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CALCULATING COHORT DEFAULT RATES (CDR)HistoryThe Higher Education Opportunity Act (HEOA) of 2008 changed the period used to calculate a school's cohort default rate (CDR) from two years to three years and revised the thresholds for applying certain sanctions and benefits that are tied to a school's CDR. The last federal fiscal year for which 2-year CDRs were calculated was FY2011. CDR CalculationA school’s CDR is the percentage of the number of the school’s borrowers who enter repayment in one federal fiscal year on Direct Loans or FFEL Program loans received to attend that school who default in that federal fiscal year or by the end of the next two federal fiscal years.Definitions:Federal Fiscal Year (FY): Begins on October 1 and ends on the following September 30. A fiscal year is identified by the calendar year it ends. For example, FY2017 is the period of time beginning 10/01/2016 and ending 9/30/2017.Cohort: A group of borrowers used to determine an institution’s cohort default rate. In general, a cohort is the total number of borrowers who enter repayment during a specified FY.Cohort Period: The 3-year monitoring period for a specified FY cohort, consisting of the specified FY plus the two following FYs.Example:Federal Fiscal Year Cohort Cohort Period FY2017Borrowers entering repayment between 10/01/2016 to 9/30/201710/01/2016 to 9/30/2019(FY2017, FY2018, & FY2019)CDRs are published in the calendar year following the Cohort Period. For example, the CDR for FY2017 is published in 2020. Draft rates are generally sent to schools in February and official rates are sent by September 30th.There are two formulas used to calculate a school’s cohort default rate:the Non-Average Rate Formula, or the Average Rate Formula. Which formula is used depends on the number of borrowers from that school entering repayment in a particular federal fiscal year.CDR calculation for schools with 30 or more borrowers entering repayment within a specified FY (Non-Average Rate Formula):The Non-Average Rate Formula takes into consideration the total number of a school’s borrowers who entered repayment on loans received to attend the school during a specified fiscal year (cohort). The borrowers in this cohort will be monitored for the specified fiscal year and the subsequent two fiscal years (cohort period).A Non-Average Rate Formula CDR is calculated by dividing the number of borrowers in a cohort who defaulted within the cohort period (numerator) by the total number of borrowers in the cohort (denominator), then multiplying the result by 100.Example:As illustrated in the table below, during FY2017, an institution had 90 borrowers enter repayment on Direct Loans or FFEL Program loans they received to attend the institution, and 15 of those borrowers defaulted before September 30, 2019.Federal Fiscal YearCohort (Number of Borrowers Entering Repayment in the Specified FY)Cohort PeriodNumber of Borrowers Who Defaulted During the Cohort PeriodFY2017(10/01/2016 – 9/30/2017)9010/01/2016 – 9/30/2019(FY2017, FY2018, & FY2019)8CDR for Federal Fiscal Year Total # of borrowers who defaulted during the Cohort Period Total # of borrowers who entered repayment in FY2017Represented as a percentageFY2017 8 90= 0.0880.088 X 100 = 8.8 percentResult: This Institution’s FY2017 CDR is 8.8%CDR calculation for schools with 29 or fewer borrowers entering repayment within a specified FY (Average Rate Formula):The Average Rate Formula takes into consideration the total number of students who entered repayment during a specified fiscal year, and the two previous fiscal years. The students in each cohort will be monitored for the specific cohort period associated with each of the three fiscal years.The Average Rate CDR is calculated by dividing the total number of borrowers who defaulted in each applicable cohort period (numerator) by the total number of borrowers who entered repayment in each applicable fiscal year (denominator), then multiplying the result by 100.Example:As illustrated in the table below, during FY2017, an institution had 29 borrowers enter repayment (of whom 2 entered default during the associated Cohort Period). The school determined that 44 borrowers who entered repayment in FY2016 (7 of which entered default), and 50 who borrowers entered repayment in FY2015 (of which 3 entered default).Federal Fiscal YearCohort (Number of Borrowers Entering Repayment in the Specified FY)Cohort PeriodNumber of Borrowers Who Defaulted During the Cohort PeriodFY2017(10/01/2016 – 9/30/2017)2910/01/2016 – 9/30/2019(FY2017, FY2018, & FY2019)2FY2016(10/01/2015 – 9/30/2016)4410/01/2015 – 9/30/2018(FY2016, FY2017, & FY2018)7FY2015(10/01/2014 – 9/30/2015)5010/01/2014 – 9/30/2017(FY2015, FY2016, & FY2017)3Total # of borrowers who entered repayment123Total # of borrowers in who defaulted12CDR for Federal Fiscal Year Total # of borrowers in who defaulted during associated cohort periods Total # of borrowers who entered repayment during the associated FYsRepresented as a percentageFY2017 12 123= 0.0970.097 X 100 = 9.7 percent Result: This Institution’s FY2017 Average CDR is 9.7%CDR Challenges, Adjustments, and AppealsChallenges:Incorrect Data Challenge (IDC)Participation Rate Index Challenge (PRI)Incorrect Data Challenges are submitted by a school after the release of draft cohort default rates using the Loan Record Detail Report. A successful challenge will fix data that was used to calculate rates. Incorrect Data Challenges are submitted to the U.S. Department of Education (the Department’s) federal loan servicers for Direct Loans and for FFEL loans held by the Department, and to the Guaranty Agency for FFEL loans not held by the Department. An incorrect data challenge must be submitted within 45 days of the timeframe begin date, as defined in Chapter 4.1 of the CDR Guide.Possible incorrect data:Borrower did not enter repayment during cohort yearBorrower did not default during monitoring periodOther borrowers entered repayment during cohort periodParticipation Rate Index Challenges are submitted to the Department of Education. They are only available if a school is potentially subject to a loss of eligibility (or provisional certification) based on draft rates. No sanction is applied if, based upon statutory formula, only a small percentage of a school’s students who could receive a Title IV loan actually received one during a defined enrollment period. A participation rate index challenge must be submitted within 45 days of the timeframe begin date, as defined in Chapter 