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(Loans) Subject: Release of Trial Three-Year Cohort Default Rates

Posted Date:December 7, 2009

Author: William Taggart, Chief Operating Officer, Federal Student Aid

Subject: Release of Trial Three-Year Cohort Default Rates

The Higher Education Opportunity Act (HEOA), enacted on August 14, 2008, made a number of changes to the student aid programs authorized under Title IV of the Higher Education Act (HEA), including the timeframes for the calculation of FFEL/Direct Loan Cohort Default Rates. On October 28, 2009 the Department published in the Federal Register the regulations that will govern the calculation of default rates beginning with the FY 2009 cohort.

Under the new provisions an institution’s Cohort Default Rate (CDR) is calculated as the percentage of the borrowers in the cohort who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment. This represents a one year extension of the current default monitoring period. The FY 2009 cohort (borrowers who entered repayment between October 1, 2008 and September 30, 2009) will be the first CDR calculation using the new standard. Thus, an institution’s FY 2009 three-year CDR will be the percentage of its borrowers who were included in the 2009 cohort who subsequently default on or before September 30, 2011. Draft rates will be provided to institutions in February of 2012 with official rates released in September of 2012.

The Department will continue to calculate and publish official two-year CDRs until three sets of three-year rates are published. The last of these two-year rates will be for the FY 2011 cohort and will be released in 2013. Beginning in 2014, only three-year rates will be published since at that time three three-year rates would have been calculated (FY 2009 published in 2012, FY 2010 published in 2013, and FY 2011 published in 2014).

To assist institutions in understanding the impact of the new three-year CDR calculation, the Department has calculated and is making available unofficial trial three-year cohort default rates for the last three cohorts for which there are data to support a three-year calculation (FY 2005, FY 2006, and FY 2007). An institution’s trial FY 2005 three-year rate is calculated as the percentage of the institution’s borrowers who entered repayment between October 1, 2004 and September 30, 2005 and subsequently defaulted on or before September 30, 2007. The trial FY 2006 three-year rate is the percentage of borrowers who entered repayment between October 1, 2005 and September 30, 2006 and subsequently defaulted on or before September 30, 2008. The trial FY 2007 three-year rate will apply to borrowers who entered repayment between October 1, 2006 and September 30, 2007 and defaulted on or before September 30, 2009.

These rates are provided for information only. No benefits or sanctions apply to these trial rates. In addition, because these are unofficial rates and serve as preview data only, institutions may not submit challenges or appeals that normally apply to draft and official rates. Nor do these rates reflect certain adjustments that may be made for official rates (fewer than 30 borrowers in a cohort, low participation, mergers, recalculations due to appeals/adjustments, etc.). The rates are simply meant to assist schools in preparing for the upcoming three-year CDR calculations.

Institutions can immediately access their trial FY 2005, FY 2006, and FY 2007 CDRs and can request a Loan Record Detail Report (LRDR) for each calculation using NSLDS at Institutions will also be able to compare these trial rates with the institutions official two-year rates for the relevant cohort years. To see the trial rates an institution should choose the Cohort Default Rate tab and look for the row labeled “3-Year Trial”. Use the Request Loan Details box to access the backup information.

While the reason for most of any increase between an institution’s two-year official rate and its three-year trial rate is, of course, the additional monitoring year, there may be other reasons. The most common of these is that while the official rates were computed one, two, or three years ago; the trial rates were computed within the past two weeks. Thus, there could have been small changes in the makeup of the cohort over time as a result of corrections made to the NSLDS database by lenders, guaranty agencies, and/or the Direct Loan Servicer.

Because we have received many requests for this information from the press and from the higher education community, beginning December 14, 2009 these trial rates (with enrollment information) will be posted publicly on the Federal Student Aid Data Center at

We hope institutions find these trial rates useful as they consider not only the impact of the move to a three-year rate but also as they think about interventions they might take to help their students avoid the consequences of defaulting on their student loans.

Last Modified: 12/06/2009