The cohort default rate (CDR) is the percentage of a school’s borrowers who enter repayment (following graduation or drop-out) on federal loan programs during a fiscal year and default on the repayment of that loan before the end of the next fiscal year. The U.S. Department of Education releases official cohort default rate reports once a year. The fiscal year 2010 2-year report will be released later this month, and the draft fiscal year 2009 3-year report will be released in March.
These CDR reports are used as a measure of how well a school prepares its students for loan repayment. High default rates suggest that the school has not accurately counseled students regarding borrowing, repayment obligations, or the consequences of defaulting on a loan.
Before reviewing this year’s CDR reports, here are five facts you should know:
- A default occurs after 270 days of non-payment. However, defaulted loans are typically not counted in an institutions cohort default rate until they are at least 360 days overdue.
- Institutions with high cohort default rates can face penalties, including a loss of eligibility for federal student aid programs.
- Default rates are expected to be significantly higher (as much as 93%) when measured over three years vs. over two years.
- Beginning in 2012, a school with a single year CDR of 30 percent or higher will be required to establish a default prevention task force to address the high default rates.
- Following the release of the unofficial CDR reports a school has 45 days to review and challenge the accuracy of the report if necessary. If any of the information on the report is incorrect a school may appeal the report with the Department of Education.
Preliminary analysis of the new CDR reports show that default rates will increase significantly across all types of institutions. Affected by the poor economy, many borrowers are struggling to repay their loans. Unfortunately, the schools are also feeling the consequences of these defaults, as their eligibility to receive federal aid funding is in jeopardy. Without access to federal grant and loan funds to assist students with the costs of receiving a higher education, the school’s survival is in question.
CampusLogic offers an automated solution for complete and accurate reconciliation of Cohort Default Rate reports. Utilizing a proven strategy combined with proprietary technology, CampusLogic is able to quickly identify discrepancies with reliable results. If your institution is faced with an increased cohort default rate or you wish to manage your default rates more effectively, contact CampusLogic immediately by calling (877) 259-9137 to learn more about their default management solutions.
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