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FY 1998 Official Cohort Default Rate Guide Page 5

Cohort Default RateCalculation

What is an FFEL Program and Direct LoanProgram cohort default rate?

An FFEL Program and Direct Loan Program cohort default rate isthe percentage of a schools student borrowers who enterrepayment on certain Federal Family Education Loan (FFEL)Program and/or William D. Ford Federal Direct Loan (Direct Loan)Program loans during a particular fiscal year and default within thefiscal year in which the loans entered repayment or within the nextfiscal year (FY)1. The cohort default rate may be an FFEL Programcohort default rate, a Direct Loan Program cohort rate, or a Dual-Program cohort rate depending on the type or types of studentloans that are considered in calculating the rate.

A school does not select whether it has an FFELProgram cohort default rate, a Direct Loan Programcohort rate, or a Dual-Program cohort rate. The typeof rate is determined on the basis of the types ofloans made to students attending the school whoenter repayment in a given fiscal year.

An FFEL Program cohort default rate2 is the cohort default ratefor schools whose students have only FFEL Program loans

entering repayment during a particular fiscal year. It is thepercentage of a schools borrowers who enter repayment on certainFFEL Program loans during a particular fiscal year and defaultwithin the fiscal year in which the loans entered repayment or withinthe next fiscal year.

A Direct Loan Program cohort rate3 is the cohort rate for schoolswhose students have only Direct Loan Program loans entering

repayment during a particular fiscal year. It is the percentage of a

schools borrowers who enter repayment on certain Direct LoanProgram loans during a particular fiscal year and default or meetother specified conditionswithin the fiscal year in which the loansentered repayment or within the next fiscal year.

1 For schools with 29 or fewer borrowers entering repayment during a fiscal year, the data isaveraged over a three year period. Please refer to page 116 for additional information on theaveraging process.2 34 CFR Section 668.17(d)3 34 CFR Section 668.17(e)

Q.Q. What is a fiscal year?A.A. A federal fiscal yearbegins on October 1 of acalendar year and ends onSeptember 30 of thefollowing calendar year.Each federal fiscal yearrefers to the calendar yearin which it ends.

Q.Q. How are cohortdefault rates calculated if aschool has branchcampuses or additionallocations?

A.A. The data from eachcampus and/or location iscombined to calculate a

single cohort default ratefor the school. The maincampus of the school isnotified of the cohortdefault rate.

Note


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General Information Cohort Default Rate Calculation


Which types of loans are included in thecohort default rate calculation?

The FFEL Program loansincluded in the cohort default rate

calculation are:

Subsidized Federal Stafford Loans (FFEL StaffordLoans);

Unsubsidized Federal Stafford Loans (FFEL StaffordLoans);

AND

Federal Supplemental Loans for Students (FederalSLS Loans).

Federal SLS Loans have not been issued since July1, 1994. However, it is possible for a Federal SLSloan to be included in a recent cohort default ratecalculation if the borrower has recently entered intorepayment on the Federal SLS loan.

The Direct Loan Program loansincluded in the cohort defaultrate calculation are:

Federal Direct Subsidized Stafford/Ford Loans (DirectLoan Program Loans);

AND

Federal Direct Unsubsidized Stafford/Ford Loans(Direct Loan Program Loans).

Note


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Cohort Default Rate Calculation General Information

Page 8 FY 1998 Official Cohort Default Rate Guide

The following loans are NOT included in the cohort default ratecalculation:

PLUS Loans;

Federal Direct PLUS Loans;

Federal Insured Student Loans;

AND

Federal Perkins Program Loans.

Federal Consolidation Loans and Federal DirectConsolidation Loans are not counted directly in thecohort default rate calculation. However, the status ofa consolidation loan may affect how the loan(s) thatwas paid off by the consolidation loan is included inthe cohort default rate calculation. Please refer topage 24 for more information on how consolidationloans may affect the cohort default rate calculation.

When are cohort default rates released?

