Your Cohort Default Rate: What Does It Mean?
October 6, 2016
© 2009–2016 by National Association of Student Financial Aid Administrators (NASFAA). All rights reserved. NASFAA has prepared this document for use only by personnel, licensees, and members. The information contained herein is protected by copyright. No part of this document may be reproduced, translated, or transmitted in any form or by any means, electronically or mechanically, without prior written permission from NASFAA. NASFAA SHALL NOT BE LIABLE FOR TECHNICAL OR EDITORIAL ERRORS OR OMISSIONS CONTAINED HEREIN; NOR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE FURNISHING, PERFORMANCE, OR USE OF THIS MATERIAL. This publication contains material related to the federal student aid programs under Title IV of the Higher Education Act and/or Title VII or Title VIII of the Public Health Service Act. While we believe that the information contained herein is accurate and factual, this publication has not been reviewed or approved by the U.S. Department of Education, the Department of Health and Human Services, or the Department of the Interior. The Free Application for Federal Student Aid (FAFSA®) is a registered trademark of the U.S. Department of Education. NASFAA reserves the right to revise this document and/or change product features or specifications without advance notice. October 2016
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NASFAA Webinar Your Cohort Default Rate: What Does It Mean?
Table of Contents
Overview of Cohort Default Rate ....................................................................................................................... 1
Special Circumstances ...................................................................................................................................... 5
Cohort Default Rate: Challenges, Adjustments, and Appeals ............................................................................ 9
Cohort Default Rate Timeline: Challenges, Adjustments, and Appeals ............................................................ 11
Incorrect Data Challenge Checklists ................................................................................................................ 15
Participation Rate Index Challenge Checklist .................................................................................................. 17
Uncorrected Data Adjustment Checklist .......................................................................................................... 19
New Data Adjustment Checklists ..................................................................................................................... 21
Erroneous Data Appeal Checklists .................................................................................................................. 23
Loan Servicing Appeal Checklists .................................................................................................................... 25
Grounds for Loan Servicing Appeals ............................................................................................................... 27
Economically Disadvantaged Appeal Checklists .............................................................................................. 29
Participation Rate Index Appeal Checklist ....................................................................................................... 31
Glossary for Cohort Default Rate Issues .......................................................................................................... 33
References for Cohort Default Rate Issues...................................................................................................... 35
Slides .............................................................................................................................................................. 37
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Overview of Cohort Default Rate
Cohort Default Rate Formulas
Non-Average Rate Formula
Used when a school has 30 or more borrowers who enter repayment during a cohort fiscal year.
Numerator Number of borrowers in the denominator who defaulted or met the other specified condition
during the cohort default period = Cohort Default Rate Denominator
Number of borrowers who entered repayment in the cohort fiscal year
Average Rate Formula
Used when a school has 29 or fewer borrowers who enter repayment during a cohort fiscal year, if the school had a cohort default rate (CDR) calculated for the two previous fiscal years.
Numerator Number of borrowers in the denominator who defaulted or met the other specified condition
during the cohort default period =
Cohort Default RateDenominator
Number of borrowers who entered repayment in the current cohort fiscal year and the two
preceding fiscal years
Source: Cohort Default Rate Guide, pp. 2.1-6 to 2.1-7
Title IV Loans Included in the Cohort Default Rate Calculation
Federal Family Education Loan (FFEL) Program • Federal Stafford Loan• Federal Unsubsidized Stafford Loan
Federal Direct Student Loan (Direct Loan) Program • Direct Subsidized Loan• Direct Unsubsidized Loan
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Title IV Loans Not Included in the Cohort Default Rate Calculation
• Federal PLUS Loans• Federal Consolidation Loans*• Federal Direct PLUS Loans• Federal Direct Consolidation Loans*• Federal Perkins Loans• Federal Insured Student Loans
*These loans are excluded from the CDR calculation, but a defaulted consolidation loan may cause theborrower to be included in the numerator of that CDR calculation if the default occurs during the cohort defaultperiod.
When is the CDR Released?
February Draft Rate
September Official Rate
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Benefits and Sanctions Related to the Official Cohort Default Rate
Low Official Cohort Default Rate Benefits
Less than 5 percent for most recent fiscal year and is an eligible home institution to cover COA in a study abroad program
• Ability to disburse loans in single installment to a student studying abroad.
• Option to disburse to first-year, first-time borrowers studying abroad without the 30-day delay.
Less than 15 percent for each of the three most recent fiscal years
• Ability to make a single disbursement of loans for one semester, trimester, quarter, or four-month period.
• Option to disburse to first-year, first-time borrowers without the 30-day delay.
High Official Cohort Default Rate Sanctions
Equal to or greater than 40 percent for any one fiscal year
• Loss of eligibility to participate in the Direct Loan Program.
Equals 30 percent or more for any one fiscal year
• Must create a default prevention task force that will develop and implement a plan to address the institution’s high cohort default rate.
• Plan must be submitted to the U.S. Department of Education (ED) for review.
Equals 30 percent or more for two consecutive fiscal years
• Must submit to ED a revised default prevention plan and may be placed on provisional certification.
Equals 30 percent or more for the three consecutive fiscal years
• Loss of eligibility to participate in both the Direct Loan Program and in the Federal Pell Grant Program.
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SpecialCircumstancesInvolvingSchools
Situation How It Affects the
Denominator How it Affects the
Numerator
A borrower separates from the school that disbursed the loans but enrolls at that school or a different school before the end of the grace period.
