Appealing & Challenging Your Cohort Default Rate

Report
Appealing & Challenging Your
Cohort Default Rate
Presented by: Tommy Sims, Sr. Debt Mgmt. Program Advisor, ECMC
&
Eric Johnson, President, Student Outreach Solutions
Moderator: Tom Le, Manager of Default Prevention, Wyotech Long Beach
The Changing Landscape
•
•
•
•
Loan default rate increasing for most schools
Educational costs continue to rise
More students borrowing more money
Combination of Stafford and private loans equals
greater debt
• Schools require uninterrupted loan capital and high
CDRs may cause access issues
• Changes to CDR calculation accompanied by new
sanctions and regulatory oversight
• FFELP to FDLP transition and loss of guarantor’s
financial literacy and default aversion efforts
Cohort Default Rate Trends
FY 2009,FY 2010, & FY2011 Cohort Default Rates
Fiscal Year 2009 Official
Fiscal Year 2010 Official
Fiscal Year 2011 Official
# of
Borrower
# of
# of
# of
Borrower
# of
# of
# of
Borrower
# of
# of
Schools Default Borrowers Borrowers Schools Default Borrowers Borrowers Schools Default Borrowers Borrowers
Rate
Defaulted Entered
Rate
Defaulted
Entered
Rate
Defaulted Entered
(%)
Repayment
(%)
Repayment
(%)
Repayment
Public
Less than 2 yrs
2-3 yrs
4yrs(+)
Private
Less than 2 yrs
2-3 yrs
4yrs(+)
Proprietary
Less than 2 yrs
2-3 yrs
4 yrs(+)
Foreign
Unclassified
Total
1,627
142
855
630
1,706
43
172
1,491
2,147
1,110
732
305
425
1
5,906
7.2%
9.9%
11.9%
5.2%
4.6%
14.5%
10.0%
4.5%
15.0%
13.7%
14.8%
15.4%
5.5%
0.0%
8.8%
128,121
749
62,234
65,138
38,718
605
1,507
36,606
152,862
18,031
42,893
91,938
493
0
320,194
1,778,903
7,548
520,256
1,251,099
825,221
4,148
15,039
806,034
1,015,855
130,936
289,546
595,373
8,862
5
3,628,846
1,621
140
845
636
1,716
41
175
1,500
2,188
1,130
746
312
432
1
5,958
8.3%
10.0%
13.4%
6.0%
5.2%
13.6%
8.5%
5.1%
12.9%
11.8%
12.0%
13.6%
2.9%
0.0%
9.1%
161,815
831
81,120
79,864
46,481
676
1,573
44,232
166,364
19,767
41,443
105,154
280
0
374,940
1,928,054
8,261
604,872
1,314,921
882,005
4,953
18,384
858,668
1,281,215
166,436
343,586
771,193
9,503
1
4,100,778
1,633
146
843
644
1,711
43
167
1,501
2,272
1,181
760
331
429
2
6,047
9.6%
9.3%
15.0%
6.8%
5.2%
14.0%
8.2%
5.1%
13.6%
14.1%
13.9%
13.4%
2.7%
0.0%
10.0%
218,418
824
116,966
100,628
51,153
734
1,445
48,974
205,681
28,018
53,854
123,809
286
0
475,538
2,253,463
8,779
774,772
1,469,912
967,956
5,219
17,458
945,279
1,507,562
197,990
387,278
922,294
10,496
4
4,739,481
Cohort Default Rate Trends
FY 2011 2-Year National Student Loan Default Rates
Issue
1989 1990 1991 1992
1993
1994
1995 1996 1997 1998
1999
2000
2001 2002 2003
2004 2005 2006 2007 2008 2009 2010 2011
25
22.4%
21.4%
20
Cohort Default Rate
17.6%
15
17.2%
17.8%
15.0%
10.7% 10.4%
10
8.8%
11.6%
9.6%
6.9%
6.7%
5.6% 5.9%
5
5.4% 5.2%
4.5%
8.8%
7.0%
9.1
10.0%
5.1%4.6% 5.2%
0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Cohort Years
FY 2009 Three-Year Official National Cohort Default Rates
FY 2010 Three-Year Official National Cohort Default Rates
Public
Less than 2 yrs
2-3 yrs
4yrs(+)
Private
Less than 2 yrs
2-3 yrs
4yrs(+)
Proprietary
Less than 2 yrs
2-3 yrs
4 yrs(+)
Foreign
Unclassified
Total
Number of
Schools
Borrower Default
Rate (%)
Number of Borrowers
Defaulted
Number of Borrowers
Entered Repayment
1,619
139
840
640
1,712
41
168
1,503
2,187
1,117
743
327
432
1
5,951
13.0%
16.5%
20.9%
9.3%
8.2%
21.8%
14.2%
8.0%
21.8%
20.9%
21.4%
22.1%
4.6%
0.0%
14.7%
250,661
1,315
125,764
123,582
72,347
1,097
2,305
68,945
277,088
34,811
71,853
170,424
449
0
600,545
1,922,773
7,963
599,467
1,315,343
879,269
5,020
16,217
858,032
1,270,965
165,921
334,459
770,585
9,562
1
4,082,570
The Consequences of Default
Not only does student loan default impact the
integrity of the student loan programs, but
there are significant consequences for:
• Taxpayers
• Schools
• Borrowers
The Consequences of Default
•
•
•
•
High CDRs may result in adverse publicity
Negatively reflect on school quality
May result in loss of Title IV eligibility
Threaten continued access to both Stafford and
private loan funds
• Result in extra work to reverse high rates
The Recession
• CDR data is retrospective, so the impact of the
recession will be seen in FY 09, FY 10 and FY 11
vintages
• More borrowers are having difficulty repaying their
loans
• The recession is (unfortunately) occurring concurrently
with the change from a 2-year to a 3-year CDR
calculation
• Some schools may face compliance difficulties due to
CDRs in the coming years
• Contributes to an un/under-employed alumni