The Department releases cohort default rates twice a year.Generally, the Department releases draft cohort default rates

before the end of March of each year. After schools receive theirdraft cohort default rate data and are provided an opportunity toidentify and correct any inaccuracies, the Department releases theofficial cohort default rates. Official cohort default rates arereleased to schools and the public approximately six months afterthe release of the draft cohort default rates BUT must be releasedno later than September 30th of each year.6

Please note that the National Student Loan DataSystem (NSLDS), which contains the data used tocalculate cohort default rates, is regularly updated.Therefore, a schools draftdata may differ from itsofficial data, even if a school does not challenge its

draft cohort default rate data.

6 HEA Section 435(m)(4)(D)

Note

Note


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Who receives cohort default rates?

The draft cohort default rates are provided only to schools and are

NOT released to the public. The draft cohort default rates arereleased to all schools that the Departments records indicate:

were participating in the FFEL Program and/or DirectLoan Program on the first day of the fiscal year onwhich the cohort default rate is based and may ormay not have student borrowers who entered intorepayment on one or more of the relevant types ofloans during the fiscal year on which the cohortdefault rate is based;

OR

have at one time participated in either loan programand have student borrowers who entered intorepayment on one or more of the relevant types ofFFEL Program and/or Direct Loan Program loansduring the fiscal year on which the cohort default rateis based.

When the Department provides a school with a draft cohort defaultrate the school will also receive a copy of the most recent DraftCohort Default Rate Guideand the draft loan record detail reportlisting all of the student borrowers contained in the school's draft

cohort default rate calculation.

The official cohort default rates are provided to schools and are

released to the public. The official cohort default rates are providedto all schools that:

are currently eligible to participate in any of the TitleIV Student Financial Assistance Programs and wereparticipating in the FFEL Program and/or Direct LoanProgram on the first day of the fiscal year for whichthe cohort default rate is based and may or may nothave student borrowers who entered into repayment

on one or more of the relevant types of loans duringthe fiscal year on which the cohort default rate isbased;

OR


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are currently eligible to participate in any of the TitleIV Student Financial Assistance Programs and havestudent borrowers who entered into repayment onone or more of the relevant types of FFEL Programand/or Direct Loan Program loans during the fiscalyear on which the cohort default rate is based.

When the Department provides a school with an official cohortdefault rate, the school will also receive a copy of the most recentOfficial Cohort Default Rate Guide. In addition, if the school'sofficial cohort default rate is ten percent or greater, an official loanrecord detail report listing all of the student borrowers contained inthe school's official cohort default rate calculation will be provided.

The public can request a listing of all of the official cohort defaultrates in the form of a press package. The press package also

contains a listing of those schools that are subject to sanctions as aresult of official cohort default rates. For a copy of the most recentpress package please call (202) 708-9396 or visit the Departmentswebsite at http://www.ifap.ed.gov.

Why are cohort default rates important?

The draft cohort default rates are important because the data used

to calculate the draft cohort default rate forms the basis of aschools official cohort default rate. Although there are nosanctions or consequences associated with a draft cohort defaultrate, it is important to review the data used to calculate the draftcohort default rate to ensure the accuracy of the data. A schoolthat fails to challenge the accuracy of its draft cohort defaultrate data through a draft data challenge may be precludedfrom challenging the accuracy of the data used in calculatingits official cohort default rate. Therefore, it is critical that allschools review their draft cohort default rate data.

In addition, because in certain circumstances a school may be ableto avoid the consequences associated with its official cohort defaultrates by submitting a successful participation rate index challengebased on its draft cohort default rate, the school should review itsenrollment data in relation to its draft cohort default rate todetermine if it qualifies to submit a participation rate indexchallenge.

Please refer to the Draft Cohort Default Rate Guidefor moreinformation on draft cohort default rates.

Q.Q. What is a draft datachallenge?

A.A. A draft data challenge isthe process used by aschool to correct cohortdefault rate data before theofficialcohort default ratesare calculated.

Please refer to the DraftCohort Default Rate Guidefor additional information ondraft data challenges.

Q.Q. What is a participationrate index challenge?

A.A. A participation rateindex challenge is achallenge submitted by aschool after the release ofthe draft cohort defaultrates that demonstrates thatthe school has a relatively

low level of borrowerparticipation in the loanprograms when comparedto the schools cohortdefault rate.