The borrower is included in the cohort fiscal year when the borrower actually enters repayment. If the date a borrower enters repayment is delayed by the borrower re-enrolling in school, then the borrower’s inclusion in a cohort default rate calculation will also be delayed.
The borrower is included if the borrower defaulted or met the other specified condition during the cohort default period.
A borrower obtained more than one loan to attend a school and the repayment dates for each of the loans fall into different cohort fiscal years.
The borrower is included in the cohort fiscal years when the borrower entered repayment. The borrower will appear in two different cohort default rate calculations for the same school if the borrower has two loans that enter repayment in different cohort fiscal years.
The borrower is included if the borrower defaulted or met the other specified condition during the relevant cohort default periods. The borrower will appear in different cohort default rate calculations for the same school if the borrower has multiple loans, enters repayment in separate cohort fiscal years, and defaults or meets the other specified condition during those cohort default periods.
A borrower takes out loans at more than one school.
The borrower is included in the cohort fiscal years when the borrower entered repayment for each school where the borrower obtained loans.
The borrower is included for the schools at which the loans were obtained if the borrower defaulted or met the other specified condition during those cohort default periods.
A school, its owner, its agent, contractor, employee, or another entity or individual associated with the school makes a payment on the borrower’s loan in order to avoid default during the cohort default period.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is included because the loan meets the other specified condition during the cohort default period.
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SpecialCircumstancesInvolvingRepayment
Situation How It Affects the
Denominator How it Affects the
Numerator
The borrower enters repayment and subsequently obtains a deferment or forbearance on the loan.
The borrower is included in the cohort fiscal year when the borrower entered repayment. Deferments or forbearances do not alter the date the borrower entered repayment.
The borrower is included if the borrower defaulted or met the other specified condition during the cohort default period.
A borrower consolidates one or more defaulted loans.
The borrower is included in the cohort fiscal years when the borrower entered repayment on the underlying loans (the loans that the borrower consolidated), not based on the date that the consolidation loan entered repayment.
Even though the borrower has regained eligibility for Title IV funds by consolidating, the borrower is still considered to be in default for the purpose of calculating the school’s cohort default rate.
A borrower requested and was granted a revised repayment schedule that started before the date the borrower was originally scheduled to enter repayment.
The borrower is included in the cohort fiscal year when the early repayment schedule begins. The early repayment date becomes the repayment date.
The borrower is included if the borrower defaulted or met the other specified condition during the cohort default period.
A borrower paid the loan in full before the date the loan was scheduled to enter repayment.
The borrower is included in the cohort fiscal year that the borrower paid the loan in full. The paid-in-full date becomes the new repayment date.
The borrower is not included because the borrower did not default, unless the loan was paid in full through a consolidation loan and the consolidation loan defaults during the cohort default period.
A borrower paid the loan in full after defaulting or meeting the other specified condition during the cohort default period but without rehabilitating the loan within the cohort default period.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is included because the loan was not successfully rehabilitated for cohort default rate purposes within the cohort default period.
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SpecialCircumstancesInvolvingLoansThatWereDischarged,Canceled,orRefunded
Situation How It Affects the
Denominator How it Affects the
Numerator
The borrower’s loan was discharged due to bankruptcy, death, disability, or other type of loan discharge (not including closed school, false certification, or identity theft) before the borrower entered repayment.
The borrower is included in the cohort fiscal year based on the date the loan was discharged. The date of discharge becomes the date entered repayment.
The borrower is not included because the borrower did not default.
The borrower’s loan was discharged due to bankruptcy, death, disability, or other type of loan discharge (not including closed school, false certification, or identity theft) after the borrower enters repayment but before the end of the cohort default period and before the borrower defaults or meets the other specified condition.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is not included because the borrower did not default.
The borrower enters repayment and defaults or meets the other specified condition during the cohort period. Subsequently, the loan is discharged due to bankruptcy, death, disability or other type of loan discharge.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is included because the borrower defaulted or met the other specified condition during the cohort default period.
The borrower’s loan was discharged due to school closure, false certification, and/or identity theft.
The borrower is not included because loans discharged due to school closure, false certification, and/or identity thefts are not included in the cohort default rate calculation.
The borrower is not included because loans discharged due to school closure, false certification, and/or identity thefts are not included in the cohort default rate calculation.
A loan was fully refunded or canceled, within 120 days of loan disbursement.
The borrower is not included because canceled loans are not included in the cohort default rate calculation.
The borrower is not included because canceled loans are not included in the cohort default rate calculation.
The loan was partially refunded within 120 days of loan disbursement.
The borrower is included in the cohort fiscal year when the borrower entered repayment on the portion of the loan that was not refunded.
The borrower is included if the borrower defaulted or met the other specified condition during the cohort default period.
The borrower dies after the borrower’s loans enter repayment before the end of the cohort default period and before the borrower defaults or meets other specified condition.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is not included because the borrower died before going into default.
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SpecialCircumstancesInvolvingLoansThatWereRepurchased
Situation How It Affects the
Denominator How it Affects the
Numerator
A lender repurchased a defaulted loan because the guaranty agency determined that the lender did not meet the insurance requirements and, as a result, the loan lost insurance and became an uninsured loan.
The borrower is not included because uninsured loans are not included in the cohort default rate calculation.
The borrower is not included because uninsured loans are not included in the cohort default rate calculation.
A lender immediately repurchased a loan because the lender incorrectly submitted the default claim to the guaranty agency and does not submit another default claim within the cohort default period.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is not included because the borrower is not in default.