3-Year CDR Sanctions
• Beginning with the 2011 CDR (published September
2014)
– Schools with CDRs of 30% or higher must take certain
corrective actions:
• Create a default prevention team
• Submit a default prevention plan to FSA for
review
Note: These are solid default prevention
strategies already recommended by FSA
CDR Sanction Threshold Changes
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Old Sanction Threshold
New Sanction Threshold as of 10/1/11
Disbursement “Relief” Thresholds
Eligible School
Benefits
A school whose most recent official cohort default
rate is less than 5.0% and is an eligible home
institution that is originating loans to cover the
cost of attendance in a study abroad program
-May disburse loan proceeds in a single
installment to a student studying abroad
regardless of the length of the student’s loan
period.
-May choose not to delay the disbursement of the
first installment of loan proceeds for first-year
first-time borrowers studying abroad.
A school with a cohort default rate of less than
15.0% for each of the three most recent fiscal
years for which data are available, including
eligible home institutions and foreign institutions,
12
-May disburse, in a single installment, loans that
are made for one semester, one trimester, one
quarter, or a four-month period.
-May choose not to delay the first disbursement of
a loan for 30 days for first-time, first-year
undergraduate borrowers.
Default Prevention Best Practices
• Form a default prevention team (task force)
• Develop or adopt a default prevention plan
• Utilize traditional financial aid office-based default
prevention strategies
• Utilize non-traditional student success-focused default
prevention strategies
• Best option: Use a combination of these four (4)
approaches
“Traditional” Approach
• Primarily involves the financial aid office
• Focus is on helping student borrowers to develop a
healthy relationship with their loans to include:
• Understanding loan repayment
• Teaching financial literacy
• Updating enrollment status changes
• Reaching out when help is needed
NSLDS Reports for Schools
DRC015&16
DER001
SCHDF2
SCHPR2
DELQ01
NSLDS Report Overview
Report
Description
DRC016
This report provides the current repayment status of certain borrowers in the FFEL and Direct Loan
programs who attended a school during a specific period
DER001
The Date Entered Repayment Report (DER001) is a list of student borrowers who are scheduled to enter
repayment during a specified date range, with their loan histories
SCHDF2
The Borrower Default Summary Report (SCHDF2) provides a list of loans that currently have a defaulted
loan status (DB, DL, DO, DT, DU, DW, DF, or DZ) and a loan status date that falls within the requested date
range
SCHPR2
The School Portfolio Report (SCHPR2) provides school users with information about all Direct Loan
and/or FFEL program loans for a specified school
DELQ01
The Delinquent Borrower Report (DELQ01) provides school users a report of borrowers who have been
reported as delinquent in making loan payments to one of the federal loan servicers
Understanding Cohort Default Rates
(CDRs) – a Quick Review
•
•
•
•
Draft and official CDRs
CDR numerator and denominator
Formulas used for CDR calculations
CDRs – a historical perspective
CDRs: the Formula
Numerator
Denominator
Borrowers who entered
repayment in one year,
and defaulted in that year
or the next
Borrowers who entered
repayment during the
one-year cohort period
3-Year CDR Formula
# of students who defaulted who entered repayment in Fiscal Year 1
FISCAL YEAR 1
FISCAL YEAR 2
# of students who
entered repayment
=
Cohort Default Rate (CDR)
FISCAL YEAR 3
CDRs Are Released Twice A Year
February
(DRAFT)
Not public
No sanctions
No benefits
September
(OFFICIAL)
Public
Sanctions apply
Benefits apply
Draft CDR Data Files
SHDRLROP
SHCDRROP
SHCDREOP
• Cover
• Letter
• Loan Record
Detail Report
• Extract Record
• Detail Report
* Verify that the overall CDR (Num/Den) on the Letter
matches the SHCDRROP (Loan Record Detail Report)
Data collected in the
SHCDREOP File
SS#
&
Date Entered
Repayment
DOB
(DER)
Enrollment Code
Claim Reason
Loan Amount
Guarantee Date &
Guarantor
Academic Level
Default Date
Loan Type
2-Year CDR Evaluation
Fiscal Year
2009
2010
2011
Draft
Rate
2012
Official Rate
CY 2009
10/1/08
9/30/09
9/30/10 Feb-11
Sep-11
Draft
Rate
Official Rate
CY 2010
10/1/09
9/30/10
9/30/11 Feb-12
Sep-12
CY 2011
10/1/10
9/30/11
9/30/12
Draft
Rate
Feb.
