Dancing Through the Draft Default Rates
It is that time of year again! It is time to brush off those dancing shoes and refresh your steps so you do not miss a beat as you waltz through the draft Cohort Default Rates (CDR) review. Yes, the dance is recommended to be more of a waltz than a salsa as the review of the draft CDR is important to your institution’s continued participation in Title IV Federal Student Aid programs. Thus, it is necessary to take it steady and slow as you move through the annual review.
New FY 2011 Draft 3-Year CDR
The U. S. Department of Education (ED) announced the release of the new FY 2011 3-year draft CDR in an Electronic Announcement on February 18, 2014. This is the first year in which there is only a 3-year draft CDR being provided. That is, for the past three years there have been two CDRs calculated—the 2-year CDR and the 3-year CDR. Since this year will be the first year in which there have been a total of three years of the calculation of the 3-year rate, the 2-year rate will no longer be calculated. This is in accordance with the provisions of the Higher Education Opportunity Act (HEOA) of 2008.
The FY2011 CDR is calculated as the percentage of borrowers in the FY 2011 cohort who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment. For example, a school’s FY 2011 3-year CDR will be calculated as the percentage of borrowers who were included in the 2011 cohort (i.e., began repayment in FY 2011) but then defaulted on or before September 30, 2013. This is the same manner in which future years’ CDRs will also be calculated.
Importance of the Draft 3-Year CDR
As most schools are aware, the CDR is an item that requires careful attention on an ongoing basis. The provision of this draft CDR allows schools the opportunity to review the data ED currently is showing for the institution. If there are perceived errors in the data, now is the time to address them since when the final official CDRs are released in September of this year, it will be too late to affect any desired changes.
Ensuring that the draft CDR data is accurate is critical to the best possible outcome for your official CDR in September. This is because if a school has a 3-year CDR of 30% or more when the official CDR is published, the school will have to establish a Default Prevention Task Force and implement a default prevention plan. If the school has three years in which their 3-year CDR has been 30% or more, then the school is subject to potential loss of eligibility to participate in Title IV. This impact can also be the result if the school has an FY 2011 3-year CDR of 40% or more for the one year’s calculation. Therefore, reviewing the draft CDR is very important to ensure there are no errors in the data.
Acting on the Draft CDR Data
Schools that have signed up for the Electronic Cohort Default Rate (eCDR) notification process were notified of the draft CDR via the Student Aid Internet Gateway (SAIG). If a school has not signed up for the eCDR notification process, they will need to download the CDRs and the Loan Record Detail Report (LRDR) that accompanies the rates by accessing the National Student Loan Data System (NSLDS) Professional Access Web site.
The timeframe for beginning the appeal of a school’s draft CDR starts on Wednesday, February 26, 2014. Schools have 45 days from the announced appeal begin date in which to ensure they have reviewed their data and submitted any challenge or appeal to the data utilized in the calculation of their draft FY 2011 CDR. A school may question the accuracy of the data utilized in the draft CDR by reviewing the LRDR. Once a school determines that it believes there is incorrect data in the LRDR it may submit an Incorrect Data Challenge (IDC). The IDC must be submitted via the eCDR Appeals application on the eCDR Appeals Web site. If a school’s official is not registered to use this site, one may do so at the eCDR Appeals Web site. Schools may also appeal their Participation Rate Index (PRI). The PRI is a ratio of borrowers to the total number of regular students during an acceptable 12-month period. Schools that wish to challenge the PRI must continue to do so by means of submitting hard copy documentation. For more information on these challenge opportunities and the specific details of what is necessary, the school should refer to the instructions provided in the Cohort Default Rate Guide at http://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html.
This annual draft CDR review is important to every school. And, for some, it may be the most important move to ensure it is not the last dance for the school. Make your steps count!