4.2 of the CDR Guide.Participation Rate Index Challenge Formula:Total borrowers in a 12-month periodXSchool’s cohort default rate=Participation Rate Index (PRI)Total regular students in a 12-month periodFor one-year > 40 percent potential loss of eligibility: PRI must be = or < than 0.06015For two-years > or = 25 percent potential loss of eligibility; for provisional certification, PRI must be = or < 0.0375For three-year > or = 30 percent, potential loss of eligibility; for provisional certification, PRI must be = or < 0.0625CDR Adjustments:Uncorrected Data Adjustment (UDA)New Data Adjustment (NDA)Adjustments are submitted by schools to the Department after the release of official rates. Successful adjustments will result in the recalculation of the cohort default rate. The electronically corrected rate is publicly released.Uncorrected Data Adjustments can be done in response to an Incorrect Data Challenge agreed to by the data manager, but not reflected in the official rate. They are only available for the most recent cohort of borrowers used to calculate the most recent official rate. If approved, the rate will be adjusted. An Uncorrected Data Adjustment must be submitted within 30 days of the timeframe begin date, as defined in Chapter 4.3 of the CDR Guide.A New Data Adjustment is available only for the most recent cohort of borrowers used to calculate the most recent official rate. New data occurs when a review of the loan record detail reports for draft and official rates show data newly included, excluded, or otherwise changed. A New Data Adjustment allows a school to challenge the accuracy of the new data. New data adjustment allegations must be confirmed by the data manager. If approved, the rate will be adjusted. New data adjustment allegations must be submitted to the data manager within 15 days of the timeframe begin date, as defined in Chapter 4.4 of the CDR Guide. The completed New Data Adjustment must be submitted to the Department within 30 days of receipt of the final data manager response.Appeals:Erroneous Data Appeal (ER)Loan Servicing Appeal (LS)Economically Disadvantaged Appeal (EDA)Participation Rate Index Appeal (PRI)Appeals are submitted by schools to the Department after the release of the official Cohort Default Rates.Erroneous Data Appeals are only available if the school is subject to a loss of eligibility (or provisional certification) based on official rates. Concurrently, an Erroneous Data Appeal is also only available if the school previously challenged the accuracy of data as part of its Incorrect Data Challenge, or if a review of loan record detail reports for draft and official rates show data newly included, excluded, or otherwise changed and the school disputes the accuracy of the data. Erroneous data appeal allegations must be submitted to the data manager within 15 days of the timeframe begin date, as defined in Chapter 4.5 of the CDR Guide. The completed Erroneous Data appeal must be submitted to the Department within 30 days of receipt of the final data manager response.Loan Servicing Appeals are available to all schools. Schools request loan servicing records from the Department’s federal loan servicers for Direct Loans and for FFEL loans held by the Department, and from the Guaranty Agency for FFEL loans not held by the Department. Schools may appeal their most recent official rate or any official rate upon which a loss of eligibility is based. A successful appeal will result in adjustments to the numerator and denominator. An electronically correct rate will be publicly released. The request for loan servicing records must be submitted to the data manager within 15 days of the timeframe begin date, as defined in Chapter 4.6 of the CDR Guide. The completed Loan Servicing Appeal must be submitted to the Department within 30 days of receipt of the final data manager response.Economically Disadvantaged Appeals are available based on a loss of eligibility or notice of second successive official rate potentially subjecting a school to provisional certification. An Economically Disadvantaged Appeal requires an independent auditor’s opinion certifying a school’s low-income rate and completion or placement rates that meet regulatory requirements. The school must determine if it is eligible for an economically disadvantaged appeal and, if so, must submit its management’s written assertion to the Department within 30 days of the timeframe begin date, as defined in Chapter 4.7 of the CDR Guide. The completed Economically Disadvantaged Appeal, which includes the auditor’s written opinion, must be submitted to ED within 60 days of the timeframe begin date.Participation Rate Index Appeals are only available if a school is subject to a loss of eligibility or provisional certification based on official rates. There will be no sanction applied if, based upon statutory formula, only a small percentage of a school’s students who could receive a Title IV loan actually received one during a defined enrollment period. A Participation Rate Index appeal must be submitted to the Department within 30 days of the timeframe begin date, as defined in Chapter 4.8 of the CDR Guide.Other CDR Appeals:Average Rate Appeals: If a school is subject to a loss of eligibility, but two or more of the official rates are average rates, actual rates will be used for those years. Before notice of the official rate, the Department will make an initial determination that the school may qualify for an average rate appeal. If the school qualifies, they will receive notice of that determination at the same time they receive notice of the official rate. Please see Chapter 4.9 of the CDR Guide for further information.Thirty-or-Fewer Borrower Appeals: If the combined total of all three years of borrowers entering repayment is less than 30, there will be no loss of eligibility. Before notice of the official rate, the Department will make an initial determination that a school may qualify for a thirty-or-fewer borrower appeal. If the school qualifies, they will receive notice of that determination at the same time they receive notice of their official rate. Please see Chapter 4.10 of the CDR Guide for further information.eCDR Appeals:All schools must use eCDR Appeals to prepare and submit an IDC, UDA, or NDA challenge or adjustment. The eCDR is available at resources for Cohort Default Rates: Cohort Default Rate Guide; Cohort Default Rate and Repayment FAQs; Definition of Default for Student Eligibility and CDRs ................
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