional balance outreach, that can make a difference in if, when and how students meet their higher education goals.

 

Higher education presents students with a series of high-stakes decisions – financial aid applications, course selection, loan repayment, debt management and career planning. However, cognitive biases and the overwhelming nature of choices often result in suboptimal decision-making.

Daniel Kahneman’s dual-system theory of thinking provides insight into why students struggle with these decisions. Fast Thinking (System 1) operates automatically and emotionally, while Slow Thinking (System 2) is deliberate and logical but requires effort. Given the demands on students’ time and mental resources, they frequently default to Fast Thinking, making quick but sometimes flawed choices.

This brief explores how nudging interventions can bridge the gap between impulsive decision-making and well-reasoned choices, helping students navigate their educational journey more effectively.

Today’s Higher Education Landscape: A Perfect Environment for Fast Thinking

While foundational research on Fast and Slow thinking dates back decades, these concepts are more relevant today than ever before due to the increasing complexity of student decision-making in the modern higher education landscape.

Today’s Key Ingredients:

• Digital Overload: With the rise of online learning platforms, social media, and financial aid portals, students are bombarded with more information than ever. This cognitive overload leads to a greater reliance on Fast thinking for quick, heuristic-based decisions.
• Economic Uncertainty: Today’s students face rising tuition costs and greater financial pressure, making short-term, emotion-driven choices (Fast) more common than long-term financial planning (Slow).
• Instant Gratification Culture: Modern technology has conditioned students to expect immediate rewards, reinforcing present bias and making it harder to engage in slow, deliberate decision-making.
• Increased Decision Complexity: Higher education has seen an expansion in academic pathways, financial aid structures, and repayment plans, which increases decision fatigue and forces students to take mental shortcuts.

By recognizing how these modern factors amplify reliance on Fast Thinking, institutions can better tailor nudging strategies to ensure students engage System 2 thinking where it matters most.

Why Students Default to System 1 Thinking

Research supports several reasons why students often rely on Fast Thinking instead of engaging Slow Thinking for crucial decisions:

Cognitive Load and Overwhelm

• Sweller’s (1988) Cognitive Load Theory explains that when students are faced with too much information, their brains default to shortcuts (System 1) to preserve mental energy.
• Higher education decisions – such as choosing a major, selecting financial aid options, or managing debt – often feel overwhelming, leading students to rely on quick, automatic responses rather than deep analysis.

Decision Fatigue

• Baumeister et al. (1998) found that prolonged decision-making drains mental energy, making students more likely to rely on System 1 shortcuts rather than engage in effortful reasoning.
• Given the many daily choices students face, by the time they reach financial or academic decisions, they may lack the cognitive resources to analyze options deeply.

Present Bias & Instant Gratification

• Ariely (2010) and Loewenstein (1992) demonstrated that when choices involve immediate vs. delayed rewards, people – especially students – tend to favor the short-term option.
• This present bias means students may procrastinate on financial aid paperwork or choose an easy class over one that would benefit their long-term career.

Social Influence & Default Bias

• Thaler & Sunstein (2008) found that people tend to follow defaults and social norms rather than analyze all choices.
• Students often mimic their peers rather than engaging Slow Thinking when making major educational and financial decisions.

Lack of Immediate Feedback in Higher Ed Choices

• Kahneman & Tversky (1979) noted that decisions with delayed consequences (such as taking on student loans) encourage Fast Thinking reliance because students do not experience the outcomes immediately.
• Without immediate feedback, students may make choices based on emotion rather than long-term logic.

By understanding these tendencies, institutions can design nudging strategies that help shift students toward Slow Thinking for important decisions.

Efficiency Versus Effort: Understanding Fast & Slow Thinking

Fast Thinking is efficient and automatic but prone to errors. Slow Thinking is methodical and analytical but requires effort and motivation.

Common Fast Thinking Pitfalls in Higher Education:

• Procrastination: Ignoring FAFSA deadlines due to form complexity.
• Overconfidence Bias: Assuming student loans will be easy to repay without proper research.
• Status Quo Bias: Sticking with an undeclared major rather than exploring new options.
• Loss Aversion: Avoiding enrollment in challenging courses due to fear of failure.

When Slow Thinking is Essential:

• Loan Repayment Planning: Evaluating interest rates and repayment plans.

• Career Pathway Research: Analyzing potential salaries, job stability, and degree requirements.

• Course Load Balancing: Weighing credit hours against work and extracurricular commitments.

• Financial Aid Consideration: Comparing scholarships, grants, and loan options.

