17 Apr Should You Review Your Draft Cohort Default Rate Data? Yes (and How!)
By Joe Jovell, Senior Marketing Associate, Great Lakes Educational Loan Services, Inc.
While no sanctions or benefits are associated with the draft cohort default rates (CDRs) you receive from the U.S. Department of Education (ED), there could be serious ramifications for your school if you don’t challenge incorrect data while you can.
You’ll have a 45-day timeframe, beginning six business days after rates are released, to challenge incorrect data. If you later discover errors in your official CDR data, certain appeals are unavailable to you unless you first challenged incorrect draft data.
If your CDR is near thresholds for sanctions or benefits, you’ll especially want to review your draft CDR reports. But even if your rates are relatively low, keep in mind that, beginning with those entering repayment during fiscal year (FY) 2011, all borrowers will be tracked for three years rather than just two. This expands the length of time they can impact your default rate.
So you can see why it’s a good idea to review your CDR data. But let’s be realistic: It’s hard to recognize incorrect data if you don’t know what you’re looking at—or for. Here are some basics to help make it easier for you.
Understand the CDR Calculation
Your three-year CDR is the percentage of your school’s federal student loan borrowers who enter repayment within a cohort fiscal year and default on their loans during that fiscal year or either of the following two fiscal years. A cohort fiscal year runs from October 1 of the previous calendar year and ends on September 30 of the calendar year it represents (e.g., cohort fiscal year 2010 runs from October 1, 2009 through September 30, 2010). For more information about CDRs and how they’re calculated, see Understanding Cohort Default Rates.
Understand Your Draft CDR Reports
The report you receive from ED containing your CDR data is called the Loan Record Detail Report (LRDR). It may simply contain incorrect information. You can see page 2.3-6 of ED’s CDR Guide for the fields that contain data most often challenged. But it’s also possible that your data may incorrectly exclude, or include, borrowers who do, or do not, belong in that particular cohort.
The LRDR contains borrower information for Stafford loans that were used to calculate your school’s draft or official CDR—including the borrower’s name, Social Security number, last date of attendance, date the borrower entered repayment, date of default (if applicable), and loan type. Borrowers with multiple loans will be counted only once. You
‘ should check your LRDRs carefully for accuracy, comparing the information to the repayment date, default status, and cancellations/refunds shown in your school records.
You may find ED’s Frequently Asked Questions useful—and you’ll definitely want to print out tip sheets from ED’s CDR Guide (for example pages 2.3-7 and 2.3-8) and keep them handy as you compare your school’s data with your LRDR; they’ll help you decipher codes on the report until you get used to them.
Avoid Common Errors Easily
When reviewing information in your LRDR, you can avoid two common errors with minimal effort.
Check NSLDS for a student’s enrollment status. Students who have withdrawn or dropped to less than halftime status may be taking classes that maintain their eligibility elsewhere. Save yourself precious time by getting the larger enrollment picture from NSLDS.
If two entities are listed for a loan, make sure you send any challenges to the correct entity (the one indicated with a usage code of “B” rather than with an “E”). Sending your challenge to the wrong servicer or guarantor can cause you to miss your deadline.
Watch for training opportunities through NASFAA as well as free webinars offered by loan servicers; they can help make this complicated task easier.
SIDEBAR: CDR BRAIN TEASERS
If you’re confused about whose loans should and should not be included in CDR calculations, you’re not alone! Here are a few case studies to get you warmed up before your draft CDR data arrives.
Should these students’ loans be included in your school’s draft 3-year CDR for FY 2010?
Your draft 3-year CDR data for FY 2010 shows that Andre graduated from your school on November 4, 2009 and defaulted on May 8, 2012. His estimated date entered repayment (DER) was May 5, 2010. According to NSLDS, Andre transferred to another school on February 4, 2010. Should he be included in your school’s CDR? What further information do you need?
Paige graduated from your school on June 1, 2009, with an estimated DER of December 2, 2009. Since Paige paid her loan in full on July 1, 2009, should her loan be included in the denominator for your 3-year CDR for FY 2010? Why or why not?
Garrett withdrew from your school on June 1, 2009, and defaulted on his loans on May 27, 2011. On December 4, 2011, he consolidated three loans in order to regain Title IV eligibility. Should Garrett’s loan be included in your 3-year CDR calculation for FY 2010? Why or why not?
1) No. Had Andre actually entered repayment on May 5, 2010 as assumed by your data, his loan would have been included for FY 2010. However, if the DER is delayed by re-enrolling in school prior to the end of grace, inclusion in a CDR calculation is also delayed. You need Andre’s actual DER to make a determination. In this case, for example, Andre’s return to school delayed his actual DER until (let’s say) sometime in FY 2011. Given that actual date, his loan data should be included in CDR calculations for FY 2011 instead.
2) No. An estimated DER based on graduation is replaced by a new repayment date based on the paid-in-full date. Since Paige repaid her loan in full on July 1, 2009 (in FY 2009) rather than entering repayment as anticipated in FY 2010, her loan should be included in CDR calculations for FY 2009. This holds true for loans discharged due to death, bankruptcy, and disability as well.
3) Yes. The date underlying loans entered repayment is the date used in the CDR calculation. In this case, Garrett entered repayment during FY 2010 for the underlying loans on which he defaulted—and these loans should be included in your FY 2010 CDR despite the consolidation in FY 2011.