COHORT DEFAULT RATE – PARTICIPATION RATE INDEX APPEAL

There’s good reason for schools to keep their default rates low. Schools with low default rates enjoy special benefits such as the ability to disburse loans without delaying the disbursement date for 30 days for first time borrowers and the ability to make single loan disbursements for students in study abroad programs.  

On the other hand, schools with Three-Year CDRs of 30% or greater for three consecutive years or with CDRs greater than 40% for one year may face federal sanctions. 

Some schools have a small number of borrowers entering repayment which can really make their rates look awful. At other schools only a small portion of the student body takes out student loans. If only three students chose to borrow loans, and one defaults, a school’s default rate would be 33% and subject to sanctions. 

If a school is facing sanctions, schools with a low loan “participation rate” may be able to appeal sanctions through the Participation Rate Index Appeal. To qualify a school can’t have more than 21% of students borrowing loans in a cohort. 

 To determine if your school might qualify check out the Templates and Spreadsheets section of FSA’s Default Management website and navigate to the Participation Rate Index Worksheet.  This worksheet is intended to help schools understand whether their student loan volume is low enough to meet the criteria of a PRI Challenge or Appeal. 

COHORT DEFAULT RATES RELEASED

On September 28, 2020, the Official Cohort Default Rates were released for the 2017 Fiscal Year. 

Since 2013, the National Student Loan Cohort Default Rate has been trending down, despite a small uptick last year. The official 2017 rate is now 9.7%, down 4% from the Official FY 2016 rate of 10.1%

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 14.7% for the 2017 CDR. Public institutions fared much better at 9.3%, followed by private institutions with just 6.7% of students defaulting on their loans. 

The Fiscal Year 2017 Three-Year CDR is calculated by dividing the number of borrowers who entered repayment in 2017 by the number of borrowers who entered repayment in 2017 and defaulted in 2017, 2018 or 2019. 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. 

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 6, 2020 through the eCDR appeals website. 

FISCAL YEAR 2017 OFFICIAL COHORT DEFAULT RATES COMING LATE-SEPTEMBER

ED will release FY 2017 Official Cohort Default Rates (CDR) to all eligible institutions in mid-September. Schools will receive their CDR electronically via their SAIG mailbox.

The Cohort Rates are an important metric used to determine school or program quality. Schools with 3-year CDRs of 30% or greater for three consecutive years or with CDRs greater than 40% for one year may face federal sanctions. Institutions may challenge, appeal, or have their rate adjusted in certain circumstances. Be on the lookout for more information such as an Electronic Announcement announcing the official release dates of the 2017 CDR package from FSA’s Operations Performance Division in the forthcoming days. In the meantime, check out the Default Management Web site which contains resources for Financial Aid Professionals, Data Managers and Students here.

FY 2017 3-YEAR DRAFT COHORT DEFAULT RATES RELEASED

On February 24, 2020, the Department of Education distributed the FY 2017 3-Year Draft Cohort Default Rate (CDR) notification packages to schools via their Student Aid Internet Gateway (SAIG) mailbox. The package includes a cover letter and Loan Record Detail Report (LRDR). It’s important for schools to review their draft data because there are sanctions for schools with high cohort default rates and benefits for schools with low ones and the draft cycle is one of the only opportunities to challenge certain data.

The Fiscal Year 2017 3-Year Draft CDR is calculated by dividing the number of borrowers who entered repayment in 2017 by the number of borrowers who entered repayment in 2017 and defaulted in 2017, 2018 or 2019.

Although there are no sanctions or benefits associated with the draft rates themselves, the draft rates will become official in September. During the draft cycle, schools have an opportunity to challenge incorrect data or challenge their (low) participation rate. The challenge and appeals cycle begins on March 3, 2020 and lasts for 45 days. More information about submitting an Incorrect Data Challenge or a Participation Rate Index Challenge can be found in the Cohort Default Rate Guide,

Benefits
A school whose most recent official cohort default rate is less than 5.0 percent and is an eligible home institution that is originating loans to cover the cost of attendance in a study abroad program may disburse loan proceeds in a single installment to a student studying abroad regardless of the length of the student’s loan period, and may choose not to delay the disbursement of the first installment of loan proceeds for first year first-time borrowers studying abroad.

A school with a cohort default rate of less than 15.0 percent for each of the three most recent fiscal years for which data are available, including eligible home institutions and foreign institutions, may disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period and may choose not to delay the first disbursement of a loan for 30 days for first time, first-year undergraduate borrowers.

Sanctions
If a school’s three most recent official cohort default rates are 30.0 percent or greater for the three-year calculation it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.

If a school’s current official cohort default rate is greater than 40.0 percent, for the three-year CDR calculation, it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years