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A cohort default rate is defined as the percentage of a school’s student borrowers entering repayment on Federal Family Education Loan Program (FFELP) or Federal Direct Loan Program during a specific fiscal year who default on those loans during the same or following fiscal year.
Cohort Default Rate (CDR) Formula:
An official cohort default rate is calculated for a school according to the formulas listed below.
| Number of students who entered repayment on their loans in the specified fiscal year and defaulted within the same fiscal year or the subsequent fiscal year (Numerator) |
÷ |
Number of students who entered repayment on their loans in the specified fiscal year (Denominator) |
X |
100 |
= |
CDR |
Example:
A lender has 200 students with loans entering repayment in FY 2003 (October 1, 2002 - September 30, 2003) – the denominator. Of those 200 students, 12 defaulted on their student loans in FY 2003 or FY 2004 (October 1, 2003 - September 30, 2004) and had default claims paid by the guaranty agency – the numerator. This lender’s FY 2003 cohort default rate calculation is:
| 12 ÷ 200 x100 = 6.0 percent |
Formula A is used for schools that had 30 or more student borrowers who entered repayment during the fiscal year for which the rate is being calculated.
Example:
A school has 500 students with loans entering repayment in FY 2003 (October 1, 2002 - September 30, 2003) – the denominator. Of those 500 students, 12 defaulted on their student loans in FY 2003 or FY 2004 (October 1, 2003 - September 30, 2004) and had default claims paid by the guaranty agency – the numerator. This school’s FY 2003 cohort default rate calculation is:
| 12 ÷ 500 x100 = 2.4 percent |
Formula B is used for schools that had fewer than 30 student borrowers who entered repayment during the fiscal year for which the rate is being calculated.
Example:
A school has 200 students with loans entering repayment in FY 2003 (October 1, 2002 - September 30, 2003) – the denominator. Of those 200 students, 12 defaulted on their student loans in FY 2003 or FY 2004 (October 1, 2003 - September 30, 2004) and had default claims paid by the guaranty agency – the numerator. This school’s FY 2003 cohort default rate calculation is:
| 12 ÷ 200 x100 = 6.0 percent |
A draft cohort default rate is calculated for a school based on one year of data (using Formula A), even if the official cohort default rate for the school will be calculated based on several years of data (using Formula B).
A dual-program cohort default rate is calculated when a school has student borrowers who entered repayment on both FFELP and Federal Direct Loans in the same fiscal year. Although the same basic formulas are used to calculate FFELP, Federal Direct Loans, and dual-program cohort default rates, slightly different definitions of default are used to determine which FFELP and Federal Direct Loan borrowers are included in the numerator of the formulas. For all schools, a FFELP loan is considered to be in default on the date the guarantor pays a default claim, and a Federal Direct Loan is considered to be in default after 360 days of delinquency.
Appealing the CDR
A school with persistently or excessively high official cohort default rates may lose FFELP or Federal Direct Loan eligibility and may also become ineligible to participate in the Federal Pell Grant Program.
A school may wish to appeal its cohort default rate if it identifies discrepancies in the data used to calculate its rate. The U.S Department of Education publishes two guides that can be referenced to learn about how to challenge and appeal the CDR. The Cohort Default Rate Guide, is a comprehensive reference document that explains in detail how the CDR is calculated, how a school can correct the data used to calculate the rates and how to submit a challenge, appeal or an adjustment. The Cohort Default Rate Quick Reference Guide presents some of the key elements of the Guide in a more informal manner to provide a quick summary of the CDR, how to calculate it and what should be done during the draft and official CDR cycles.
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