If it has not already been received, your institution will soon receive the 2023 Draft Cohort Default Rate (CDR) report. The report contains repayment status information for the members of the cohort and provides you with a preview of your final CDR. Even low-CDR schools not in danger of losing benefits or being sanctioned can benefit from ensuring there are not errors in the report. Afterall, each defaulted borrower represents an alum struggling with the ramifications.
For the uninitiated, the CDR represents the percentage of borrowers within a cohort that defaulted during the monitoring period. The cohort members are borrowers that entered repayment during a particular federal fiscal year which runs from October 1 through September 30. The 2023 cohort includes borrowers that entered repayment between October 1, 2022, and September 30, 2023. The monitoring period is three years including the cohort year, so October 1, 2022, through September 30, 2025. There is an alternate calculation for very small colleges or those with few student loan borrowers. Borrowers are considered in default after 360 days of delinquency.
Institutions are responsible for maintaining a low CDR, and there are benefits to doing so. Institutions with the most recent year CDR below 5% may disburse loan proceeds in a single disbursement for students attending a study abroad program, regardless of the length of the program and are not required to delay disbursements for first-year first-time borrowers. Schools with a CDR of 15% or below over the last three monitoring periods can issue funds in a single disbursement for students enrolled in a single term, semester, trimester, etc. These schools can also elect not to delay disbursement for first-year first-time borrowers. Sanctions for high-CDR school are serious: loss of Direct Loan and Pell Grant eligibility with a CDR of 30% or more for the last three cohort years and loss of Direct Loan eligibility for the current fiscal year and next two fiscal years with a CDR of 40% or higher in the most recent calculation.
The draft period allows institutions to identify erroneous information used in the calculation and submit corrections called challenges. The platform for submitting challenges is called eCDR Appeals which is a little confusing because appeals cannot be filed on it. Appeals can be filed by institutions subject to sanctions that can document a specific extenuating circumstance. See Part 4 of the Cohort Default Rate Guide for more information about appeals. The most common error found in the draft data is the separation date which is critical for determining when the student should enter repayment and number of days of delinquency. An incorrect separation date can put the student in the wrong cohort (the denominator of the calculation) or improperly appear to be in default (the numerator of the calculation). A borrower removed from the denominator (the cohort) should also be removed from the numerator even if really in default. The default will be counted in another year’s CDR. Luckily, the separation date is the one piece of data we have at our fingertips, and it is under our institutional control to report it accurately. If you have concerns about the timeliness and accuracy of your institution’s NSLDS reporting, you should review your draft data closely. This is an arduous, time-consuming process with a short window for completion at a very busy time of year, unfortunately.
Wouldn’t it be great if you could manage this process throughout the year so when you get your draft data, you are confident it is correct? We have good news for you! NSLDS provides you with a suite of reports available in several formats to allow you to monitor your cohort before the draft CDR is calculated.
The Date Entered Repayment report (DER001) contains currently enrolled borrowers with enter repayment dates within the time frame you specify. You can compare this data to your institution’s anticipated graduation date on record to identify incorrect separation dates reported to NSLDS. One thing to keep in mind is that students who leave school or drop below half-time for a period may have some loans enter repayment before their anticipated graduation date even if they later return. This report includes borrowing history, so you can identify these students easily.
The Delinquent Borrower report (DELQ01) contains borrowers being reported delinquent by one of the federal loan servicers. It includes demographic information like address and telephone number and can be used to do outreach to borrowers to help them avoid defaulting (and thus stay out of the numerator of your CDR calculation).
The Borrower Default Summary report (SCHDF2) contains defaulted borrowers affiliated with your institution where the default status falls within a date range you supply. This report is helpful for identifying the borrowers in the current monitoring period that may impact your CDR. The first usage is to compare the default status date with your institutional separation date to see if it makes sense. Another use is to identify borrowers who may be able to rehabilitate defaulted loans before the end of the monitoring period.
Rehabilitation allows borrowers to negotiate an affordable monthly payment with their loan servicer and if they make those payments on time for nine months, the defaulted loan returns to good standing, and all records of the default are erased. This is important to schools in that if a borrower can rehabilitate their defaulted loan before the end of the monitoring period, it can be removed from the numerator of the CDR calculation, thus reducing your CDR. This is the only time a default will not count against your institution. In any other scenario, including fully paying the loan balance or consolidating to return to good standing during the monitoring period, if the default occurred, it counts.
Loan summary detail for either the most recent 24 months (DRC015) or 36 months (DRC016) contains a listing of borrowers with repayment history relevant for the period. This is the same type of data that will be reported in the Loan Record Detail report (LRDR) provided with your draft CDR.
Finally, the School Portfolio Report (SCHPR1) contains all loans associated with your institution that entered repayment during a specified timeframe, including those that may be from the now defunct Federal Family Education Loan Program (FFEL). When the appropriate date range is requested, this report best simulates the LRDR.
To obtain these reports, log into NSLDS and navigate to the reports tab. You have several options, depending on the report, for delivery including delivery to your SAIG mailbox. See this section of the Default Rate Guide for more information about report formats and delivery options.
If this sounds like a lot of work, it is! However, it is much more manageable to make it a regular part of your financial aid administration than the alternative of identifying and correcting erroneous information in a window of five to six weeks. Furthermore, managing your CDR throughout the year gives you the best opportunity to help borrowers avoid defaulting in the first place, which is a win-win situation. The first step of implementing a new process in your office is often the hardest step. The Higher Education Assistance Group has the expertise to get you off to a running start. Visit our website or email info@heag.us for information about our services.
Source: https://fsapartners.ed.gov/knowledge-center/topics/default-management/cohort-default-rate-guide