Default Prevention

CDR Resources

3-year CDR Transition

CDR Consequences and Benefits

CDR Management Opportunities

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TG Default Aversion
defaultaversion@tgslc.org

Cohort default rates 101

The cohort default rate, or CDR, is one measure of how well a school prepares its students for student loan repayment. Low CDRs indicate that schools are counseling their students to borrow as needed, stay aware of their repayment obligations, and understand the consequences of default. High CDRs may indicate that schools need to better support their borrowers with repayment information and resources. This page, outlined in the set of hyperlinks just below, offers an overview of CDRs, how they're published, locating trial 3-year data, and more.

Cohort default rate defined
Some background
How CDRs are calculated
CDR publication process
Benefits of low rates
Consequences of high rates
Find out your estimated 3-year rate
Challenging your draft CDR
National and Texas CDRs

Cohort default rate defined

The cohort default rate (CDR) is the percentage of a school's borrowers of Stafford, SLS, and certain Consolidation loans (originated under the FFELP or FDLP) who enter repayment in a given fiscal year and then default by the end of the next one to two fiscal years. Official CDRs have previously been measured on a 2-year basis only; however, that measure is in the process of being phased out in favor of a 3-year calculation, which becomes the definitive measure beginning with the fiscal year (FY) 2009 CDR (to be published in 2012).

Some background

In the late 1980s, CDRs were introduced to help ensure accountability among institutions of higher education. At the time, a number of schools were enrolling students who were not necessarily qualified for a program of study or who could not reasonably benefit from the degree enough to repay any federal student loans they may borrow. By implementing a measure that identified schools with high CDRs, Congress hoped to cut down on fraud in the marketing of higher education and to help ensure that students could make good on their college investment.

How CDRs are calculated

The federal fiscal year, which begins October 1 of one year and ends September 30 of the next year, is the key span of time in measuring CDRs. Today, an institution's official CDR is calculated on a two-fiscal year basis, though that will change in the near future. Let's examine the 2-year calculation by considering the fiscal year (FY) 2009 CDR as an example.

The FY 2009 CDR 2-year CDR is based on borrowers who entered repayment in FY 2009 (October 1, 2008 - September 30, 2009) and subsequently defaulted before the end of FY 2010 (October 1, 2009 - September 30, 2010).

FY 2009
2-year CDR =

Number of borrowers who defaulted
between October 1, 2008, and September 30, 2010
Number of borrowers who entered repayment
between October 1, 2008, and September 30, 2009

x 100

With the FY 2009 cohort, ED will begin transitioning from the 2-year to a 3-year CDR calculation. Under the 3-year CDR, a borrower will affect a school's CDR if he or she enters repayment in a given fiscal year and defaults within the next two fiscal years.

FY 2009
3-year CDR =

Number of borrowers who defaulted
between October 1, 2008, and September 30, 2011
Number of borrowers who entered repayment
between October 1, 2008, and September 30, 2009

x 100

CDR publication process

ED provides schools with draft, or unofficial, CDRs via email in February of each year. This draft rate is ED's initial calculation and is released only to schools and not the general public. The official rates are released to schools in September of each year and made available to the general public at that time. The official rate is used to determine if schools have triggered a benefit (based on a low CDR) or sanction (based on a high CDR). Schools can challenge, that is, call into question the accuracy of data for their draft CDRs.

Benefits of low CDRs

Having several consecutive low CDRs entitles a school to certain benefits. For FDLP loans with first disbursements on or after October 1, 2011, if a school's three most recent 2- or 3-year CDRs are less than 15 percent, the school:

May deliver Stafford or PLUS loans in a single disbursement (given semester length); and
Is not required to delay by 30 days the first disbursements of Stafford loans to first-year, first-time, undergraduate borrowers.

Drawbacks of high CDRs

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 greater than 40 percent, could lose eligibility for participating in certain Title IV programs, including the FDLP and Federal Pell Grant Program.

Effective September 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. This plan must:

Identify the factors causing the rate to be 30 percent or greater,
Establish measurable objectives and steps to improve future rates, and
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.

Find out your trial 3-year CDRs

Schools can access trial FY 2005, FY 2006, FY 2007, and FY 2008 CDRs and request a Loan Record Detail Report (LRDR) for each calculation through the National Student Loan Data System (NSLDS). Schools will also be able to compare these trial rates with official 2-year rates for the relevant cohort years. Trial 3-year rates (with enrollment information) have been posted on the Federal Student Aid Data Center.

Challenging your draft CDR

If a school feels a draft CDR is not accurate, the school can challenge the rate. Generally, a school may challenge only its most recent draft CDR. However, if a school is facing a potential loss of eligibility due to its three most recent CDRs being 25 percent or greater, the school may challenge its two most recent official rates, its current draft rate, or a combination of these within the 45-day challenge period. These challenges are submitted directly to ED. Contact information is available for ED through the IFAP website.

Domestic schools have 45 days from the time a draft CDR is received to submit a challenge. There are two types of challenges that a school may submit:

an incorrect data challenge (alleging inaccuracies in the data itself), or
a participation rate index challenge (demonstrating that only a small percentage of the school's students borrowed loans included in the draft data).

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 determined by adding six months plus one day to the date the borrower graduated, withdrew, or dropped below half-time enrollment. For CDR purposes, the date of default on a FFELP loan is the date a default claim is paid to the lender by the guarantor, or, for FFELP loans held by ED, the 361st day of delinquency. For FDLP loans, since there is no default claim payment, the default date is the 361st day of delinquency.

A school's incorrect data challenge must be submitted to the appropriate data manager. The guarantor/servicer code on the LRDR identifies the data manager for a particular loan record. Data manager contact information is available on ED's website. 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.

Participation rate index challenge
Participation rate index challenges are intended for schools with low FFELP and/or FDLP loan participation relative to their student population. The school's participation rate index is the percentage of such students who borrowed FFELP or FDLP loans during that period, multiplied by the school's draft CDR. If the school's participation rate index is less than specified thresholds for CDR-based sanctions, the school's challenge is successful. Further details regarding how to construct this type of challenge are provided in Chapter 4.2 of ED's Cohort Default Rate Guide.