Cohort Default Rates
101
Cohort Default Rate Definition
• The Cohort Default Rate (CDR) is a percentage of the number of the
borrowers that enter repayment in a fiscal year (FY) and default within
the next two fiscal years
• Historically the CDR has been calculated on a 2-year cohort period;
however, the 2-year calculation is being phased out to be replaced by 3
year calculation beginning with FY 2009, to be published in 2012
How CDRs are Calculated
Below is a CDR calculation using fiscal year (FY) 2009 as an example
The FY 2009 2-year CDR is based on borrowers that entered repayment in FY 2009
(October 1, 2008 – September 30, 2009) and defaulted before the end of FY 2010
(October 1, 2009 – September 30, 2010)
NUMBER OF BORROWERS THAT DEFAULTED
FY 2009
2-year CDR =
BETWEEN OCTOBER
1, 2008 AND SEPTEMBER 30, 2010
NUMBER OF BORROWERS THAT ENTERED REPAYMENT
BETWEEN OCTOBER
1, 2008 AND SEPTEMBER 30, 2008
Beginning with FY 2009 cohort, the Department of Education (ED) will transition from the two year to the three
year CDR calculation. Under the three year CDR, a borrower will affect a school’s CDR if he/she enters
repayment in a given fiscal year and defaults within the next two fiscal years
NUMBER OF BORROWERS THAT DEFAULTED
FY 2009
3-year CDR =
BETWEEN OCTOBER
1, 2008 AND SEPTEMBER 30, 2011
NUMBER OF BORROWERS THAT ENTERED REPAYMENT
BETWEEN OCTOBER 1, 2008 AND SEPTEMBER
30, 2009
Benefits of Low CDRs
Having several consecutive low CDR’s entitles a school certain benefits
A school with a cohort default rate of less than 15 percent for each of the three
most recent fiscal years for which data is available, may
Disburse, in a single installment, loans that are made for one
semester, one trimester, one quarter, or a four-month period
and
Choose not to delay the first disbursement of a loan for 30 days for
first-time, first-year undergraduate borrowers
Drawbacks of High CDR’s
Consistently high CDRs can result in some significant consequences. Schools with three official, consecutive
CDRs of 25 percent or greater, or a single CDR of 40 percent, could lose eligibility for participating in certain
Title IV programs including: the Federal Direct Loan Program and Federal Pell Grant Program.
Effective 2014, any time two of a school’s three most-recent 3-year rates equal or exceed 30 percent, the
school may be placed on provisional certification for Title IV participation. The threshold for triggering a
sanction will increase at that time from 25 to 30 percent.
The Higher Education Opportunity Act (HEOA) amended the Higher Education Act by establishing some
additional consequences that take effect with 3-year CDRs. The first time a school's 3-year CDR is equal to or
greater than 30 percent, the school must establish a default prevention task force and prepare a default
prevention plan that provides the following:
• Identify the factors causing the rate to be 30 percent or greater
• Establish measurable objectives and steps to improve future rates
• Specify actions that can be taken to improve student loan repayment, including counseling regarding
loan repayment options
The school's plan must be submitted to ED for review. This could happen as early as 2012, based on the
school's official FY 2009 3-year CDR.
If the school's CDR remains equal to or greater than 30 percent for two consecutive fiscal years, the school's
default prevention task force must review and revise the plan, and submit the revised plan to ED. ED may
require the school to make further revisions to the plan and/or take actions to improve student loan
repayment success. This could happen as early as 2013, based on the school's FY 2009 and 2010 3-year
CDRs.
CDR Calculations By CDR Year
CDR
Denominator:
Enter Repayment
Numerator
Default
Publish Rates
Cohorts used for
Sanctions
FY 2009
(3-year)
10/1/08-9/30/09
10/1/08-9/30/11
September 2012
No Sanction
FY 2010
(2-year)
10/1/09-9/30/10
10/1/09-9/30/11
September 2012
FY 08, FY 09, FY 10
FY 2010
(3-year)
10/1/09-9/30/10
10/1/09-9/30/12
September 2013
No Sanction
FY 2011
(2-year)
10/1/10-9/30/11
10/1/10-9/30/12
September 2013
FY 09, FY 10, FY 11
FY 2011
(3-year)
10/1/10-9/30/11
10/1/10-9/30/13
September 2014
FY 09, FY 10, FY 11
CDR Publication Process
ED provides schools with draft, or unofficial CDRs in February of each year.
The draft rate is ED’s initial calculation and is released only to schools. The
official rates are released to schools in September of each year and is
available to the general public.
ED electronically transmits cohort default rate notification packages to all
schools using the Student Aid Internet Gateway (SAIG) destination point
designated by the school. Each CDR package will include a cover letter, a
reader-friendly Loan Record Detail Report (LRDR) and an extract type LRDR.
All schools are allowed five business days to report any problems with the
electronic transmission of their CDR packages.
Challenging Your Draft CDR
Any school that receives a draft cohort default rate is provided the
opportunity to challenge its most recent draft cohort default rate. Because
the draft data forms the basis for a school’s official cohort default rate, it is
important that every school reviews its loan record detail report (LRDR) for
the draft cohort default rates and, if necessary, submit an incorrect data
challenge to the appropriate data manager. Information on how to review
the LRDR is found in Chapter 2.3 of ED’s Cohort Default Rate Guide at
http://ifap.ed.gov/DefaultManagement/finalcdrg.html
Domestic schools have 45 days from the time a draft CDR is received to
submit a challenge. For domestic schools the “timeframe begin date” is
the sixth business day after the cohort default rates are released as
officially announced on the IFAP website.
Incorrect Data Challenge
In filing an incorrect data challenge, the school may contest a borrower’s
repayment start date and/or date of default. The repayment start date is
the determined by adding six months plus on day to the date the borrower
graduated, withdrew, or dropped to less than half-time enrollment. For
CDR purposes, the date of default on a Federal Family Education Loan
(FFEL) is the date a default claim is paid to the lender by the guarantor. For
FFEL loans held by ED (PUT Loans) or Federal Direct Loans (FDL) the default
date is the 361st day delinquency.
A school’s incorrect data challenge must be submitted to the appropriate
data manger. The guarantor/servicer code on the LRDR identifies the data
manger for a particular loan record. If a school identifies inaccuracies on
multiple loans involving multiple data managers, the school submits a
separate incorrect data challenge to each of those data managers. Each
challenge includes only the loans associated with the data manager to
which the challenge is submitted.
Details on how to construct an Incorrect Data Challenge are provided in
Chapter 4.1 of ED’s Cohort Default Rate Guide
http://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html
How Does a School Submit an
Incorrect Data Challenge?
All schools must submit their incorrect data challenge via the electronic
Cohort Default Rate Appeals (eCDR Appeals) system. The eCDR Appeals
system is a web-based application that allows school to submit their
incorrect data challenge allegations electronically, allows the data manager
to respond electronically, and allows ED to review the data manager
response electronically.
All schools must complete the registration process in order to use the eCDR
Appeals system. Complete instructions for registering for the eCDR
Appeals as well as the processes to submit your challenge can be found in
the eCDR Appeals Registration and User Account Guide at
https://ecdrappeals.ed.gov/ecdra/index.html