Since students often default to Fast Thinking, institutions must design interventions that prompt Slow Thinking engagement for crucial decisions.

Nudging: A Practical Solution to Make the Most of Fast Thinking

A subtle intervention that alters behavior in a predictable way without limiting choices is a nudge. Used with purpose, nudges can break down choices to make bigger decisions easier to navigate and guide students toward better decisions while keeping autonomy intact.

Key Nudging Strategies for Higher Education:

• Default Options: Opt-out enrollment in financial aid reminders and student success programs.
• Text Message Reminders: FAFSA completion nudges with personalized deadlines.
• Process Simplification: User-friendly financial aid and loan counseling tools.
• Social Norming: Showing that “85% of students in your major complete their FAFSA by this date.”
Studies show that these behaviorally informed interventions increase student engagement, persistence, and financial responsibility.

Inceptia’s Nudging-Driven Solutions:

To help students the most, Inceptia includes nudges in each solution to break down processes, remove barriers, and ease decision-making. Taking it a step further to improve the quality of the nudge, each solution has a target audience based on conditional logic or school input to ensure the correct messaging is delivered to the right student at the right time. This approach reduces today’s information clutter and helps students focus on what they need to do next. Additionally, our expert counselors specialize in the programs they support, allowing them to truly advocate for the best student outcomes.

Inceptia specializes in behaviorally-driven solutions to enhance student success by integrating research-backed nudging strategies into its financial aid, enrollment and admissions support services.

• Enrollment Ready Outreach: Timely, targeted nudges to offer reminders and ensure timely submissions that also delivers insight to schools for future planning.
• Loan Summary, Grace Counseling Outreach, Repayment Counseling Outreach: Proactive insights into loan repayment and financial planning.
• Verification Gateway, SAP Advisor, PJ Advisor: Reducing complexity in financial aid processes to increase student follow-through.
• Financial Avenue: Helping students engage with top financial education topics through self-guided interventions.

Conclusion

The dual-system model of thinking helps explain why students often struggle with complex decisions. By integrating behavioral science and nudging strategies, institutions can support students in making more informed, responsible choices. Inceptia’s expert-driven, student-focused solutions create a decision-making environment that reduces barriers, breaks down tasks and encourages thoughtful action.

In an era where higher education success depends on both access and informed decision-making, Inceptia stands at the forefront of leveraging behavioral science to support students and institutions alike.

References

• Kahneman, D. (2011). Thinking, Fast and Slow.
• Thaler, R., & Sunstein, C. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness.
• Inside Higher Ed (2024). Study on the Effectiveness of Nudging for Student Success.

By Sue Downing, Senior Vice President & Officer, Inceptia

As of April 2025, the U.S. Department of Education has resumed aggressive collection efforts on defaulted federal student loans, including administrative wage garnishment (AWG). This policy change threatens millions of borrowers and poses significant challenges for higher education institutions. Financial aid administrators and institutional leaders must proactively support at-risk borrowers to mitigate these risks and uphold institutional integrity.

The Escalating Risk of Default

Following the expiration of pandemic-era protections, borrowers who are 270 days delinquent on federal student loans now face severe consequences, such as wage garnishment of up to 15% of disposable income and seizure of tax refunds through the Treasury Offset Program. These measures can lead to financial instability for borrowers and tarnish institutional reputations.

Institutional Accountability and Cohort Default Rates

The U.S. Department of Education monitors institutions' cohort default rates (CDRs), which reflect the percentage of borrowers defaulting within three years of entering repayment. High CDRs can result in sanctions, including loss of eligibility for federal student aid programs. Therefore, supporting borrowers in repayment is not only ethical but also essential for institutional sustainability.

Strategies for Supporting At-Risk Borrowers

1. Enhanced Financial Education Programs: Implement comprehensive financial education initiatives to equip students with budgeting skills and loan repayment strategies. Explore platforms such as Financial Avenue to bring online financial education programs to your student body.
2. Proactive Communication: Utilize tools like Repayment Counseling Outreach to identify and engage with borrowers at risk of default, providing personalized support and information on repayment options.
3. Collaboration with External Partners: Partner with organizations such as Inceptia, which specialize in default prevention, to offer tailored counseling and resources, enhancing the support network for borrowers.
4. Institutional Policy Reforms: Establish campus-wide committees involving faculty and staff to develop and implement strategies aimed at reducing default rates and promoting student success.

Conclusion

In the current landscape, where federal enforcement of student loan repayments has intensified, institutions must take decisive action to support borrowers. By implementing targeted strategies and fostering a culture of financial responsibility, financial aid administrators and institutional leaders can protect their students and uphold the institution's commitment to educational excellence.

