Cohort Default Rate (CDR): Impact on Schools and Students

Transcription

1 Cohort Default Rate (CDR): Impact on Schools and Students Prepared by the US Department of Education Presented by Cindy Marrs TG Senior Default Aversion Consultant Agenda Cohort Default Rates review Campus collaboration: Building a task force Identifying risk Developing a plan Engaging at-risk borrowers Challenges, adjustments, and appeals 2 Cohort Default Rate Review Understanding Cohort Default Rates (CDRs) A Quick Review CDR Definition The Cohort Periods The current formulas used for the Cohort Default Rate calculations When are CDRs Released? 3 1

2 The 3-Year Cohort Default Rate CDR Denominator #Enter Repayment Numerator #Default Publish Rates Cohorts used for Sanctions FY 2009 (3-Year) FY 2010 (3-Year) FY 2011 (3-Year) 10/1/08-9/30/09 10/1/08-9/30/11 September 2012 No Sanction 10/1/09-9/30/10 10/1/09-9/30/12 September 2013 No Sanction 10/1/10-9/30/11 10/1/10-9/30/13 September 2014 FY 09, FY 10, FY 11 FY 2012 (3-Year) 10/1/11-9/30/12 10/1/11-9/30/14 September 2015 FY 10, FY 11, FY Year Cohort Default Rate Benefits Eligible School 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. 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. Benefits -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 firstyear first-time borrowers studying abroad. -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 firsttime, first-year undergraduate borrowers. 5 CDRs Are Released Twice A Year February (DRAFT) Not public No sanctions No benefits September (OFFICIAL) Public Sanctions apply Benefits apply 6 2

3 CDRs: The Formula Numerator Borrowers who entered repayment in one year, and defaulted in that year or the next. Denominator Borrowers who entered repayment during the one-year cohort period. 7 Default Prevention Defaulted loans have significant consequences for: Borrowers Schools 8 Consequences of Default-for the borrower Credit report damage (7-year minimum) Wage garnishment Seizure of federal and state tax refunds Seizure of portion of any federal payment Legal action in federal district court Title IV ineligible May lose state occupational license No mortgage loans May have difficulty obtaining car loans May be unable to rent an apartment May be turned down for jobs Collection costs 9 3

4 Consequences of Default-for the School The CDR is a measure of a school s administrative capability. High CDRs can: Negatively reflect on school quality; Result in provisional certification; Result in loss of Title IV eligibility; and Threaten access to private loan funds. 10 Dept. of ED Recommendation The Department recommends that every school implement a default prevention and management plan consistent with 34 CFR to: Promote student and school success; Preserve the integrity of the loan programs; Reduce costs to taxpayers; Achieve low CDR; and Save students from the consequences of default. 11 Campus Wide Commitment The job of your Default Prevention (DP) Task Force: Determine the source of your default risk; Determine what steps your school will take to reduce default risk; Represent all parts of the institution (including management), which will contribute to risk reduction activities; Allocate school resources to default reduction activities; and Assess the effectiveness of default reduction activities over time: are they working? 12 4

5 Steps to Identify Default Risk Conducting Risk Analysis Use data to create a picture of borrowers at-risk of default. Who is not enough. Why will require input of academic, student affairs and other professionals. Knowing why is necessary to create targeted, useful and measureable interventions. 13 NSLDS and School Based Data In order to Conduct Risk Analysis You NEED DATA! Academic Data: Program completion rates, retention rates, data at the student level. NSLDS: Review NSLDS (default and delinquency) data along with school data about defaulters and non-defaulters. Servicer Data: Servicers offer customized reports. Remember! You need someone to work the data! 14 Identifying Risk-Conduct a Risk Analysis A Risk Analysis Will Enable You to Create Targeted Interventions Intervene: In school; In grace; and In repayment. Focusing on the right problem at the right time will result in more effective interventions. 15 5