Please refer to the DraftCohort Default Rate Guidefor additional information onparticipation rate indexchallenges.


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The official cohort default rates are important because they may

affect a schools eligibility to participate in certain Title IV StudentFinancial Assistance Programs and because the Department maytake administrative actions against a school on the basis of itsofficial cohort default rate(s). In addition, official cohort default

rates below certain thresholds may qualify a school for certainbenefits associated with the disbursement of loan program funds.

Please refer to the Cohort Default Rate Effects section beginningon page 35 for more information on the administrative actions theDepartment may initiate against a school due to its official cohortdefault rate(s) and a description of the benefits associated with itsofficial cohort default rate(s).

What are the time frames of a cohort defaultrate?

The time frames for a cohort default rate are based on federal fiscalyears. Federal fiscal years begin on October 1 of a calendar yearand end on September 30 of the following calendar year.7

Except for schools with 29 or fewer borrowers entering repayment,the cohort default rate is based on the number of borrowers whoentered repayment in a single fiscal year (the denominator of thecohort default rate calculation), and of those borrowers, the numberof borrowers who defaulted or met other specified conditionsbefore the end of the next fiscal year (the numerator of thecohort default rate calculation).8 The cohort default rate for FY1998 is based on the number of borrowers who entered repaymentin FY 1998 and of those borrowers, the number who defaulted ormet other specified conditions in FY 1998 or FY 1999. Therefore,

the borrowers who entered repayment from October 1, 1997,through September 30, 1998, are included in the denominator ofthe FY 1998 cohort default rate calculation. Of those borrowers inthe denominator of the cohort default rate calculation, theborrowers who defaulted or met other specified conditions fromOctober 1, 1997, through September 30, 1999, are included in thenumerator of the FY 1998 cohort default rate calculation.

Please refer to the chart on the next page for a listing of the timeframes associated with seven relevant cohort default ratecalculations.

7 34 CFR Section 668.17(d)(2)8 34 CFR Section 668.17(d), (e), and (f)


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Cohort Default RateTime Frames

FiscalYear

Borrowers Included in the CohortDefault Rate Calculation9

Period of Time

FY 1994

Borrowers who entered repayment ontheir loans in FY 1994

and defaulted in FY 1994 or FY 1995Borrowers who entered repayment on

their loans in FY 1994

10/1/93 to 9/30/9510/1/93 to 9/30/94

FY 1995




10/1/94 to 9/30/9610/1/94 to 9/30/95

FY 1996




10/1/95 to 9/30/97

10/1/95 to 9/30/96

FY 1997




10/1/96 to 9/30/9810/1/96 to 9/30/97

FY 1998




10/1/97 to 9/30/9910/1/97 to 9/30/98

FY 1999




10/1/98 to 9/30/0010/1/98 to 9/30/99

FY 2000




10/1/99 to 9/30/0110/1/99 to 9/30/00

9 Except for the FY 1994 cohort default rate, for non-degree granting proprietary schools only,borrowers who have received Direct Loan Program loans are considered to be in default for purposesof calculating a schools cohort default rate if, for a specified period of time within the cohort period inquestion, the students are in repayment under the income contingent repayment (ICR) plan withscheduled payments that are less than 15 dollars per month and less than the interest accruing onthe loan. Please refer to page 6 for an explanation regarding the period of time the borrower must bein an ICR plan prior to being treated as a defaulted borrower.


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How does the Department calculate a schoolscohort default rate?

The formula the Department uses for calculating a schools cohortdefault rate depends on the number of student borrowers from that

school entering repayment in a particular fiscal year and thenumber of cohort default rates previously calculated for the school.

The three types of formulas used to calculate a school's cohortdefault rate are:

Non-Average Rate Calculation for a school with30 or more borrowersentering repayment during afiscal year (see pages 14 and 15);

Average Rate Calculation for a school with 29 or

fewer borrowersentering repayment during a fiscalyear that had a cohort default rate calculated for thetwo previous fiscal years (see pages 16 and 17);

AND

Unofficial Rate Calculation for a school with 29or fewer borrowersentering repayment during a fiscalyear that did not have a cohort default rate calculatedfor either or both of the two previous fiscal years (see pages 18 and 19).