A lender immediately repurchased a loan because the lender incorrectly submitted the default claim to the guaranty agency and later submits another default claim that is paid within the cohort default period.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is included because the subsequent default claim was paid within the cohort default period.
A lender made a courtesy repurchase of a defaulted loan because the borrower established a new repayment plan or for other reasons.
The borrower is included in the cohort fiscal year when the borrower entered repayment.
The borrower is included because the original valid default claim was paid during the cohort default period.
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Cohort Default Rate: Challenges, Adjustments, and Appeals
Challenges Why Result of Successful Submission
When to File
Incorrect Data Challenge (IDC) 668.204(b)
School believes the LRDR for the draft CDR contains incorrect data. Opportunity to correct data before official CDR is released. (If accuracy of data not challenged in IDC, the school cannot contest the accuracy of that data later in an Uncorrected Data Adjustment or Erroneous Data Appeal based on disputed data.)
NSLDS will be corrected and the corrected data will be used with calculating the official CDR.
Draft
Participation Rate Index Challenge (PRI) 668.204(c)
School believes it may be subject to loss of eligibility or potential provisional certification based on its CDR with the release of the official CDR; however, school can demonstrate it should not be subject to sanction or potential provisional certification because of its low participation rate index.
School will not be subject to the anticipated sanction or provisional certification. If challenges were based on a prior official CDR, that CDR will not be basis for a future sanction.
Draft
Adjustments Why Result of Successful Submission
When to File
Uncorrected Data Adjustment (UDA) 668.209
School believes the LRDR for the official CDR contains data that should have been corrected as a result of its successful Incorrect Data Challenge.
NSLDS will be corrected and ED will recalculate the CDR.
Official
New Data Adjustment (NDA) 668.210
School, which is not subject to sanction, believes the LRDR for the official CDR contains data that was not included in the draft CDR or that is different from the draft CDR data. (If the school is subject to sanctions, Erroneous Data Appeal should be submitted instead.)
NSLDS will be corrected and ED will recalculate the CDR.
Official
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Appeals Why Result of Successful Submission
When to File
Erroneous Data Appeal (ER) 668.211
A school that is subject to sanction believes the LRDR for the official CDR contains new, incorrect data and/or contains disputed data that was included in an incorrect data challenge.
NSLDS will be corrected and ED will recalculate the CDR. If the recalculated rate falls below the relevant threshold, the school will no longer be subject to loss of eligibility or provisional certification.
Official
Loan Servicing Appeal (LSA) 668.212
School believes the LRDR for the official CDR contains defaulted loans that were improperly serviced for CDR purposes and contests the servicing of the borrower’s loan account.
ED will recalculate the CDR.
Official
Economically Disadvantaged Appeal (EDA) 668.213
School believes it should not be subject to loss of eligibility or potential provisional certification based on its CDR because of its demonstrated high number of low-income students attending the school and the school’s placement rate (for a nondegree-granting school) or the school’s completion rate (for a degree-granting school).
School will not be subject to sanction for that CDR year.
Official
Participation Rate Index Appeal (PRI) 668.214
School believes it should not be subject to loss of eligibility or provisional certification based on its cohort default rates because of its low participation rate index.
School will not be subject to sanction for that cohort fiscal year. If the school’s participation rate index is for a cohort fiscal year that meets the relevant threshold, the CDR for that cohort fiscal year will not be the basis for a future sanction.
Official
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Cohort Default Rate Timeline: Challenges, Adjustments, and Appeals
Challenges Cycle Action When
Incorrect Data Challenge (IDC)
Draft School receives CDR February
School sends completed IDC to data manager via eCDR
Within 45 days of time frame begin date
Data manager sends IDC response to school via eCDR
Within 30 days of the receipt of school’s IDC
Participation Rate Index Challenge (PRI)
Draft School receives CDR February
School sends completed PRI challenge to ED
Within 45 days of time frame begin date
ED sends school written notification of its decision which is final.
