What is it?
For schools with 30 or more borrowers, the Cohort Default Rate (CDR) is the percentage of a school's borrowers who enter repayment on certain Federal Family Education Loans (FFEL) and/or William D. Ford Federal Direct Loans (Direct Loans) during a fiscal year (October 1 through September 30) and default or meet the other specified conditions within the cohort default period.
For schools with 29 or fewer borrowers entering repayment during a fiscal year, the cohort default rate is an "average rate" based on borrowers entering repayment over a three-year period.
How is it calculated?
- Numerator: Number of federal loan (FFEL/Direct Loan) borrowers from the denominator who default within a cohort period.
- Denominator: The number of Stafford loan borrowers who enter repayment within a cohort period.
- Result: Each cohort tracks borrowers who enter repayment between October 1 and September 30.
- Note: *If 29 or fewer borrowers entered repayment in a given cohort fiscal year, the "average rate" formula is used to calculate a Cohort Default Rate.
How does it work?
The Department of Education provides schools with "draft" (unofficial) CDRs each spring then releases official rates to the general public in the fall. The official CDRs are available to the public through a searchable database.
Benefits of a Low CDR
Having several consecutive low CDRs entitles your school to certain benefits.
|Benefits of Low CDRs||Exempt From 30-Day Delayed Disbursement Rule for First-Year, First-Time Stafford Loan Borrowers?||Exempt From Multiple Disbursement Rule for Stafford and PLUS Loan Borrowers?|
|3 most recent 2-year or 3-year CDRs are less than 15%||Yes||Yes, for a loan period no longer than 1 standard term or 4 months|
|Most recent 2-year or 3-year CDR is less than 5%||Yes, for a school originating a Stafford loan to cover a study-abroad student's cost of attendance||Yes, for a school originating a Stafford or PLUS loan to cover a study-abroad student's cost of attendance|
Sanctions for a High CDR
Consistently high CDRs can result in some significant consequences for your school.
|Consequences of High Official CDRs||Default Prevention Task Force and Plan Required?||Provisional Certification of Title IV Eligibility?||Loss of Title IV Program Eligibility?|
|3 Year Sanctions Effective Beginning Cohort Year 2011||Most recent 3-year CDR is 30% or above||Yes||No||No, if most recent CDR is not above 40%|
|2 of 3 most recent 3-year CDRs are 30% or above||Yes, and if those rates are for two consecutive years, school must revise its plan||Yes||No, if most recent CDR is not above 40%|
|3 consecutive 3-year CDRs are 30% or above||Not required||Yes||Yes - Pell grant and Direct loan eligibility|
|Most recent 3-year CDR is above 40% (as of September 2014)||Not required||No (depends on the prior 2 rates)||Yes - Direct loan eligibility only|
If a school feels a CDR is not accurate, the school can challenge the draft rate or submit an appeal or adjustment on the official CDR. Submissions to challenges, adjustments, or appeals must be within specified periods, which vary depending on the type of adjustment or appeal filed. For more on challenges and appeals, read the U.S. Department of Education's Cohort Default Rate Guide.