Shoptalk 532, December 8, 2009
Industry Update
ED releases trial three-year cohort default rates
On December 7, ED announced that to assist schools in understanding the impact of the new three-year cohort default rate (CDR) calculation, it has calculated and is making available unofficial trial three-year CDRs for the last three cohorts for which there are data to support a three-year calculation (fiscal years 2005, 2006, and 2007).
Background
The Higher Education Opportunity Act (HEOA) of 2008 made changes to the timeframes for the CDR calculation. As a reminder, a school's CDR is the percentage of a school's federal student loan borrowers that enter repayment within the cohort fiscal year (denominator in the formula below) and default within the cohort default period (numerator). Currently, the cohort default period is the two-year period that begins on October 1 of the fiscal year when the borrower enters repayment and ends on September 30 of the following fiscal year. For example, for the fiscal year 2007 (FY 2007) official rates that were published last September, the CDR calculation was performed as follows:
Number of borrowers who defaulted between October 1, 2006, and September 30, 2008
Number of borrowers who entered into repayment between October 1, 2006, and September 30, 2007
Beginning with the FY 2009 cohort, however, the CDR formula will be calculated on a three-year basis. In other words, the first three-year CDR, which will be issued in draft form to schools in February 2012 and as official rates in September 2012, will be calculated as follows:
Number of borrowers who defaulted between October 1, 2008, and September 30, 2011
Number of borrowers who entered into repayment between October 1, 2008, and September 30, 2009
ED will continue to calculate and publish official two-year CDRs until three sets of three-year rates are published. The last of these two-year rates will be for the FY 2011 cohort and will be released in 2013. Beginning in 2014, only three-year rates will be published, since, at that time, three three-year rates would have been calculated (FY 2009 will be published in 2012, FY 2010 in 2013, and FY 2011 in 2014).
Trial three-year CDRs
To assist schools in preparing for the transition to the three-year CDR, ED is releasing "trial" three-year CDRs for FY 2005, FY 2006, and FY 2007. These rates are provided for information only; no benefits or sanctions apply to these trial rates. In addition, because these are unofficial rates and serve as preview data only, schools may not submit challenges or appeals that normally apply to draft and official rates. Nor do these rates reflect certain adjustments that may be made for official rates (fewer than 30 borrowers in a cohort, low participation, mergers, recalculations due to appeals or adjustments, etc.).
Schools can access their trial FY 2005, FY 2006, and FY 2007 CDRs and can request a Loan Record Detail Report (LRDR) for each calculation through the National Student Loan Data System (NSLDS) at www.nsldsfap.ed.gov. Schools will also be able to compare these trial rates with their official two-year rates for the relevant cohort years. Beginning December 14, 2009, these trial rates (with enrollment information) will also be posted publicly on the Federal Student Aid Data Center at www.FSADataCenter.ed.gov.
More information
To view the entire ED announcement on three-year cohort rates, please visit the Information for Financial Aid Professionals website.
ED issues reminder on requesting Status Information Letters from Selective Service
On November 23, ED released an Electronic Announcement advising schools that the Selective Service System is currently receiving an unusually large number of requests from schools for Status Information Letters. The Status Information Letter is used by schools to document that a federal student aid applicant is exempt from registering with Selective Service, if the student isn't clearly exempt from the requirement to register. This increase in the number of requests has caused a significant backlog in Selective Service System processing.
Selective Service has researched the nature of these requests and has determined that the requests are primarily from schools asking for verification for specific student aid applicants who are not required to register with Selective Service.
Most men aged 18-25 are required to register with Selective Service in order to be eligible for federal student aid. This requirement includes men residing in the U.S. who are U.S. citizens or noncitizens. However, there are several categories of men who are not required to register with Selective Service in order to receive federal student aid. The announcement describes which types of students are not required to register (and for whom the school should not request a Status Information Letter) and provides examples of documentation that may be used to verify a student's exempt status.
If the student is not clearly exempt from the requirement to register, then it is appropriate to request a Status Information Letter from Selective Service.
More information
The complete announcement is available on the Information for Financial Aid Professionals website.
Please review the 2009-10 Federal Student Aid Handbook, Volume 1, Chapter 5, for more information about Selective Service requirements. The Handbook is available for download in PDF format on TG Online. For more information about who is required to register, please go to the Selective Service System website, and select "Need a Status Information Letter or Not?" in the "What's New?" section.
If you have questions, contact TG customer assistance at (800) 845-6267, or send an email message to cust.assist@tgslc.org.
