Cohort Default Rates

Transcription

1 Cohort Default Rates

2 Challenging the Draft Rates Julia Alexander Compliance & Training Officer Nelnet Guarantor Solutions!2 Nelnet Education Loan Services

3 Agenda Cohort Default Rate (CDR) overview Challenging draft CDR rates Incorrect data challenge (IDC) Why? When? What? How? Resources!3

4 Nelnet Education Loan Services Cohort Default Rate Overview

5 What is a Cohort Default Rate (CDR)? A CDR is a headcount of borrowers who enter repayment during a federal fiscal year (FFY) compared to the number in that group that default by the end of a specified time frame 2-year rate: By the end of the next FFY 3-year rate: By the end of the third FFY FFY = 10/1 9/30 FFY 2010: 10/1/09 9/30/10 FFY 2011: 10/1/10 9/30/11!5

6 FFY Year CDR Numerator and then defaulted between these dates 10/01/09 9/30/10 FFY /01/10 10/1/11 FFY 2011 Borrower who entered repayment between these dates... Denominator!6

7 FFY Year CDR Numerator and then defaulted between these dates 10/01/09 9/30/10 FFY /01/10 9/30/11 FFY /01/11 10/1/12 FFY 2012 Borrower who entered repayment between these dates... Denominator!7

8 CDR Calculation: 2-Yr vs. 3-Yr 2010 Rates Numerator Denominator FY 10 FY ,000 FY 10 FY 11 FY , , ,000 =.030 or 3.0% =.055 or 5.5%!8

9 What loans are included? Loans included in CDR calculation FFELP & DL Stafford Loans Subsidized and unsubsidized Federal Supplemental Loans for Students (SLS) Loans not included in CDR calculation Parent PLUS Loans Graduate/Professional PLUS Loans Federal Insured Student Loans (FISLs) Federal Perkins Loans!9

10 How do consolidation loans affect the CDR? Federal and Direct Consolidation Loans are not directly included in the CDR calculation A defaulted consolidation loan may cause a borrower to be included in the numerator This occurs if the consolidation loan defaults within the CDR that is applicable to the underlying loan(s)!10 Nelnet Education Loan Services

11 FFY 2010 Consolidation Example LDA = 5/20/09 Default = 2/26/12 10/01/09 9/30/10 10/01/10 9/30/11 10/01/11 9/30/12 FFY 2010 FFY 2011 FFY 2012 DER = 11/21/09 Consolidation 2/1/ YR CDR!11

12 When are the Cohort Default Rates released? Draft rates Released in February Not public No sanctions or benefits apply Official rates Released in September Public Sanctions and benefits apply Technical Update GA !12

13 When must the draft CDR challenge be submitted?

14 What is the submission time frame? Incorrect Data Challenges School must submit within 45 days of the time frame begin date set by ED Sixth business day after draft CDR release date Data Manager must respond within 30 days from the date the timely challenge is received from the school DPM sets response date!14

15 Nelnet Education Loan Services Challenging the Draft Rates

16 Why challenge the draft rate?

17 Benefits of Low Official CDRs Institutions with CDRs below 15% for the 3 most recent fiscal years for which data is available Effective for loans first disbursed on or after October 1, 2011 Exempt from 30-day delay of first disbursement for first-time freshman borrowers Exempt from the requirement for multiple disbursements for a single term loan!17 Nelnet Education Loan Services

18 FSA Ineligibility Based on High Official CDRs Loss of low CDR benefits Loss of eligibility if the three most recent 2-Year CDRs are each > 25% through FFY 2011 Loss of eligibility if the three most recent 3-year CDRs are each > 30% beginning FFY 2012 Default prevention plan and task force 34 CFR Loss of eligibility if the most recent CDR is > 40% 34 CFR Subpart M !18

19 What are the draft rate challenges?

20 Draft CDR Challenges Incorrect Data Challenge (IDC) Correct incorrect data in the Loan Record Detail Report (LRDR) before the official CDRs are released CDR Guide Section 4.1 Low borrower participation rate challenge Demonstrate a low borrower participation rate to avoid an anticipated sanction with the official CDR CDR Guide Section 4.2!20

21 Incorrect Data Challenge (IDC) Submit if school believes the LRDR for the draft CDR contains incorrect data If successful, NSLDS will be corrected, and corrected data will be used when calculating the school s official CDR!21

22 What can be challenged in an IDC?

23 Incorrect Data Challenges Borrower s data was incorrectly reported Borrower was incorrectly included Borrower was incorrectly excluded!23