Before official CDRs are published
Adjustments Cycle Action When
Uncorrected Data Adjustment (UDA)
Official School receives official CDR September
School sends ED completed UDA via eCDR
Within 30 days of time frame begin date
New Data Adjustment (NDA)
Official School receives official CDR September
School sends NDA allegations to data manager via eCDR
Within 15 days of time frame begin date
Data manager sends NDA response to school via eCDR
Within 20 days of receipt of school’s NDA allegations
School requests clarification via eCDR (if necessary)
Within 15 days of receipt of data manager response
Data manager sends requested information to school via eCDR
Within 20 days of receipt of school’s clarification request
School sends completed NDA via eCDR
Within 30 days of receipt of final data manager response
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Appeals Cycle Action When
Loan Servicing Appeal (LSA)
Official School receives official CDR September
School sends request for loan servicing records to data manager and ED via eCDR
Within 15 days of time frame begin date
Data manager notifies school and ED via eCDR of any fee for providing records along with a list of the representative sample and a description of how sample was selected
Within 20 days of receipt of school’s request
School pays fee, if applicable Within 15 days of data manager notification
Data manager documents fee and sends loan servicing records to school via eCDR
Within 20 days of receipt of payment or within 20 days of receipt of schools request if no fee is charged
School requests clarification, replacement, or ED records via eCDR
Within 15 days of receipt of records
Data manager sends requested information to school via eCDR
Within 20 days of schools request
School sends completed LSA to ED via eCDR
Within 30 days of receipt of records, except, if later as provided in 34 CFR 668.212(c)(10)(ii), as applicable, if school is also filing a new data adjustment or erroneous data appeal
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Appeals (continued) Cycle Action When
Erroneous Data Appeal (ER)
Official School receives notice of loss of eligibility or notice of provisional certification
September
School sends ER allegations to data manager
Within 15 days of time frame begin date
Data manager sends ER response to school
Within 20 days of receipt of the school’s ER allegations
School requests clarification (if necessary)
Within 15 days of receipt of data manager response
Data manager sends requested information to school
Within 20 days of receipt of the school’s request for clarification
School sends completed ER to ED
Within 30 days of receipt of final data manager response, or, if applicable, and later, as provided in 34 CFR 668.211(b)(6)(ii)
Economically Disadvantaged Appeal (EDA)
Official School receives notice of loss of eligibility or notice of a second consecutive three-year CDR subjecting school to potential placement on provisional certification
September
School sends written assertion by its management to ED
Within 30 days of time frame begin date
School sends completed EDA to ED
Within 60 days of time frame begin date
Participation Rate Index Appeal (PRI)
Official School receives notice of loss of eligibility or of a second three-year CDR that, in combination with an earlier three-year rate, potentially subjects the school to provisional certification
September
School sends completed PRI appeal to ED
Within 30 days of time frame begin date
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ED-Determined Appeals Cycle Action When
Average Rate Appeal Official School receives notice of loss of eligibility; ED notifies school that it may qualify for Average Rate Appeal
September
School sends completed Average Rate Appeal to ED
Within 30 days of time frame begin date
Thirty-or-Fewer Borrower Appeal
Official School receives notice of loss of eligibility; ED notifies school that it may qualify for Thirty-or-Fewer Borrowers Appeal
September
Schools sends completed Thirty-or-Fewer Borrower Appeal to ED
Within 30 days of time frame begin date
Incorrect Data ChallengeChecklists
School to eCDR Appeals
Determine Does the loan record detail report for the draft cohort rate contain inaccurate
data?
Submit to eCDR Appeals Relevant information for each borrower challenged Supporting Documentation for each borrower challenged CEO Certification Letter
Data Manager to eCDR Appeals
Determine Was the school submission before deadline? Does the data manager hold the loans? Is all the material present? Does the data manager agree or disagree with the school?
Response to School via eCDR Appeals Relevant information for each borrower challenged Supporting Documentation for all Disagrees
Follow‐up Update NSLDS and internal records (if necessary)
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ParticipationRateIndexChallengeChecklist
SchooltotheDepartment
Determine Willtheschoolbesubjecttosanctionafterthereleaseoftheofficialcohort
defaultrates? Whatistheschool’sparticipationrateindex?
SubmittotheDepartment Spreadsheet Letter
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Uncorrected Data Adjustment Checklist
School to the Department
Determine Does the loan record detail report for the official cohort default rates contain
incorrect data that a data manager agreed to correct?
Submit to the Department Relevant information for each borrower included in UDA case CEO Certification Letter
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NewDataAdjustmentChecklists
SchooltoDataManagerviaeCDRAppeals
Determine Doestheloanrecorddetailreportfortheofficialcohortdefaultratecontainnew
data?
SubmittoDataManagerviaeCDRAppeals RelevantInformationforeachborrowerchallenged SupportingDocumentationeachborrowerchallenged CEOCertificationLetter
DataManagertoSchoolviaeCDRAppealsDetermine Wastheschoolsubmissionbydeadline? Doesthedatamanagerholdtheloans? Isallthematerialpresent? Doesthedatamanageragreeordisagreewiththeschool?
ResponsetoSchoolviaeCDRAppeals RelevantInformationforeachborrowerchallenged SupportingDocumentationforallDisagrees
Follow‐Up UpdateNSLDSandinternalrecords
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ErroneousDataAppeal
Checklists
1. SchooltoDataManager
Determine DoestheLRDRfortheofficialcohortdefaultratescontainnewdataordisputed
data Istheschoolsubjecttosanction Istheschoolsubjecttoprovisionalcertificationbasedsolelyontheschool’s
cohortdefaultrate?
SubmittoDataManager Spreadsheet RelevantpagesofLoanRecordDetailReport Supportingdocumentation. Letter
2. DataManagertoSchool
Determine Istheschoolsubjecttolossofeligibility? Istheschoolsubjecttoprovisionalcertificationbasedsolelyontheschool’s
cohortdefaultrate? Wastheschoolsubmissiontimely? Doesthedatamanagerholdtheloans? Doesthesubmissionincludeallrequiredmaterials? Doesthedatamanageragreeordisagreewiththeschool?
Responsetotheschool Spreadsheet Supportingdocumentation. Letter
Follow‐up SendcopyofresponsetoDepartment UpdateNSLDSandinternalrecords,ifnecessary SendmonthlystatusreporttoDepartment
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ErroneousDataAppealChecklists(continued)
3. SchooltoDepartment
Determine Didthedatamanageragreewithanyoftheerroneousdataappealallegations? Doestheschoolagreeordisagreewiththedatamanager’sdecision? Doestheschoolhaveoutstandingnewdataadjustmentallegationsor
outstandingrequestsforloanservicingrecords?
SubmittoDepartment Withdrawalnotice
OR
Spreadsheet Supportingdocumentation. CopyoftheDataManagerIncorrectDataChallengeResponseand/orErroneous
DataAppealResponse Letter
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Loan Servicing Appeal Checklists
School to Data Manager via eCDR Appeals
Determine ♦ Does the LRDR for the official cohort default rates contain defaulted loans that were
improperly serviced for cohort default rate purposes?
