FY 2018 DRAFT COHORT DEFAULT RATES COMING SOON

The U.S. Department of Education is set to release the Fiscal Year 2018 3-Year Draft Cohort Default Rates on February 22, 2021.

The Draft 3-Year Cohort Default Rates (CDR) for Fiscal Year 2018 is calculated by dividing the number of borrowers who entered repayment in 2018 by the number of borrowers who entered repayment in 2018 and defaulted in 2018, 2019 or 2020. In 2020 repayment on federal student loans was paused as a result of pandemic. Borrowers who were in default were taken out of default and their loans were put into forbearance. ED has been silent as to how this will affect a school’s cohort default rate, but it seems logical to assume that there should be no defaulters on a school draft CDR for 2020. Let’s see.

As with any other year, schools have 45 days from receipt of the report to submit challenges and appeals during the draft cycle. Although there are no sanctions associated with the draft rates, schools should review the data used to calculate the rate for accuracy, because this data forms the basis of a school’s official cohort default rates which come out in September. A school that fails to challenge the accuracy of its draft cohort default rate data through an Incorrect Data Challenge may not contest the accuracy of the same cohort data when it receives its official cohort default rate when it comes out later this year on September 27.

What are the sanctions for schools that have a high Cohort Default Rate?

When a school’s three most recent official cohort default rates are 30.0 percent or greater for the three- year calculation:

    • A school will lose Direct Loan and Federal 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.
    •  When a school’s current official cohort default rate is greater than 40.0 percent, for the three-year CDR calculation:
    • A school will lose direct Loan Program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two years.