2013
09/30/13
Institutional CDR Calculations by CDR Year
Publications of 3-Year CDR
Fiscal Year Vintage
CDR
Denominator:
(# In Repayment)
Numerator
(# In Default)
Publish 3-Year
Rates
Rate used for
Sanctions
FY 2009
10/1/08-9/30/09
10/1/08-9/30/11
September 2012
N/A
FY 2010
10/1/09-9/30/10
10/1/09-9/30/12
September 2013
N/A
FY 2011
10/1/10-9/30/11
10/1/10-9/30/13
September 2014
3-Year CDR
FY 2012
10/1/11-9/30/12
10/1/11-9/30/14
September 2015
3-Year CDR
FY 2013
10/1/12-9/30/13
10/1/12-9/30/15
September 2016
3-Year CDR
FY 2014
10/1/13-9/30/14
10/1/13-9/13/16
September 2017
3-Year CDR
Challenges, Adjustments, and Appeals
Challenges
Adjustments
Appeals
• Incorrect Data Challenge
(IDC)
• Participation Rate Index
Challenge (PRI)
• Uncorrected Data
Adjustment (UDA)
• New Data Adjustment
(NDA)
• Loan Servicing Appeal (LS)
• Erroneous Data Appeal
(ER)
• Economically
Disadvantaged Appeal
(EDA)
• Participation Rate Index
Appeal (PRI)
Cohort Default Rate Guide
eCDR System Login Page
eCDR Appeals
•
Processes IDC, UDA, and NDA electronically
•
First became available in February 2008 (FY 2006 draft
CDR)
•
Available at the following link:
https://ecdrappeals.ed.gov/ecdra/index.html
Loan Servicing Appeal
•
Schools request loan servicing records from the guaranty agency (GA) for FFEL
loans held by the GA and the Department of Education (ED) servicers/not-forprofits for FFEL loans held by ED and for Direct Loans
•
Schools may appeal their most recent official rate; or any official rate upon which
loss of eligibility is based
•
A successful appeal will result in adjustments to numerator and denominator
•
Should be available via eCDR Appeals beginning in Fall 2013
Loan Servicing Appeal
When is a defaulted Direct Loan or FFEL PUT to the
Department considered improperly serviced for Cohort
Default Rate purposes?
A defaulted Direct Loan is considered improperly serviced for Cohort Default Rate purposes
if one or more of the following occur:
The borrower never made a loan payment, and the school can document that the Federal Servicer was required but
failed to send at least one letter (other than the final demand letter) urging the borrower to make payments on the
loan.
The borrower never made a loan payment, and the school can document that the Federal Servicer was required but
failed to attempt at least one telephone call to the borrower.
The borrower never made a loan payment, and the school can document that the Federal Servicer was required but
failed to send a final demand letter to the borrower.
The borrower never made a loan payment, and the school can document that the Federal Servicer was required but
failed to document that skip tracing was performed if the Federal Servicer determined it did not have the
borrower’s current address.
Loan Servicing Appeal Timeframe
September
Within 20 days
Within 20 days
• School receives official Cohort Default Rate
• School sends request for loan servicing records to Data Manager and ED within 15 days of timeframe
begin date.
• Data Manager notifies school and ED of any fee for providing records, together with a list of the
representative sample and a description of how the sample was chosen within 20 days of receipt of
school’s request
• School pays the fee, if charged within 15 days of Data Manager notification
• Data Manager sends loan servicing records to school, and sends ED a copy of the cover letter within 20 days of
receipt of payment (or within 20 days of receipt of school’s request, if no fee is charged)
• School requests clarification, replacement, or ED records within 15 days of receipt of records
• School sends completed Loan Servicing Appeal to ED
Within 30 days
Submitting Appeals/Adjustments
• Starting in 2012 schools may submit
challenges/appeals/adjustments for both the 2-year
CDR and 3-year CDR
• Use eCDR Appeals (at ecdrappeals.ed.gov) to submit
IDC, UDA, and NDA (LS beginning in Fall 2013)
• At this time, all other CDR appeals will continue to be
submitted via hard copy
Default Management Resources
• IFAP website: http://www.ifap.ed.gov
• Default Prevention and Management website:
http://www.ifap.ed.gov/DefaultManagement/DefaultMa
nagement.html
• eCDR Appeals website: https://ecdrappeals.ed.gov/
Thank You!
Questions?
Contact Information:
Tommy Sims
651-253-4299
[email protected]
Eric Johnson
317-348-9119
[email protected]

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