Submit to Data Manager ♦ Request for records via eCDR Appeals♦ Fee for Loan Servicing Records (if required)
Data Manager to School Determine
♦ ♦ Does the data manager hold the loans?♦ Is all the material present?♦ Does data manager hold more than 99 loans for school?♦ If so, what is a representative sample of the loans?♦ Is there a fee for the loan servicing records and, if so, how much is it?♦ Has the school paid the fee for loan servicing records (if required)?
Response to School ♦ Request for fee♦ SpreadsheetOR♦ Spreadsheet♦ Loan Servicing Records
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Loan Servicing Appeal Checklists (continued)
School to the Department
Determine ♦ Do the loan servicing records show that the LRDR for the official cohort default rates
contains loans that were improperly serviced for cohort default rate purposes?
Submit to the Department via eCDR Appeals ♦ Withdrawal NoticeOR♦ Loan Servicing Appeal case via eCDR Appeals♦ CEO Certification Letter (See sample letter)
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Grounds for Loan Servicing Appeals
FFEL Direct Loan
A defaulted FFEL is considered improperly serviced for cohort default rate purposes if the borrower never made a loan payment and the school can document the lender was required but failed to complete one or more of the of the following:
• Sent at least one letter, other than the final demand letter, urging the borrower to make payments on the loan;
• Attempted at least one telephone call to the borrower;
• Submitted a request for pre-claims assistance or default aversion assistance to the guaranty agency;
• Sent a final demand letter to the borrower; or
• Submitted a certification, or other documentation, to the guaranty agency to demonstrate that the lender performed skip-tracing.
A defaulted Direct Loan is considered improperly serviced for cohort default rate purposes if the borrower never made a loan payment and the school can document the Federal Servicer was required but failed to complete one or more of the of the following:
• Sent at least one letter, other than the final demand letter, urging the borrower to make payments on the loan;
• Attempted at least one telephone call to the borrower;
• Sent a final demand letter to the borrower; or
• Failed to document that skip tracing was performed if the Federal Servicer determined it did not have the borrower’s current address.
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Economically Disadvantaged AppealChecklists
School to the Department & Independent Auditor
Determine ♦ Is the school subject to sanction or potential provisional certification based on a second
successive three year cohort default rate above 30 %?♦ What is the school’s low-income rate?♦ For a non-degree-granting school, what is the school’s placement rate? For a degree-
granting school, what is the school’s completion rate?
Submit to the Department ♦ Spreadsheets♦ Letter (see sample letter #1)
Submit to Independent Auditor ♦ Spreadsheets♦ Other Requested Materials♦ Letter (see sample letter #2)
Independent Auditor to School
Determine ♦ Does school meet criteria?
Submit to School ♦ Written Opinion (see sample letter #3)
School to the Department (after receiving auditor’s response)
Submit to the Department ♦ Copy of Independent Auditor’s Response♦ Letter (see sample letter #4)
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Participation Rate Index Appeal Checklist
School to the Department
Determine Is the school subject to sanction? What is the school’s participation rate index?
Submit to the Department Spreadsheet Letter
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Glossary for Cohort Default Rate Issues Average Rate Appeal: U.S. Department of Education (ED) initiated appeal for a school whose 3 most recent cohort default rates (CDRs) are at or above 30 percent is not subject to sanction if at least 2 of the 3 CDRs were calculated as average rates and would have been less than 30 percent if calculated using only data for those cohort fiscal years alone, or, if the most recent CDR is above 40 percent and was calculated as an average rate, the school is not subject to sanction. Average rate: Formula used to calculate the official cohort default rate for a school with 29 or fewer borrowers entering repayment during a fiscal year that also had a CDR calculated for two previous fiscal years. Benefit: Advantage granted to schools with low official CDRs. Schools with low official CDRs may be exempt from certain loan disbursement requirements. Cohort default rate (CDR): For schools having 30 or more borrowers entering repayment in a fiscal year, the school’s cohort default rate is the percentage of a school’s borrowers who enter repayment on certain Federal Family Education Loans (FFEL) and/or Federal Direct Student Loans (Direct Loan) during that fiscal year and default (or meet the other specified condition) within the cohort default period. For schools with 29 or fewer borrowers entering repayment during a fiscal year, the cohort default rate is an “average rate” based on borrowers entering repayment over a three-year period. Data manager: Entity responsible for maintaining and managing the data used in calculating cohort default rate, which depending on the type of loan may be a Federal Loan Servicer, a guaranty agency, or ED. Draft cohort default rate: ED provides schools with draft, or unofficial, cohort default rates via email each spring. This draft rate is ED's initial CDR calculation and is released only to schools and not the general public. Economically Disadvantaged Appeal (EDA): An appeal a school files when a school believes it should not be subject to CDR sanctions due to a high number of low-income students. This appeal can be filed based upon either low income and placement rate (for nondegree-granting schools) or low income and completion rate (for degree-granting schools). Electronic cohort default rate (eCDR) appeals system: The electronic system institutions use to process CDR challenges, adjustments, and/or appeals. Erroneous Data (ER) Appeal: An erroneous data appeal alleges that because of “new data” and/or “disputed data” included in the official cohort default rate calculation, a school’s official cohort default rate is inaccurate. Federal fiscal year (FY): Begins on October 1 of the current calendar year and ends on September 30 of the next calendar year. Incorrect Data Challenge (IDC): After the release of the draft cohort default rates, ED provides schools an opportunity to review the draft data and, if necessary, work with the data manager responsible for the loans to correct any errors. The process of correcting data is called an incorrect data challenge. Loan Record Detail Report (LRDR): Contains information on the loans used in the calculation of a school’s draft or official cohort default rate. Loan Servicing Appeal (LSA): A loan servicing appeal is an appeal that alleges a school’s official cohort default rate includes defaulted FFELs or Direct Loans that are considered improperly serviced for cohort default rate purposes. “Improperly serviced” always means “improperly serviced for cohort default rate