24 IDC Allegations See CDR Guide, Pages 3.1, 9-12 for: Incorrect date entered repayment allegations Incorrect default status allegations Incorrect inclusion due to multiple loans Incorrect inclusion of borrower Incorrect exclusion of borrower!24 Nelnet Education Loan Services

25 When does a loan enter repayment? A loan enters repayment after a 6-month grace period that begins when the borrower ceased to be enrolled at least half-time Graduates, withdraws, or drops below half-time LDA + 6 months + 1 day = official repayment date This date is generally used to determine which cohort year the borrower is included in for calculation See CDR Guide, Page 2.1 9!25

26 When is a loan in default? FFELP Loans Borrower has not made payments on the loan for more than 270 days The guarantor must also have purchased the loan as a defaulted loan Use date default claim was paid in NSLDS A lender generally must file a default claim after 270th day of delinquency GA has 90 days to pay claim If the date the default (DF) claim is paid is within the CDR period, the loan is included in the numerator!26

27 FFELP date of default NSLDS loan history Loan detail Date of Default is the date the default claim was paid!27 Nelnet Education Loan Services

28 When is a loan in default? Direct Loans (and ED held FFELP loans) Borrower has not made payments on the loan for 270 days A loan is considered in default for CDR purposes after 360 consecutive days of delinquency If the date the loan reaches 361 consecutive days of delinquency is in the CDR period, the loan is included in the numerator!28

29 Direct Loan Date of Default NSLDS loan history Loan detail Date of DF for CDR = 361 st day of delinquency for ED held loans!29 Nelnet Education Loan Services

30 How does rehabilitation affect the CDR? If the borrower rehabilitates the loan before the end of the CDR period, the borrower is not included in the numerator If the borrower rehabilitates the loan after the end of the CDR period, the borrower is included in the numerator!30 Nelnet Education Loan Services

31 CDR Calculation: 2-Yr vs. 3-Yr 2010 Rates Refined for Rehabilitation Numerator Denominator FY 10 FY FY 10 FY 11 FY Rehabs -0 Rehabs =.030 or 3.0% = or or 4.5% 5.5%!31

32 Special Circumstances See CDR Guide pages 2.1, for: Special circumstances involving schools Special circumstances involving repayment Special circumstances involving loans that were discharged, canceled, or refunded Special circumstances involving loans that were repurchased!32 Nelnet Education Loan Services

33 Special Circumstances Situation: Borrower transfers to a subsequent school before grace period expires Effect on denominator: Borrower is included in the cohort year when the borrower actually enters repayment Effect on numerator: Borrower is included if the borrower defaulted during the CDR period!33 Nelnet Education Loan Services

34 Special Circumstances Situation: Borrower takes out loans at more than one school Affect on denominator: Borrower is included in the cohort years when the borrower entered repayment for each school where the borrower obtained loans Affect on numerator: Borrower is included for the schools at which the loans were obtained if the borrower defaulted during those CDR periods!34 Nelnet Education Loan Services

35 Special Circumstances Situation: Borrower paid the loan in full after defaulting during the CDR period but without rehabilitating the loan Effect on denominator: Borrower is included in the cohort year when the borrower entered repayment Effect on numerator: The borrower is included because loan was not successfully rehabilitated for CDR purposes within the CDR period!35 Nelnet Education Loan Services

36 Special Circumstances Situation: The borrower enters repayment and defaults during the cohort period and then subsequently, the loan is discharged due to death or disability Effect on denominator: Borrower is included in the cohort year when the borrower entered repayment Effect on numerator: Borrower is included because the borrower defaulted during the CDR period!36 Nelnet Education Loan Services

37 Special Circumstances Situation: Lender made a courtesy repurchase of a defaulted loan because the borrower established a new repayment plan or for other reasons Effect on denominator: Borrower is included in the cohort year when the borrower entered repayment Effect on numerator: Borrower is included because the original valid default claim was paid during the CDR period!37 Nelnet Education Loan Services

38 Other Circumstances & Allegations Split servicing Not a valid allegation Must demonstrate data is incorrect Borrower did not receive full grace period If borrower defaulted, the default cannot be removed by Federal Loan Servicers DER and date of default can be changed to later date based on the correct DER!38 Nelnet Education Loan Services

39 Other Circumstances & Allegations Late conversion to repayment The first payment is due on a date established by the lender The date must be no more than 60 days following the first day that the repayment period begins 34 CFR !39 Nelnet Education Loan Services

40 How do we challenge for incorrect data?

41 Obtain Loan Record Detail Report (LRDR) ED sends the ecdr package to each school through SAIG destination point Cover letter Reader-friendly LRDR Extract-type LRDR May request electronic LRDR via NSLDS NSLDS Report tab Delivered to SAIG mailbox See CDR Guide, page for more info!41

