Cohort Default Rate (CDR): An FAA’s
Challenge of Discovery
Panel Discussion
Moderated by Bill Spiers – Financial Aid Director, Tallahassee Community
College
Panel Members
Thresa Tyus
Default Aversion Consultant
TG
Mary McKinney
Executive Director, Office of
Student Financial Assistance
University of Central Florida
Shavon Seegobin
Default Prevention Manager
Full Sail University
Tocoa Evariste
Assistant Director of Student
Financial Services
Polk State College
Outline
• Default management – why does it matter?
• Cohort default rate (CDR) – what is it?
• Panel discussion
– Best practices and strategies to keep CDRs low
Default Management – Why does it matter?
Managing default is more important than ever
• Tough economy and job market
• Rising enrollment and borrowing
• Split loans (multiple servicers)
• Transition to a 3-year cohort default rate
Default management – Why does it matter?
• Higher education is an investment
worth protecting
• Cohort default rates help enforce accountability
Default management – Why does it matter?
• Schools
– May result in provisional certification or loss of Title
IV eligibility
– Risk of negative publicity
– Additional time and resources to manage and
reverse high rates
• Borrowers
– Damaged credit
– Wage garnishment, collections costs, treasury
offset, etc.
Cohort default rate – What is it?
What is a Cohort Default Rate (CDR)?
• A “cohort” is a group of Stafford loan borrowers
who enter repayment within a given federal fiscal
year (FY)
• The CDR is the percentage of those students in
a school’s cohort who default within a specified
period of time:
– 2-year CDR: by the end of the next fiscal year
– 3-year CDR: within the next two fiscal years
2-year and 3-year CDR illustration
FY 2009
2-year CDR =
FY 2009
3-year CDR =
Stafford borrowers who entered
repayment and defaulted between
10/1/08 and 9/30/10
Stafford borrowers who entered repayment
between 10/1/08 and 9/30/09
Stafford borrowers who enter
repayment and default between
10/1/08 and 9/30/11
Stafford borrowers who entered repayment
between 10/1/08 and 9/30/09
2-year CDR trends
25.0%
2-year CDR
20.0%
15.0%
10.0%
5.0%
0.0%
Source data: http://www2.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html
Comparing the 3-year CDR
14.0%
12.0%
10.0%
8.0%
Official 2-Year CDR
6.0%
Trial 3-year CDR
4.0%
2.0%
0.0%
Fiscal Year
Source data: http://www2.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html
Benefits for low CDRs
• Three most recent 2-year CDRs < 10%
– Loans released in one disbursement
– No 30-day delayed disbursement for first-year,
first-time borrowers
• Three most recent 2- or 3-year CDRs < 15%
(Effective for loans first disbursed after October 1, 2011)
Sanctions for high CDRs – Provisional certification
Trigger event –
A single 2-year CDR ≥ 25%
Two 3-year CDRs ≥ 30% in
last three years
Effective with third 3-year rate (September 2014)
35%
30%
30%
25%
25%
CDR
CDR
20%
15%
10%
20%
15%
10%
5%
5%
0%
0%
FY 2007
FY 2008
FY 2009
FY 2009
FY 2010
FY 2011
Sanctions for high CDRs – Loss of eligibility
FDLP loans only :
FDLP loans and Pell Grants:
• 2- or 3-year CDR greater than
40% for a single year
• 2-year CDR 25% or greater for 3 years
• 3-year CDR 30% or greater for 3 years
Effective with third 3-year rate (September 2014)
50%
35%
45%
1 year
20%
15%
10%
CDR
25%
20%
15%
10%
3 years
3-year CDR
25%
3 years
2-year CDR
30%
2 or 3-year CDR
35%
CDR
40%
30%
5%
5%
0%
0%
FY 2009
FY 2009-2011
FY 2009-2011
High CDRs – New requirements
When 3-year CDRs are ≥ 30%, but less than 40%:
• First year
– Establish default prevention task force
– Prepare default prevention plan
• Second year
– Review and revise plan
• Third year
– Lose eligibility (Pell grants and Direct loans)
Two-Year and Three-Year CDRs
Panel Discussion
Questions?
Contact Information
Thresa Tyus
Thresa.Tyus@tgslc.org
Mary McKinney
Mary.McKinney@ucf.edu
Shavon Seegobin
Shavon.Seegobin@fullsail.com
Tocoa Evariste
tevariste@polk.edu
© 2011 Texas Guaranteed Student Loan Corporation
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