The formulas and sample calculations are shown on the next sixpages.


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Non-Average Rate For a school with 30 or more borrowers

Calculation: entering repayment during FY 1998, anon-average rate is calculated. 10 The FY1998 non-average cohort default rate iscalculated as follows:

Other specified conditions: For non-degree grantingproprietary schools only, borrowers who have receivedDirect Loan Program loans are considered to be indefault for the purposes of calculating a schoolscohort default rate if, for a specified period of timeduring the cohort period in question, the borrowers arein repayment under the income contingent repayment(ICR) plan with scheduled payments that are less than15 dollars per month and less than the interestaccruing on the loan. Please refer to page 6 for anexplanation regarding the period of time the borrowermust be in an ICR plan prior to being treated as a

defaulted borrower.

The following page provides an example of a non-average cohortdefault rate.

10 34 CFR Section 668.17(d), (e), and (f)

100

the number of borrowers who enteredrepayment in FY 1998 and defaulted or metother specified conditionsin FY 1998 or FY1999 Numerator

the number of borrowers who entered

repayment in FY 1998 (Denominator)

X


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Non-Average Rate School A, a degree granting school,Example: certified 117 loans for 90 borrowers that

entered repayment in FY 1998(denominator). Of those borrowers, 8borrowers defaulted on a total of 16 loans in

FY 1998 or FY 1999 (numerator). School Ascohort default rate is calculated by dividing 8by 90 and multiplying the result by 100 toproduce a non-average cohort default rate of8.9 percent.

Q.Q. Are cohort defaultrates based on thenumber of loans thatenter repayment or thenumber of borrowerswho enter repayment?

A.A. Cohort default ratesare based on thenumber of unduplicatedborrowers who enter

repayment.

= 8.9%x90

8

100


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Average Rate For a school with 29 or fewer borrowers

Calculation: entering repayment during FY 1998 that had acohort default rate calculated for FY 1996 andFY 1997, the Department calculates an averagecohort default rate. 11 The FY 1998 average

cohort default rate is calculated as follows:

Other specified conditions: For non-degree grantingproprietary schools only, borrowers who have receivedDirect Loan Program loans are considered to be indefault for the purposes of calculating a schools cohortdefault rate if, for a specified period of time during thecohort period in question, the borrowers are in

repayment under the income contingent repayment(ICR) plan with scheduled payments that are less than15 dollars per month and less than the interest accruingon the loan. Please refer to page 6 for an explanationregarding the period of time the borrower must be in anICR plan prior to being treated as a defaulted borrower.

The following page provides an example of an average cohortdefault rate.

11 34 CFR Section 668.17(d), (e), and (f)

100

the total number of borrowers who enteredrepayment in FY 1996, FY 1997, and FY 1998 anddefaulted or met other specified conditionsbefore the end of the fiscal year immediatelyfollowing the fiscal year in which the loan enteredrepayment (Numerator)

the total number of borrowers who enteredrepayment in FY 1996, FY 1997, and FY 1998(Denominator)

X


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Average Rate School B, a degree-granting school, certifiedExample: loans for the following students: 50 borrowers

who entered repayment in FY 1996, 44 borrowerswho entered repayment in FY 1997, and 29borrowers who entered repayment in FY 1998

(50+44+29=123, which represents thedenominator). Of those 123 borrowers, 2 of theborrowers who entered repayment in FY 1996defaulted in FY 1996 or FY 1997; 6 of theborrowers who entered repayment in FY 1997defaulted in FY 1997 or FY 1998; and 4 of theborrowers who entered repayment in FY 1998defaulted in FY 1998 or FY 1999 (2+6+4=12,which represents the numerator). School Bsaverage cohort default rate is calculated bydividing 12 by 123 and multiplying the result by

100 to produce an average cohort default rate of9.8 percent.

100 = 9.8%x2 6 4

50 44 29 123+ + =

+ + = 12

FY96 FY97 FY98


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Unofficial Rate For a school with 29 or fewer borrowersCalculation: entering repayment during FY 1998 that did

not have a cohort default rate calculated forFY 1996 and/or FY 1997, the Departmentcalculates an unofficial cohort default rate.