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purposes only.” Failure to perform each of the servicing activities listed in 34 CFR 668.212(b) constitutes improper loan servicing for cohort default rate purposes. New Data Adjustment (NDA): An administrative action in which a school challenges the accuracy of new data included in the school’s official CDR that was not reflected in the draft CDR. If the school is subject to loss of eligibility or provisional certification as a result of the official cohort default rate, the school should bring an erroneous data appeal instead. Non-average rate: Formula used to calculate the official CDR for a school with 30 or more borrowers entering repayment during a fiscal year. Official cohort default rate: ED provides schools with an official CDR by no later than September 30 of each year. Official CDRs are released to both schools and the public and are the basis for any benefits or sanctions a school may receive. Participation Rate Index (PRI) Appeal: A PRI appeal alleges a school should not be subject to loss of loan eligibility (or potential placement on provisional certification based solely on cohort default rates) because the school has a participation rate index that meets one of the following thresholds: • Subject to sanction based on three consecutive cohort default rates of 30.0 percent or greater—
participation rate index of 0.0625 or less; • Subject to sanction based on most recent cohort default rate over 40.0 percent or greater—participation
rate index of 0.0832 or less; or • Subject to potential provisional certification based on two out of three most recent cohort default rates of
30.0 percent or greater—participation rate index of 0.0625 or less. Participation Rate Index (PRI) Challenge: A PRI challenge alleges a school should not be subject to a potential loss of loan eligibility or potential placement on provisional certification based solely on its cohort default rates because the school has a participation rate index that meets one of the following thresholds (with the most recent draft rate considered for purposes of this challenge only as the most recent cohort default rate): • For a school that is subject to potential loss of eligibility based on most recent three consecutive cohort
default rates of 30.0 percent—participation rate index for at least one of those fiscal years of 0.0625 or less;
• For a school that is subject to potential loss of eligibility based on most recent cohort default rate over 40.0 percent—participation rate index of 0.0832 or less; or
• For a school that is subject to potential provisional certification based on two out of three most recent cohort default rates of 30.0 percent or greater—participation rate index of 0.0625 or less.
Sanction: Penalties ED imposes on a school with a high official CDR. Sanctions associated with high official CDRs occur when a school’s three most recent official CDRs are 25 percent or greater for the two-year calculation or 30 percent or greater for the three year calculation, or when a school’s most recent official CDR is greater than 40 percent. These sanctions include a loss of eligibility to participate in certain Title IV programs. Another sanction is placement on provisional certification, which may occur when one of a school’s three most recent official CDRs is a two-year official cohort default rate of 25 percent or greater or when two of a school’s three most recent official three-year CDRs are official CDRs of 30 percent or greater. Special circumstance: A situation that can affect the official CDR calculation. When one of these occurs, a school must submit documentation to the data manager in a timely manner in order to impact the official CDR. Uncorrected Data Adjustment (UDA): An UDA is a request submitted to ED to ensure a school’s official CDR calculation reflects changes that were correctly agreed to as a result of an incorrect data challenge the school submitted after the release of the draft CDR.
© 2016–17 NASFAA 35 Your Cohort Default Rate Webinar 10/6/2016
References for Cohort Default Rate Issues
The following is a list of cohort default rate resources that you may find helpful if you need additional information or clarification on a topic covered in this webinar.
Law
The Higher Education Act of 1965, as amended: • Section 435(m) – Definitions for Student Loan Insurance Program
Regulations
34 CFR 668, Subpart N – Cohort Default Rate
34 CFR 668.16(m) – Standards of Administrative Capability
34 CFR 682.401 – Federal Family Education Loan (FFEL) Program, Basic Program Agreement
34 CFR 682.410 – Fiscal, Administrative, and Enforcement Requirements
34 CFR 682.603 – Certification by a School that Participated in the FFEL Program in Connection with a Loan Application
34 CFR 685.303 – William D. Ford Federal Direct Loan Program, Processing Loan Proceeds
Federal Registers
Federal Register, 10/29/09, pp. 55910 to 55914, General and Non-Loan Programmatic Issues; Final Rule
Federal Register, 10/28/09, pp. 55628 to 55633, Institutions and Lender Requirements Relating to Education Loans, Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program; Final Rule
Federal Register, 8/21/09, pp. 42391 to 42400, General and Non-Loan Programmatic Issues; Notice of Proposed Rulemaking
Federal Register, 7/28/09, pp. 37435 to 37446, Institutions and Lender Requirements Relating to Education Loans, Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program; Notice of Proposed Rulemaking
Dear Colleague Letters
GEN-14-03 – Impact of Cohort Default Rates on Institutional Title IV Program Eligibility
GEN-05-14 – Sample Default Prevention and Management Plan
Electronic Announcements
Electronic Announcement, 9/26/16 – FY2013 3-Year Official Cohort Default Rates Distributed September 26, 2016
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Electronic Announcement, 3/2/16 – FY 2013 3-Year Draft Cohort Default Rates Distributed March 1, 2016 Electronic Announcement, 2/29/16 – Re-distribution of FY 2013 3-Year Draft Cohort Default Rates Accompanying Data Electronic Announcement, 3/11/15 – Loan Record Detail Report (LRDR) Import Tool Electronic Announcement, 7/14/11 – New Default Prevention Resource Information Web Page Electronic Announcement, 2/25/11 – Definition of Default for Student Eligibility and Cohort Default Rate Calculations Other Resources 2016–17 FSA Handbook, Volume 2, School Eligibility and Operations (Chapter 4: Audits, Financial Standards, Limitations, & Cohort Default Rates) Cohort Default Rate Guide, September 2016 (available at https://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html) Default Prevention Resource Information page (available at http://ifap.ed.gov/DefaultPreventionResourceInfo/index.html)
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
National Association of Student Financial Aid Administrators
NASFAA’s Webinar Series
Your Cohort Default Rate: What Does It Mean?
