Managing Your School's Cohort Default Rate

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Overview

• Understanding Cohort Default Rate• Brainstorming• Getting Started• Creating a Plan• Measuring Success

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• Measures number of borrower defaults relative to borrowers in repayment during specific periods

• Tracked and calculated by the Department of Education using the National Student Loan Data System (NSLDS) and the Loan Record Detail Report (LRDR)

%%Cohort Cohort Default Default

RateRate

Understanding CDR

NumeratorNumerator(Borrowers in default)

DenominatorDenominator(Borrowers in repayment)

==

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Understanding 3-Year CDR

Cohort Fiscal Year Borrower Entered Repayment 3-Year Cohort Default Period Cohort Default Rate Calculation Date

2009 10/01/2008 – 09/30/2009 10/01/2008 – 09/30/2011Draft: February 2012

Official: September 2012

2010 10/01/2009 – 09/30/2010 10/01/2009 – 09/30/2012Draft: February 2013

Official: September 2013

2011 10/01/2010 – 09/30/2011 10/01/2010 – 09/30/2013Draft: February 2014

Official: September 2014*

2012 10/01/2011 – 09/30/2012 10/01/2011 – 09/30/2014Draft: February 2015

Official: September 2015

2013 10/01/2012 – 09/30/2013 10/01/2012 – 09/30/2015Draft: February 2016

Official: September 2016

2014 10/01/2013 – 09/30/2014 10/01/2013 – 09/30/2016Draft: February 2017

Official: September 2017

2015 10/01/2014 – 09/30/2015 10/01/2014 – 09/30/2017Draft: February 2018

Official: September 2018

2016 10/01/2015 – 09/30/2016 10/01/2015 – 09/30/2018Draft: February 2019

Official: September 2019

2017 10/01/2016 – 09/30/2017 10/01/2016 – 09/30/2019Draft: February 2020

Official: September 2020

*First application of sanctions for 3-Year Cohort Default Rates.

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Impact – Consequences*

• Most recent 3-year CDR above 30% - Create a default prevention taskforce and plan.

• Two of three most recent 3-year CDRs 30% - Obtain provisional certification. If consecutive years, revise default prevention plan.

• Three consecutive 3-year rates above 30%– Lose Pell Grant and Direct Loan eligibility.

• Most recent 3-year CDR above 40% - Lose Direct Loan eligibility only.

* Consequences of high 3-year CDRs will take effect beginning in September 2014, based on 3-year official CDRs for FY 2009 – FY 2011. Until then, consequences are based on 2-year official CDRs.

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Impact - Benefits

• Three most recent CDRs are below 15% - Exemption from the 30-day delayed disbursement rule for first-year, first-time Stafford loan borrowers and from the multiple disbursement rule for Stafford and PLUS loan borrowers (for a loan period no longer than one standard term or four months.)

• Most recent CDR is less than 5% - Exemption from both rules for borrowers using the loan to cover a study-abroad cost of attendance.

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Brainstorming

You have been asked to create a simple, effective default prevention plan for your school, Sample State College.You should know:

» Your approximate enrollment is 15,000 students, 45% of which receive federal aid.

» Your student body is made up of commuters, non-commuters and online students.

» Over the past four years, your CDR has increased steadily by 2% and your estimated 3-year rate is 18%.

» Your plan should contain strategies for students who are:• In School• In Grace/Repayment• Delinquent

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How Do I Get Started?

• Set a target default rate for your institution.» Identify the maximum number of defaults to meet your target.» Project your rates throughout the year by monitoring current

defaulted borrowers and borrowers over 300 days delinquent.

• Review prior defaulters at your school to identify common characteristics.

» Withdrawn students» Transfer students» Participants in particular programs of study» SAP students» Students who borrowed above the cost of attendance

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Developing Messages

In School

Their total loan debt and available

resources

Repayment

Their servicer contact information and payment options

Delinquent

The consequences of default and their

resources

What should your students know?What should your students know?

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Creating a Plan

• In-school» Meet with “high-risk” students, based on your research» Encourage small, manageable payments while in school

• Grace» Email students» Calls to “high-risk” students

• Repayment» Letters/emails to early stage delinquent students» Calls to late stage delinquent students» Calls to students ending a deferment/forbearance

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In School - Campus Involvement

• Your administration and faculty could be impacted by your school’s high CDR. Make them part of the solution!

• Consider including:» Admissions» Resident Life» Commuter Services» Greek Life» Academic Clubs» Career Counseling» Faculty

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Creating a Plan

• In-school» Meet with “high-risk” students, based on your research» Encourage small, manageable payments while in school

• Grace» Email students» Calls to “high-risk” students

• Repayment» Letters/emails to early stage delinquent students» Calls to late stage delinquent students» Calls to students ending a deferment/forbearance

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Entering Grace - Before You Go

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Creating a Plan

• In-school» Meet with “high-risk” students, based on your research» Encourage small, manageable payments while in school

• Grace» Email students» Calls to “high-risk” students

• Repayment» Letters/emails to early stage delinquent students» Calls to late stage delinquent students» Calls to students ending a deferment/forbearance

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Delinquent - NSLDS Resources

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Measure Success

• Categorize your efforts, track your success, and make adjustments.

Late-Stage Delinquency Students - Total Students (100)

Sample Size

EffortResponded

to effortResolved delinquency

through paymentResolved delinquency through

other means

50 Email 15 (30%) 7 (47%) 8 (53%)

50 Phone Call 30 (60%) 10 (33%) 20 (67%)

High-Risk Students - Total Students (90)

Sample Size

Risk FactorMade in-school

paymentEnrolled in automatic

paymentsNon-delinquent

50 Transfer 5 (10%) 15 (30%) 45 (90%)

40 SAP 2 (5%) 15 (38%) 30 (75%)

Questions? Comments?