The FY 1998 unofficial cohort default rate iscalculated as follows:

Other specified conditions: For non-degreegranting proprietary schools only, borrowers whohave received Direct Loan Program loans areconsidered to be in default for the purposes ofcalculating a schools cohort default rate if, for aspecified period of time during the cohort period inquestion, the borrowers are in repayment under theincome contingent repayment (ICR) plan withscheduled payments that are less than 15 dollars permonth and less than the interest accruing on the

loan. Please refer to page 6 for an explanationregarding the period of time the borrower must be inan ICR plan prior to being treated as a defaultedborrower.

Since an unofficial cohort default rate does not meetthe statutory definition of a cohort default rate, itcannot be used to determine sanctions or benefits.

The following page provides an example of an unofficial cohort

default rate.

100

the number of borrowers who entered repaymentin FY 1998 and defaulted or met other specifiedconditionsin FY 1998 or FY 1999 (Numerator)

the number of borrowers who entered repayment

in FY 1998 (Denominator)

X

Note


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How does the Department determine whichloans are placed in the denominator of thecalculation?

Loans are included in the denominator of the cohort default ratecalculation based on when the loans entered repayment. Except foran average cohort default rate calculation, loans included in thedenominator of the FY 1998 cohort default rate calculation are therelevant FFEL Program and Direct Loan Program loans that enteredrepayment during FY 1998 (i.e., from October 1, 1997 throughSeptember 30, 1998).

Different loan types enter repayment under different rules.

FFEL Program Stafford Loans enter repayment on the day following

six months of an uninterrupted grace period after a student drops

below at least half-time enrollment PROVIDED that the school timelynotified the lender and/or guaranty agency of the students change inenrollment status. If the school does not timely notify the lenderand/or guaranty agency of a student's change in enrollment status,the lender will use the best information available to determine thestudents date entered repayment and this date will be used forpurposes of calculating the school's cohort default rate.

If the loan was converted into repayment before March1, 1996, the repayment date for FFEL Program StaffordLoans may be date-specific (for example, 1/16/1996) ormonth-specific (for example, 2/1996). On or after March1, 1996, the repayment date is date-specific.

Direct Loan Program Loans enter repayment on the day followingsix months of an uninterrupted grace period after a student dropsbelow at least half-time enrollment PROVIDED that the school timelynotified the Direct Loan servicer of the students change in enrollmentstatus. If the school does not timely notify the Direct Loan servicer ofa student's change in enrollment status, the servicer will use the bestinformation available to determine the students date enteredrepayment and this date will be used for purposes of calculating theschool's cohort default rate.

Unlike FFEL Program loans, the date enteredrepayment for Direct Loan Program loans has alwaysbeen date specific.

Q.Q. If a borrower requests aforbearance or deferment, willthe students date enteredrepayment change?

AA.. No, a forbearance ordeferment will not alter theborrowers date entered

repayment.

Q.Q. When will a borrower

enter repayment if theborrower re-enrolls in aneligible school prior to theexpiration of the borrowersgrace period?

AA.. If a school provides timelynotification that the borrowerre-enrolled, the borrower willnot enter repayment until theborrower has received sixconsecutive months of anuninterrupted grace period.

Note

Note


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Federal SLS Loans if not reported in a cohort default rate priorto FY 1993, the following definitions apply.

If a student has a Federal SLS Loan and an FFELProgram Stafford Loan that were both obtained in the

same period of continuous enrollment, the date enteredrepayment for the Federal SLS Loan is the same as thedate entered repayment for the FFEL Program StaffordLoan.

OR

In all other instances, the date entered repayment for theFederal SLS Loan is the day following the day a studentis no longer enrolled on at least a half-time basis.

Under these guidelines for Federal SLS Loans, which wereimplemented beginning with the FY 1993 cohort default rates, a loanthat was reported as having entered repayment prior to FY 1993 mightalso meet the criteria to be included in FY 1993 or later. To preventthe possibility of double-counting loans, any Federal SLS Loan thatwas reported in a cohort default rate prior to FY 1993 will not bereported again.

Please refer to the list of special circumstances affectingthe cohort default rate calculation beginning on page 24.