October 6, 2016
Introductions
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Amanda SharpOnline Instruction Manager
NASFAA Training and Regulatory Assistance
Dana KellyChief Training Officer
NASFAA Training and Regulatory Assistance
Handouts
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at the bottom of your screen, orvisit Webinar Event Lobby
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© 2016–17 NASFAA 37 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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Technical Assistance
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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Questions and Answers
Submit your questions
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Webinar Goals
• Overview of cohort default rates
• Impact on institutions
• What do do next
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Overview ofCohort Default Rates
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© 2016–17 NASFAA 39 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
What is a Cohort Default Rate (CDR)?
• The CDR is a percentage that represents:
– Cohort of borrowers who enter repayment
– Members of that cohort who defaulted
Slide 10 © 2016 NASFAA
What is a Cohort Default Rate (CDR)?
• The CDR is a percentage that represents:
– Cohort of borrowers who enter repayment
– Members of that cohort who defaulted
• Calculation performed each federal fiscalyear
October 1
September30
Slide 11 © 2016 NASFAA
Cohort Default Rate Calculations
NumeratorBorrowers included in the denominator who have defaulted during cohort period
DenominatorBorrowers who entered repayment in cohort fiscal year
Non-Average Rate
CohortDefaultRate %
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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Borrowers who entered repayment FY13
10/1/2012–9/30/2013
Borrowers who defaulted in
FY13, FY14, or FY15
10/1/2012–9/30/20158
908.8%
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Cohort Default Rate Calculations
NumeratorBorrowers included in the denominator who have defaulted during cohort period
DenominatorBorrowers who entered repayment in cohort fiscal year and the two preceding fiscal years
Average Rate
CohortDefaultRate %
Slide 14 © 2016 NASFAA
Take a Poll
Have you reviewed your institution’s most recent official CDR?
Yes No
Slide 15 © 2016 NASFAA
© 2016–17 NASFAA 41 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Take a Poll - Results
Have you reviewed your institution’s most recent official CDR?
Yes _______ No _______
Slide 16 © 2016 NASFAA
Cohort Default Rates
FEBRUARY
SEPTEMBER
Draft RatesIssued
FebruaryEach Fiscal Year
Official RatesIssued
by September 30Each Fiscal Year
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Importance of Cohort Default Rates
• Defaulted loans are costly
• Impact of defaults on the borrower
• Impact of defaults on the school
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Benefits of a Low Cohort Default Rate
• Single-term loans may be disbursed in onedisbursement
• Exempt from 30-day delay for first-time, first-yearundergraduate borrowers
<15% each of three most recentfiscal years
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Benefits of a Low Cohort Default Rate
• Single disbursement for study abroad students• Exempt from 30-day delay for first-time, first-year
undergraduate borrowers enrolled in study abroadprograms
<5% single most recent fiscal year
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Sanctions for a High Cohort Default Rate• CDR ≧ 30% can include:
– Institutional default preventionrequirements
– Change in school certification– Restriction or loss in Title IV
participation• CDR ≧ 40%
– Loss of eligibility to participatein the Federal Direct StudentLoan (Direct Loan) Program
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© 2016–17 NASFAA 43 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
What Can You Do?
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Loan Record Detail Report (LRDR)
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What Can You Do?
• Incorrect Data Challenge (IDC)• Participation Rate Index Challenge (PRI)ChallengeChallenge
• Uncorrected Data Adjustment (UDA)• New Data Adjustment (NDA)AdjustmentAdjustment
• Erroneous Data Appeal (ER)• Loan Servicing Appeal (LSA)• Economically Disadvantaged Appeal (EDA)• Participation Rate Index Appeal (PRI)
AppealAppealSlide 24 © 2016 NASFAA
Your Cohort Default Rate Webinar 10/6/2016 44 © 2016–17 NASFAA
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Take a Poll
Has your institution ever submitted a challenge, adjustment, or appeal of your CDR?
Yes No
Slide 25 © 2016 NASFAA
Take a Poll - Results
Has your institution ever submitted a challenge, adjustment, or appeal of your CDR?
Yes _______ No _______
Slide 26 © 2016 NASFAA
Take a Poll
If you answered yes, did your action have a positive impact on your CDR?
Yes No
Slide 27 © 2016 NASFAA
© 2016–17 NASFAA 45 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Take a Poll - Results
If you answered yes, did your action have a positive impact on your CDR?
Yes _______ No _______
Slide 28 © 2016 NASFAA
What Can You Do?
