2. AGENDA Default Defined Cohort Default Rates (CDRs) Changes to Tracking FY08 3-year CDRs Implementing a Plan Default Prevention Activities Lowering CDRs DEFAULT PREVENTION
3. DEFAULT DEFINED Students enter into repayment on Federal Stafford Loans 6 months after separation (graduation/withdraw) from school Default process begins on a loan after a delinquency has persisted for 270 consecutive days (9 months/payments) The loan holder files a claim with the guarantee agency/Debt Collection Services The claim is reviewed for due diligence and then paid as a default by the Dept of Ed (ED) approximately 90 days later (360 total days)
4. DEFAULT DEFINED DEFAULT TIMELINE DEFAULT (360 DAYS) 4.01.10 9.30.10 9.20.11 6.30.11 GRACE PERIOD (6 MONTHS) DELINQUENCY PERIOD (9 MONTHS) CLAIM REVIEWED CLAIM FILED
5. COHORT DEFAULT RATES Cohort Default Rates (CDRs) are the percentage of borrowers who enter into repayment (denominator) on Federal Stafford loans in a given federal fiscal year and then default (numerator) by the end of the cohort default period The fiscal year begins October 1 of one year and ends September 30 of the next year The cohort default periodbegins October 1 of the fiscal year and ends September 30 of the next 2 fiscal years (3-years)
6. COHORT DEFAULT RATES FY09 3-YEAR CDR SAMPLE 550 (DEFAULTS) 100 x= 23% 2390 (COHORT) NUMBER OF BORROWERS WHO DEFAULTED 10.01.08—9.30.11 (NUMERATOR) NUMBER OF BORROWERS WHO ENTERED REPAYMENT 10.01.08—9.30.09 (DENOMINATOR)
7. COHORT DEFAULT RATES Official CDRs are used to determine a school's participation in Title IV programs (federal student loans & federal grants) Participation can be limited, suspended or terminated when a school’s official CDR is at or above 30% for three consecutive years (all Title IV programs), or if the rate for one year is greater than 40% (federal student loans) A majority of students attending for-profit colleges finance their education with Title IV funds
9. CHANGES TO TRACKING Default Period Was previously measured for two years FY09 & beyond will now be measured for three years Draft CDRs Previously released for the 2-year default period only FY09 – 2011 will receive a 2-year and 3-year rate School loss of eligibility Current threshold is 25% New threshold will be 30%
11. The Department of Ed (ED) has released FY08 3-year Trial CDRs The 3-year rate more than doubled vs. the 2-year rate at for-profits Rates increased from 11.6% on average to 25% FY08 3-YEAR CDRs
12. IMPLEMENTING A PLAN Identify all borrowers in a given cohort through the Date Entered Repayment (DER) Report available on NSLDS per OPEID and branch campus code Identify delinquent borrowers through the Delinquent Borrower (DLQ) Report available on NSLDS Delinquent borrower reports can also be requested directly through the repayment servicers
13. DEFAULT PREVENTION ACTIVITIES Prior to Enrollment Introduction of Default Prevention Services to prospective students During Enrollment Provide in class-room financial literacy workshops Before Separation Provide exit counseling & collect updated contact info During Grace Period Send out grace letters During Delinquency Make phone calls, send letters and emails to assist borrowers After Default Work with borrowers to rehabilitate defaulted loans