6 Strategy-Reducing Default Risk Plan Considerations Develop a 34 C.F.R Compliant DP Plan Data Driven Initiatives Directed at Pockets of Risk Measureable Activities Incorporates Best Practices In Writing 16 Plan Considerations Reducing Default Risk Targeted Additional Loan Counseling Targeted Existing Student Success Efforts for At-Risk Borrowers Review Policies/Procedures Early Stage Delinquency Assistance Late Stage Delinquency Assistance Promoting Loan Rehab for Defaulters 17 Engaging At-Risk Borrowers What Schools Can Do While a Borrower is Still In School? Target at-risk borrowers with: Early/extra exit loan counseling; Financial literacy training; and Collect additional contact Information. Which at-risk borrowers? Students on academic probation. Students who express intention to withdraw. Students currently enrolled in programs producing a disproportionate number of defaulters. 18 6

7 Financial Literacy for Borrowers Correlation exists between increased financial literacy and decreased defaults. Schools can play an important role: Some schools make it part of their first year curriculum; and Some schools offer a class for credit, if possible. There are many free resources available; federal, nonprofits, lenders, guarantors. Consider online financial literacy programs. Counsel students on credit card usage. 19 Engaging At-Risk Borrowers What Can Schools Do While a Borrower is In Grace? Steps to take: Validate contact information; Re-enrollment assistance; Transfer assistance; Prepare borrower for repayment; Provide employment counseling and search preparation; Job placement assistance; and Assist the borrower establish a relationship with their servicer. 20 Engaging At-Risk Borrowers What Can Schools Do Once a Borrower is In Repayment? Reach out to at-risk borrowers and facilitate the critical contact with the loan servicer to prevent default. Early Stage Delinquency Target borrowers days delinquent Mid Stage Delinquency Target borrowers days delinquent Late Stage Delinquency Target borrowers 241+ days delinquent 21 7

8 Timely/Accurate Enrollment Reporting The IMPORTANCE of Enrollment Reporting... Critical for administration of Title IV Loan Programs. Ensures students rights are protected. Essential for: Proper servicing of loan throughout the life cycle of the loan; Preventing defaults; and School cohort management. 22 NSLDS Reports for Schools School should compare the NSLDS default and repayment status reports to the School s own data. If an error is found, the School should contact the appropriate data manager to resolve. If a School discovers a student is enrolled at least ½ time in an eligible program at their school shows in repayment in NSLDS, the school must update NSLDS and contact the data manager. 23 Challenges, Adjustments and Appeals Challenges Incorrect Data Challenge (IDC) Participation Rate Index Challenge (PRI) Adjustments Uncorrected Data Adjustment (UDA) New Data Adjustment (NDA) Appeals Loan Servicing Appeal (LS) Erroneous Data Appeal (ER) Economically Disadvantaged Appeal (EDA) Participation Rate Index Appeal (PRI) 24 8

9 Challenging Your Data There are a few things to keep in mind regarding timing and steps for schools to take prior to the release of official rates and the appeals process. Remember schools challenge draft rates and appeal official rates. Adjustments are another action schools can take with the official rates, but there are only two actions schools can take with draft rates. Incorrect Data Challenge Participation Rate Index Challenge 25 Incorrect Data Challenge The purpose of this challenge is to correct the data before the official default rates are released. If a data error is agreed to through the Incorrect Data Challenge for the draft rate and is not reflected in the official rate, the school is allowed to submit an Uncorrected Data Adjustment Appeal after the official rates are released. The school only has one chance to submit an incorrect data challenge, so it is important that they review their data carefully. 26 Participation Rate Index Challenge The PRI index for schools with one year over 40% changed from to and was included in the regulations package that is effective July 1, Because this section was not identified as available for early implementation. The Department does not expect this to have a big impact and most definitely the DCL correctly included the new index, but for those institutions affected by this, this index change could make a difference. 27 9

10 The PRI is Based on Arithmetic Schools can easily determine if they have a chance of a successful PRI challenge: The number of borrowers in a 12 month period* divided by the total enrollment for the same 12 month period, times the CDR, equals the Participation Rate Index** *see summary provided in December for defining 12 month period. **which must be equal to or less than for 3 years over 30 percent and for one year over 40 percent. 28 Timing is Important! The school must submit the incorrect data challenge with 45 calendar days of the timeframe begin date (which is the 6th business day after the release of the draft rates). Within 30 days of receipt of the school s incorrect data challenge, the data manager sends incorrect data challenge response to the school via ecdr. If all supporting documentation is not provided within the first submission of the data challenge, the school must provide it to the data manager within the initial 45 day timeframe. There is no additional time allowed to provide follow-up documentation. 29 QUESTIONS? 30 10