• Incorrect Data Challenge (IDC)• Participation Rate Index Challenge (PRI)• After release of draft CDR
ChallengeChallenge
• Uncorrected Data Adjustment (UDA)• New Data Adjustment (NDA)AdjustmentAdjustment
• Erroneous Data Appeal (ER)• Loan Servicing Appeal (LSA)• Economically Disadvantaged Appeal (EDA)• Participation Rate Index Appeal (PRI)
AppealAppealSlide 29 © 2016 NASFAA
Incorrect Data Challenge
Data incorrectly reported in draft
CDR
Borrower excluded but should have been included
Borrower included but should have been excluded
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Participation Rate Index Challenge
Percentage of students who borrowed under during a specified 12-month period
School’s CDR
Participation Rate Index
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Participation Rate Index Challenge
• Can challenge on basis that PRI meets certainthresholds:– Loss of eligibility
3 consecutive CDRs of 30%, PRI for 1 year .0625 orless
Most recent CDR >40%, PRI .0832 or less; or– Possible provisional certification
2 out of 3 CDRS – 30% and PRI .0625 or less
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What Can You Do?
• Incorrect Data Challenge (IDC)• Participation Rate Index Challenge (PRI)ChallengeChallenge
• Uncorrected Data Adjustment (UDA)• New Data Adjustment (NDA)• After release of official CDR
AdjustmentAdjustment
• Erroneous Data Appeal (ER)• Loan Servicing Appeal (LSA)• Economically Disadvantaged Appeal (EDA)• Participation Rate Index Appeal (PRI)
AppealAppealSlide 33 © 2016 NASFAA
© 2016–17 NASFAA 47 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Uncorrected Data Adjustment
Incorrect Data Challenge
submitted on time
Submit Uncorrected
Data Adjustment
IDC approved
Changes not
reflected in official CDR
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New Data Adjustment
Draft CDR LRDR Official CDR LRDR
New; Excluded; or
ChangedData
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What Can You Do?
• Incorrect Data Challenge (IDC)• Participation Rate Index Challenge (PRI)ChallengeChallenge
• Uncorrected Data Adjustment (UDA)• New Data Adjustment (NDA)AdjustmentAdjustment
• Erroneous Data Appeal (ER)• Loan Servicing Appeal (LSA)• Economically Disadvantaged Appeal (EDA)• Participation Rate Index Appeal (PRI)• After release of official CDR
AppealAppealSlide 36 © 2016 NASFAA
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Erroneous Data Appeal
LRDR contains• New incorrect data• Disputed data
LRDR contains• New incorrect data• Disputed data
Successful Appeal• NSLDS corrected• ED recalculates CDR
Successful Appeal• NSLDS corrected• ED recalculates CDR
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Erroneous Data Appeal
• LRDR contains one or both:– New, incorrect data Newly included, excluded, or changed
– Disputed data Included in an Incorrect Data Challenge Same error still included in official CDR data
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Loan Servicing Appeal
LRDR contains• Improperly serviced
loans• Disputed data
LRDR contains• Improperly serviced
loans• Disputed data
Successful Appeal• Improperly serviced
loans removed from CDR• ED recalculates CDR
Successful Appeal• Improperly serviced
loans removed from CDR• ED recalculates CDR
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© 2016–17 NASFAA 49 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
Presented October 6, 2016
Loan Servicing Appeal
• A defaulted Direct Loan is improperly serviced if:– Borrower never made a loan payment and
school can document servicer was required butfailed to Send at least one letter (other than final demand
letter) prompting borrower to make payments Send a final demand letter to the borrower Attempt at least one telephone call to the borrower Document skip tracing was performed if servicer did
not have borrower’s current address
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Loan Servicing Appeal
• If a borrower makes at least one payment or ifthe servicer performs all of the above on atimely basis, the loan is properly serviced forCDR purposes.
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Economically Disadvantaged Appeal
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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Economically Disadvantaged Appeal
• Successful appeal:– School not subject to sanction for that CDR
fiscal year– Does NOT change the school’s official CDR
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Participation Rate Index Appeal
• School believes it should not be subject tosanction based on low participation rate
• Only allowed when school subject to loss ofeligibility or potential provisional certification
• School sends completed appeal to ED• Successful appeal
– Will not be subject to sanction for that CDR fiscalyear
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eCDR
https://ecdrappeals.ed.gov/ecdra/index.htmlSlide 45 © 2016 NASFAA
© 2016–17 NASFAA 51 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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ED-InitiatedAppeals
Slide 46 © 2016 NASFAA
ED-Initiated Appeals
• Average Rate Appeal
• Thirty-or Fewer Borrower Appeal
• ED automatically determines if schools meetcriteria prior to release of official CDR
• Cohort Default Rate Guide, Chapters 4.9 and4.10
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Questions and Answers
Submit your questions!
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NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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NASFAA’s Webinar Series
Federal Income Taxes Demystified
October 12, 2016
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2016 – 17 Course Schedule
Overview of the Financial Aid Programs – 9/12/16Student Eligibility – 10/3/16
Cash Management – 10/18/16Verification – 11/17/16
Return of Title IV Funds – 1/30/17Consumer Information – 2/27/17Gainful Employment – 3/27/17
Professional Judgment – 4/25/17Overview of the Financial Aid Programs – 7/10/17
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© 2016–17 NASFAA 53 Your Cohort Default Rate Webinar 10/6/2016
NASFAA’s Webinar SeriesYour Cohort Default Rate: What Does It Mean?
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Thank you for joining us!
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