How does the Department determine whichloans are placed in the numerator of thecalculation?

Loans must be included in the denominator of a cohort default ratecalculation in order to be included in the numerator of the cohortdefault rate calculation.

Note


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For Direct Loan Program loans, loans are included in the

numerator of the cohort default rate calculation when a studentdefaults. As a result of the change in definition of default, thedefinition of default for cohort default rate purposes for DirectLoan Program loans was changed from 270 days of delinquency to

360 days of delinquency. This change was effective October 7,1998. Therefore, if a borrower defaults on a Direct Loan Programloan based on a first day of delinquency that occurred beforeOctober 7, 1998, the default will be based on 270 days ofdelinquency. If a borrower defaults on a Direct Loan Program loanbased on a first day of delinquency that occurred on or afterOctober 7, 1998, the default will be based on 360 days ofdelinquency. As with FFEL Program loans, it is important to notethat the first day of delinquency may change based on latepayments made by borrowers. The change in the borrower's firstday of delinquency may affect whether or not the borrower is

considered in default after 270 days or 360 days of delinquency.

In either circumstance, if the borrowers default date falls within thesame fiscal year in which the loan entered repayment or thenext fiscal year, the loan will be included in both thedenominator and the numerator of the cohort default ratecalculation.

In addition, for non-degree granting proprietary schools only,borrowers who have received Direct Loan Program loans areconsidered to be in default for purposes of calculating a schools

cohort default rate if, for a specified period of time during the cohortperiod in question, the borrowers are in repayment under theincome contingent repayment (ICR) plan with scheduled paymentsthat are less than 15 dollars per month and less than the interestaccruing on the loan. The period of time that determines whether aborrower will be included as a defaulted borrower due to theborrowers ICR plan is based on the cohort default rate calculationin which the borrower is included. If the borrower is included in acohort default rate calculation prior to FY 1998, the period of timeis 270 days. If the borrower is included in theFY 1998 or a latercohort default rate calculation, the period of time is 360 days.13

Please refer to the list of special circumstancesaffecting the cohort default rate calculation beginningon page 24.

13 64 Fed. Reg. 58974, 58979 (November 1, 1999) (Preamble to Final Rule)

Note

Q.Q. Why would a DirectLoan Program loan have loan status code of DU (i.defaulted) BUT not beconsidered in default forcohort default rate

purposes?

A.A. For the purposes ofborrower eligibility, a DireLoan Program loan isconsidered in default afte270 days of delinquency.However, for cohort defaurate purposes, a DirectLoan Program loan is notconsidered in default untilafter 360 days ofdelinquency. If theborrower reaches 271days of delinquency withinthe cohort period inquestion, the loan will be

assigned a DU loan statuIf the borrower's 361st dayof delinquency does notoccur within the cohortperiod in question, theborrower will be reportedwith a loan status code ofDU, but will not beconsidered a defaultedloan for cohort default ratpurposes.


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Special Circumstances Affecting HowCohort Default Rates are Calculated

If Then AndA borrower obtained

more than one loanto attend a schooland the loansentered repaymentduring the samefiscal year

The borrower should be

included in the denominatorof the cohort default ratecalculation in the year inwhich the loans enteredrepayment. Cohort defaultrates are calculated for aschool based on anunduplicated borrowercount. Therefore, even if aborrower has more thanone loan enteringrepayment in a single fiscal

year for a given school, thatborrower will only becounted once in thedenominator of the school'scohort default ratecalculation.

The borrower should

be included in thenumerator of thecohort default ratecalculation if one ormore of the loansdefaulted or met otherspecified conditionswithin the fiscal year inwhich the loansentered repayment orwithin the next fiscalyear. Even if more

than one loandefaulted or met otherspecified conditions,the borrower would becounted only once inthe numerator of theschool's cohort defaultrate calculation.

A borrower obtainedmore than one loanto attend a school butthe repayment datesfor each of the loansfall into differentfiscal years

The borrower should beincluded in thedenominators of the cohortdefault rate calculations inthe years in which the loansentered repayment. Thesame borrower can appearin two different cohortdefault rate calculations fora school if the borrower hastwo separate loans and therepayment dates for each ofthe loans fall into separatefiscal years. However, thesame loan cannot be usedin more than one cohortdefault rate calculation.

