On February 27, 2017, the Department of Education distributed the FY 2014 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 2014 3-Year Draft CDR is calculated by dividing the number of borrowers who entered repayment in 2014 by the number of borrowers who entered repayment in 2014 and defaulted in 2014, 2015 or 2016.
Although there are no sanctions or benefits associated with the draft rates themselves, the draft rates become official in September. During the draft cycle, schools have an opportunity to challenge incorrect data or challenge their (low) participation rate. Such challenges, if successful, will be reflected in the school’s official rate. The challenge and appeals cycle begins on March 7, 2017 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 here: http://bit.ly/2lWBRLo
Benefits for schools with low cohort default rates
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 for schools with high cohort default rates
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.