42 What s in an LRDR? LRDR gives details of each borrower included Name and SSN Loan status Date entered repayment Date of default (if applicable) Loan type (FFELP or Direct) How loan is counted in CDR Numerator, denominator, both, or neither!42 Nelnet Education Loan Services

43 Loan Record Detail Report (LRDR) Learn how to read the LRDR See CDR Guide Quick Reference!43 Nelnet Education Loan Services

44 Loan Record Detail Report (LRDR) Codes CDR Guide Page 2.3-7!44 Nelnet Education Loan Services

45 Review the LRDR Data Compare the information in the LRDR to the school s own records and NSLDS to ensure the accuracy of the data Does the loan record detail report for the CDR rate contain inaccurate data? See CDR Guide, Ch. 2.3 Reviewing the Loan Record Detail Report (LRDR)!45

46 Is there data incorrectly included? Review details for the borrowers who defaulted (the numerator) Determine when each borrower left school or ceased to be enrolled at least half-time Determine when each borrower should have entered repayment Confirm that the date they entered repayment actually falls within the cohort time frame Submit a challenge of any defaulted borrowers in the numerator who did not enter repayment during that period!46

47 Is there data incorrectly excluded? Run a report from your system of all borrowers who would have entered repayment during CDR time frame Based on LDA Then compare to borrowers include in the denominator of the CDR!47

48 Is there data incorrectly excluded? If any borrower appears to be missing from the denominator, perform two checks 1. Check NSLDS to determine if student transferred to a subsequent school A transfer before the grace period has expired will delay the date entered repayment 2. Check NSLDS to determine if your school correctly and timely reported the LDA/LHD Holders rely on accurate institution enrollment reporting for correct conversion to repayment If no transfer, and enrollment reporting was accurate and timely, challenge to have borrower added to denominator!48

49 LDA and Scheduled Repayment Date (DER) Enrollment Detail!49 Nelnet Education Loan Services

50 ecdr Appeals System Must submit challenge electronically through ecdr Data Managers respond via ecdr Website also provides CDR Guide revised November 2011 ecdr User guides IDC, UDA, NDA FAQs School demonstration sessions IDC, UDA, NDA!50

51 ecdr Appeals System!51 Nelnet Education Loan Services

52 The Incorrect Data Challenge Submit the following to the correct Data Manager through ecdr Certification letter for challenge Supporting documentation for each borrower Some examples: NSLDS screen print confirming borrower s withdrawal date or less-than-half-time status date and timely submission Canceled check fully refunding loan within 120 days of disbursement For additional examples see CDR Guide Page 3.1-7!52

53 What is the Data Manager s role? Data Manager holding the loan reviews the challenge Must issue a decision within 30 days of receiving challenge If agrees that a change should be made, corrects data in its internal system and NSLDS!53

54 What is the DPM s role in IDCs? Reviews Data Manager responses to incorrect data challenges submitted by schools to ensure that the responses are correct Default Prevention and Management (DPM) website DefaultManagement.html!54 Nelnet Education Loan Services

55 NSLDS and CDRs NSLDS calculates 2- and 3-year rates during transition to 3-year calculation in 2014 Enhancements to NSLDS website All cohort default rates will display on NSLDS Under Org tab LRDR is available for all rates CDR reports See NSLDS newsletter #30 for details NSLDS Reference Materials!55 Nelnet Education Loan Services

56 What resources are available?

57 CDR Quick Reference & Guide Cohort Default Rate Guide - Quick Reference Quick summary Cohort Default Rate Guide How rates are calculated How schools get rates and data Reviewing the LRDR Incorrect Data Challenge!57

58 FSA Data Center Links to Searchable CDR database Trial 3-Year CDRs Lifetime CDRs student/default!58 Nelnet Education Loan Services

59 Acronym Key Acronym CDR DER DPM ED FFY IDC LDA LHD LRDR SAIG Meaning Cohort Default Rate Date entered repayment Default Prevention Management U.S. Department of Education Federal Fiscal Year Incorrect Data Challenge Last date of attendance Less than half-time date Loan Record Detail Report Student Aid Internet Gateway!59 Nelnet Education Loan Services

60 Questions? Julia Alexander Compliance & Training Officer Nelnet is glad to help schools access all the information needed to make their jobs easier and to best help students. We cannot offer opinion or interpretation of FSA policies in all circumstances. If you have specific questions about your programs and procedures, we recommend that you contact FSA.!60