The borrower shouldbe included in thenumerator of thecohort default ratecalculation if the loandefaulted or met otherspecified conditionswithin the fiscal year inwhich that loanentered repayment orwithin the next fiscalyear.


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If Then AndA borrower takes outloans at more than

one school

The loans obtained forattendance at one school

are included in thedenominator of thatschool's cohort default ratecalculation and the loansobtained for attendance atany other schools areincluded in thedenominator of the otherschools' cohort default ratecalculations.

The loans obtained forattendance at one school

are included in thenumerator of thatschool's cohort defaultrate calculation and theloans obtained forattendance at the otherschools are included inthe numerator of theother schools' cohortdefault rate calculations,provided that the loansdefaulted or met other

specified conditionswithin the fiscal year thatthe loans enteredrepayment or within thenext fiscal year.

A borrowerconsolidated oneor more of his/hernon-defaultedloans

The borrower should beincluded in thedenominator(s) of thecohort default ratecalculation(s) in which theunderlying loan(s)

entered repayment.

If the consolidation loandefaulted or met otherspecified conditionswithin the fiscal year inwhich the underlying

loan(s) enteredrepayment or within the

next fiscal year, then theborrower should beincluded in thenumerator(s) of thecohort default ratecalculation(s).

Q.Q. What is anunderlying loan?

A.A. If a borrowerconsolidates his/herFFEL Program and/orDirect Loan Programloan(s), the FFEL

Program and/or DirectLoan Program loan(s)that was consolidated isconsidered theunderlying loan.


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If Then AndThe borrowers loanwas discharged

due to death,bankruptcy, and/ordisability AFTERthe borrowerentered repaymentBUT prior to theborrowerdefaulting.

The borrower should beincluded in the

denominator of the cohortdefault rate calculationbased on the fiscal year inwhich the loan enteredrepayment.

PROVIDED that thelender, guaranty agency,

and/or Direct Loanservicer was timelynotified of the borrowersdeath, bankruptcy,and/or disability, theborrower should NOT beincluded in the numeratorof the cohort default ratecalculation because theloan did not default priorto the death, bankruptcy,and/or disability.

The borrowers loanwas dischargeddue to death,bankruptcy, and/ordisability AFTERthe borrowerdefaulted14

The borrower should beincluded in thedenominator of the cohortdefault rate calculationbased on the fiscal year inwhich the loan enteredrepayment.

The borrower should beincluded in the numeratorof the cohort default ratecalculation if, prior todischarge, the loandefaulted or met otherspecified conditionswithin the fiscal year inwhich the loan enteredrepayment or the nextfiscal year.

A payment is made

on a loan by theschool, its owner,agent, or anotherentity or individualaffiliated with theschool to avoid

default by theborrower15


included in thedenominator of the cohortdefault rate calculationbased on the fiscal year inwhich the loan enteredrepayment.


included in the numeratorof the cohort default ratecalculation because theloan is treated as indefault for cohort defaultrate purposes.

14 34 CFR Section 682.402 and 685.21215 HEA Section 435(m)(2)(B), 34 CFR Section 668.17(d)(1)(ii)(B), (e)(2)(ii), and (f)(2)(ii)


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If Then AndA loan was fullyrefunded to the

lender/Direct Loanservicer (i.e.,cancelled) within

120 days ofdisbursement

The borrower should NOT beincluded in the denominator

of the cohort default ratecalculation because cancelledloans are not included in thecohort default ratecalculation.

The borrower shouldNOT be included in

the numerator of thecohort default ratecalculation becausecancelled loans arenot included in thecohort default ratecalculation.

A loan waspartially refunded

to the lender/DirectLoan servicer orwas not fully

refunded within 120days ofdisbursement.

The borrower should beincluded in the denominatorof cohort default ratecalculation based on thefiscal year in which the loan

entered repayment.

The borrower shouldbe included in thenumerator of thecohort default ratecalculation if the

portion of the loan thatwas not refunded,defaults or meetsother specifiedconditions within thefiscal year the loanentered repayment orthe next fiscal year.

