COHORT DEFAULT RATES: WHY ARE THEY IMPORTANT?
Cohort default rates (CDRs) may generate good (or bad) publicity, might facilitate (or hamper) recruitment efforts and can affect the motivation and morale of financial aid departments. They also have serious, tangible impacts on how a school administers Title IV funds.
SANCTIONS:
- If CDR is 30% or higher for most recent 3 years = ineligible for participation in Federal Loan and Pell Grant Programs for 3 fiscal years.
- If CDR is 40% or higher in a single year = ineligible for participation in Federal Loan Program for 3 fiscal years.
After a single year of 30% or higher CDR, a school must create a default prevention task force and submit a written plan to the Department of Education.
BENEFITS:
- If CDR is 15% or lower for most recent 3 years = may disburse loan in one installment and not required to delay disbursement by 30 days to first-year undergraduates.
- If CDR is 5% or lower for most recent year = may disburse loans in one installment and not required to delay disbursement by 30 days to first-year undergraduates in study abroad programs.
Sanctions and benefits are based on Official CDRs. Schools may submit challenges, adjustments and/or appeals to both Draft and Official CDRs – all of which demand time and resources.