On September 24, 2018, the Official Cohort Default Rates were released for the 2015 Fiscal Year.
The national default rate has fallen since last year after it rose to more than 11.5%. Since 2013, the National Student Loan Cohort Default Rate has been trending down, despite a small uptick last year. The official 2015 rate is now 10.8%.
According to Federal Student Aid’s National Default Briefing, the highest Defaults are still coming from the proprietary school sector which has an average of 15.6% for the 2015 CDR. Public institutions fared much better at 10.3%, followed by private institutions with just 7.1% of students defaulting on their loans. There are some interesting outliers in this year’s CDR which signify borrowers are struggling in each sector.
Although the privates had the lowest overall default rate, borrowers from schools identified as 2-3 year schools, defaulted at a rate of 16.7%. At private colleges identified as less than 2 years, that rate jumps to 22%, beating the defaults in every other category. Even among public institutions, students who had attended institutions identified as 2-3 year schools the same 16.7% of borrowers defaulted on their loans. Out of the 6155 schools included in the national cohort default rate, nearly 27.5% of schools were identified as 2-3 year institutions and those institutions account for nearly 23% of all defaults.
Borrowers from institutions identified as 4-year institutions had the lowest rates of default in each sector.
The Fiscal Year 2015 Three-Year CDR is calculated by dividing the number of borrowers who entered repayment in 2015 by the number of borrowers who entered repayment in 2015 and defaulted in 2015, 2016 or 2017. A school with a high default rate will face sanctions and may lose its eligibility to participate in Federal Student Aid Programs or expand their scope of participation with ED. Schools with Three-year CDRs of 30% or greater for three consecutive years or with CDRs greater than 40% for one year are subject to federal sanctions.
Nearly sixty institutions with at least one year of cohort default rates over 30% will be required to submit a formal default management plan to ED. High cohort default rates are also a trigger for program reviews and can lead to heightened cash monitoring.
This year seven institutions will lose Title IV program eligibility because their 2015 Cohort Default Rate is over 40%. Five institutions will also lose eligibility to participate in the federal student aid programs due to having three years of official 3-year Cohort Default Rates that are 30% or greater.
The official Three-Year rates were sent to all schools via their Student Aid Internet Gateway (SAIG) mailbox. Federal Student Aid’s Operations Performance Management Services calculates the rates which measure the ratio of students who enter repayment during a cohort year and who later default on those loans. Since the data isn’t always right, schools can challenge and appeal their CDR calculation to have their rates adjusted. Schools may begin submitting challenges and appeals on Tuesday, October 2, 2018 through the eCDR appeals website.