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Recalculation of Some FY 1994 Cohort Default Rates

PublicationDate: 6/20/96
Summary: Recalculation of Some FY 1994 Cohort Default Rates
Author: IPOS - Institutional Participation and Oversight Service


June 20, 1996

On May 6, 1996, the Department of Education (Department) transmitted draft FY
1994 cohort default rates to 6,900 schools. Subsequently, the Department
discovered that an error in off-the-shelf computer software used in calculating
those rates caused some borrowers with defaulted loan records to be improperly
excluded from the numerator of the calculated rates. As a result, FY 1994
pre-publication default rates were reported too low for approximately 2,700
schools. The effect was small for most of the schools; for more than fifty percent
of them, fewer than six borrowers were erroneously omitted. This has NOT
affected default rates published for any previous years.

Fortunately, this defect was found early in the FY 1994 cohort default rate cycle
and was easy to correct. The offending software product has been completely
replaced by new software. In addition, the Department has recalculated rates for
the affected schools and is mailing the revised rates along with the corresponding
pre-published backup data to all those schools. The 2,700 schools whose rates
are being revised will have 30 additional days from the date they receive their
notice to submit challenges of the data to guarantee agencies.

The following text is the letter of explanation that the Department will be sending
to the affected schools. Please be assured the Department will put procedures
in place to avert such errors in the future.

*********************************************************************************************
July 1996

Dear President:

In May, the U.S. Department of Education (Department) mailed Fiscal Year (FY)
1994 pre-publication cohort default rate notices to all schools to allow them the
opportunity to review and correct data errors prior to the calculation of FY 1994
official cohort default rates.

The Department has determined that some defaulted loan records were
improperly excluded from the numerator of your school’s FY 1994 pre-publication
cohort default rate. These loans were excluded because of a problem
encountered in off-the-shelf computer operating software.

The problem has now been corrected, and the Department has recalculated your
school’s FY 1994 pre-publication cohort default rate. Enclosed are revised FY
1994 pre-publication cohort default rate data for your review. The Department is
also offering your school a second opportunity to challenge the FY 1994 data
prior to the calculation of your school’s official FY 1994 cohort default rate.

If your school chooses to challenge the enclosed cohort default rate data, it has
30 calendar days from the receipt of the enclosed data to notify the appropriate
guaranty agency(ies) of any data that your school believes to be incorrect. Your
school must submit its challenge to the guaranty agency that reported the
information to the Department in accordance with the procedures described at 34
CFR §668.17(h) and the FY 1994 Cohort Default Rate Data Pre-Publication
Review Booklet you received in May.

The Department regrets any inconvenience this problem may have caused your
school. If you have any questions about the cohort default rate pre-publication
review process, please contact the Department’s Default Management Hotline at
(202) 708-9396.

Sincerely,

Suzanne M. Duval
Acting Chief
Default Management Section

Enclosure

Last Modified: 08/16/1999