 

Higher education is more than just earning a degree – it’s about preparing students for long-term success, both professionally and financially. A high student loan repayment rate isn’t just a metric for compliance; it’s a reflection of an institution’s dedication to student financial empowerment, career readiness, and overall institutional excellence. Schools that prioritize strong borrower repayment outcomes set their students up for lifelong financial success and distinguish themselves as leaders in student support.

Student Financial Empowerment and Success

A high student loan repayment rate signals graduates are thriving financially, successfully managing their student loan obligations, and achieving economic independence. By fostering strong financial habits early on, schools help students lay the foundation for a secure financial future.

Why It Matters:

• Higher repayment rates indicate graduates are building strong credit, improving financial stability, and reaching their professional goals.
• Students who manage their debt successfully are more likely to become engaged alumni who support their alma mater.

“Typically, when students weren’t repaying their loans it’s because they were unaware of how to pay the debt back and then would go into hiding. Inceptia stepped in when we couldn’t and made students aware of their repayment options and that made the difference.”

-Megan Hartless, Financial Aid Director, Blue Ridge Community College

Strengthening School-Student Partnerships

Rather than focusing on penalties for high default rates, institutions have an opportunity to highlight the support systems they have in place to guide students toward repayment success. Schools that actively invest in financial literacy and counseling create lasting partnerships with students beyond graduation.

Why It Matters:

• Providing proactive financial education fosters trust and long-term student success.
• Strong support systems ensure students understand their loan repayment options and make informed financial decisions.

“Our students come to us with varying backgrounds and we want them to be able to find their full selves while getting their education. Financial wellness plays a big roll.”

-Rhonda Lake, First-Year Advisor, Doane College

Institutional Proactivity vs. Reactivity

Rather than responding to high default rates as a crisis, schools that proactively address borrower success create a culture of financial well-being. Implementing financial literacy programs, personalized counseling, and repayment strategies ensures students are set up for success from day one.

Why It Matters:

• Preventative measures help students make informed borrowing decisions and avoid financial pitfalls.
• A proactive approach reflects a forward-thinking institution that prioritizes student success holistically.

Building a Stronger Workforce & Supporting Economic Mobility

Graduates who can successfully manage student loan repayment are more likely to advance in their careers, purchase homes, and contribute to economic growth. Strong borrower outcomes signal students are securing meaningful employment that supports financial stability.

Why It Matters:

• Low default rates reflect students are obtaining well-paying jobs post-graduation.
• Students who avoid default are more likely to purchase homes and contribute to local economies.
• Schools play a role in fostering upward economic mobility and strengthening the workforce.

Competitive Advantage for Enrollment & Retention

Parents and students increasingly evaluate institutions based on return on investment (ROI). Schools that demonstrate strong financial outcomes attract and retain students who seek a secure financial future.

Why It Matters:

• Students want to attend institutions that prioritize their long-term financial success.
• A strong repayment rate enhances an institution’s value proposition for prospective students and their families.

Institutional Excellence & Reputation

Schools with high repayment success rates stand out as leaders in student success and financial wellness. A high repayment success rate also reinforces an institution’s commitment to student outcomes, boosting its reputation among prospective students, parents, and stakeholders.

Why It Matters:

• Positive repayment trends signal that the institution equips students with the knowledge and tools to navigate financial decisions.
• Schools recognized for strong borrower outcomes can differentiate themselves in a competitive landscape.
• A report from the National Center for Education Statistics found that borrowers from institutions with strong repayment support services default at significantly lower rates than their peers.

A Future Built on Financial Stability

Maintaining a high student loan repayment rate is about more than just compliance – it’s a sign of an institution’s investment in student success. Schools that prioritize financial education, career readiness, and proactive support create an environment where graduates thrive, reinforcing their reputation and long-term impact.

“We believe that student success extends beyond the classroom. By equipping borrowers with essential financial tools and knowledge, we help institutions create a foundation for long-term financial stability and career growth."

-Sue Downing, Senior Vice President & Officer, Inceptia

At Inceptia, we partner with institutions to empower students with the tools and guidance they need to navigate repayment successfully. Through financial education initiatives, student engagement programs, and personalized support, we help schools keep borrowers on track and ensure a strong financial future for graduates. Investing in repayment success isn’t just about avoiding default – it’s about building a legacy of financial empowerment and opportunity for generations to come.

To find out how Inceptia services can help your students and school prosper, connect with us at TalkToUs@inceptia.org or visit www.inceptia.org.