Default Prevention


Default Prevention

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, and more.

In addition, TG has created CDR resources to help schools better understand important information about CDRs, and to provide ideas for schools to consider when developing default management plans. TG has also created a high-level overview of each type of challenge, appeal, and adjustment that provides a brief description and identifies key points.

Cohort default rate defined

The cohort default rate (CDR) is the percentage of a school's borrowers who enter repayment on certain Federal Family Education Loan (FFEL) Program or William D. Ford Federal Direct Loan (Direct Loan) Program loans in a given fiscal year and then default within the next two fiscal years.

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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.

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How CDRs are calculated

The federal fiscal year (FY), which begins October 1 of one year and ends September 30 of the next year, is the key span of time in measuring CDRs. In the past, an institution's official CDR was calculated on a two-fiscal year basis. However, with the FY 2009 cohort, ED began transitioning from the 2-year to a 3-year CDR calculation. During this transition period, ED calculated and published both 2- and 3-year CDRs, but with the publication of the official FY 2011 CDR in September 2014, the transition to the 3-year CDR is complete, and the 2-year CDR is no longer published.

Let's examine the 3-year calculation by considering the FY 2011 CDR as an example. The FY 2011 CDR 3-year CDR is based on borrowers who entered repayment in FY 2011 (October 1, 2010 - September 30, 2011) and subsequently defaulted before the end of FY 2013 (October 1, 2012 - September 30, 2013). Under the 3-year CDR, a borrower affects a school's CDR if he or she enters repayment in a given fiscal year and defaults within the next two fiscal years.

FY 2011
Number of borrowers who defaulted
between October 1, 2010, and September 30, 2013
Number of borrowers who entered repayment
between October 1, 2010, and September 30, 2011

x 100

CDR publication process

ED provides schools with draft, or unofficial, CDRs via email each spring. 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 each fall 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.

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Benefits of low rates

Having several consecutive low CDRs entitles a school to certain benefits. If a school's three most recent official CDRs are less than 15 percent, the school:

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

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Consequences of high rates

Consistently high CDRs can result in some significant consequences. Schools with three official, consecutive CDRs of 30 percent or greater, or a single CDR of greater than 40 percent, could lose eligibility to participate 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.

Further, the first time a school's 3-year official 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.

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.

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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 high CDRs, 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 for ED is available 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.

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National and Texas CDRs

The charts below display national and Texas CDRs for 1992-2012 period.

Three-Year Official Cohort Default Rates (Adobe Acrobat pdf document Adobe PDF)


National Three-Year Official Cohort Default Rates for 1992-2012


Texas Three-Year Official Cohort Default Rates for 1991-2012


Texas Student Loan Default Rates (Adobe Acrobat pdf document Adobe PDF)

Fiscal Year 2011 Three-Year Official Cohort Default Rates by Region

Texas Student Loan Default Rates, Fiscal Year 2011 Official Three-Year Cohort Default Rates by Region

TG Student Loan Cure Rates for 1996-2014 (Adobe Acrobat pdf document Adobe PDF)

The cure rate is the primary indicator of TG's effectiveness in getting delinquent borrowers back into repayment.

TG Student Loan Cure Rates for 1996-2014

Here are other documents located on that you may be interested in:

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