A borrowerrequested and wasgranted a revisedrepayment

schedule thatstarted before thedate the borrower

was originallyscheduled toenter repayment

The borrower should beincluded in the denominatorof the cohort default ratecalculation based on the

fiscal year in which that earlyrepayment schedule startdate falls.

The borrower shouldNOT be included inthe numerator of thecohort default rate

calculation if the loandid not default or meetother specifiedconditions.


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If Then AndA borrowerdefaulted on a loan

but it wasrehabilitatedforcohort default ratepurposes beforethe end of thecohort periodassociated with thefiscal year in whichthe borrowerenteredrepayment16

The borrower should beincluded in the


The borrower shouldNOT be included in the

numerator of the cohortdefault rate calculationbecause the loan is notconsidered in default.

A borrower paid the

loan in-fullPRIORto the date the

borrower wasoriginally scheduledto enter repayment


included in thedenominator of the cohortdefault rate calculationbased on the fiscal yearthat the borrower paid theloan in-full. The paid in-fulldate becomes the new

repayment date.

The borrower should

NOT be included in thenumerator of the cohortdefault rate calculationbecause the loan neverdefaulted or met otherspecified conditions.

A borrower paid theloan in-full AFTERdefaulting on the

loan and theborrower did notsuccessfullyrehabilitate his/herloan before the endof the cohort periodassociated with thefiscal year in whichthe borrowerentered repayment

The borrower should beincluded in thedenominator of the cohort

default rate calculationbased on the fiscal year inwhich the loan enteredrepayment.

The borrower should beincluded in the numeratorof the cohort default rate

calculation if the loandefaulted or met otherspecified conditionswithin the fiscal year inwhich the loan enteredrepayment or the nextfiscal year.

16 HEA Section 428 F(a), 435(m)(2)(C), and 34 CFR Section 682.405(a) An FFEL Program loan isrehabilitated if a borrower has made 12 consecutive, voluntary, on-time monthly payments before the end ofthe cohort period in which the student entered repayment and the loan is sold to a lender. HEA Section451(b)(2), 455(a)(1), and 34 CFR Section 685.211(e) A Direct Loan Program loan is rehabilitated if aborrower has made 12 consecutive on-time monthly payments before the end of the cohort period in which theborrower entered repayment.


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If Then AndA lenderrepurchased a loan

on which a claimhad been paid

because theborrowerestablished a newpayment plan andis making payments,or thelender/servicersimply requests therepurchase (i.e., acourtesy

repurchase) ANDthe loan does notmeet therehabilitation criteriadiscussed on page30.

The loan should beincluded in the


Since the loan isconsidered a defaulted

loan for cohort defaultrate purposes, the loanshould be included in thenumerator of the cohortdefault rate calculation ifthe original claim waspaid within the cohortperiod associated withthe cohort default rate inwhich the loan enteredrepayment.


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Key

Code DescriptionCDR Cohort Default

Rate

N NumeratorD DenominatorB Both Numerator

and Denominator

How does adding and subtracting loans fromthe cohort default rate calculation affect aschools cohort default rate?

The following chart describes the effect that the movement of aloan has on a cohort default rate calculation.

Results of Adding and Subtracting LoansIf And the Department Then the

followingchange to thecohortdefault rateresults:

the borrower has no Adds a defaulted loan +B

other loans in the Adds a non-defaulted loan +DCDR calculation Subtracts a defaulted loan -B

Subtracts a non-defaulted

loan-D

Changes a defaulted loan toa non-defaulted loan

-N

the borrower Adds a defaulted loan +Nhas other non- Adds a non-defaulted loan No effectdefaulted loan(s)

correctly included in

Subtracts a non-defaulted

loanNo effect

the CDR calculation Subtracts a defaulted loan -NChanges a defaulted loan to

a non-defaulted loan

-N

the borrower Adds a defaulted loan No effecthas otherdefaultedloan(s) correctly

included in the CDRcalculation

Adds a non-defaulted loan No effect

Subtracts a defaulted loan No effectSubtracts a non-defaultedloan

No effect

Changes a defaulted loan toa non-defaulted loan

No effect


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