Why worry about the CDR now? Cohort Default Rates (CDR) have become a benchmark of reputation and success. Schools with high CDRs risk, among other issues, participation eligibility in U.S. Department of Education Title IV funding. The suspension gave students and schools a break, and maybe even a false sense of security. As you look forward, diligence needs to be taken now to prepare for long-term repayment issues.
All borrowers were brought current effective March 2020, resulting in all borrowers reentering repayment in October 2023 but, the Department of Education also issued a 12-month “on-ramp” to repayment from October 1, 2023 to September 30, 2024 in which borrowers are shielded from the possibility of delinquency and default. This also makes it likely that a larger number of borrowers will become delinquent at the same time whether it’s because they can’t afford it, don’t know how to start repayment or don’t realize they have loans at all. Also, with the economic changes and using natural disaster trending data, there is typically a higher than normal delinquency rate following a disaster. Since many borrowers can default at once, CDRs will change drastically, rather than through the curve in traditional years.
It’s vital for schools to prepare now for the influx of student repayment in order to curb default rates, improve student success and enhance the school’s reputation.
This guide works through the importance of the CDR, how it is calculated, what happens if your CDR is too high for too long, the key impacts to repayment from the CARES Act, and actions you can take now to prepare.
How the CDR Works Federal student loan borrowers typically begin repaying their loans six months after graduating, leaving school, or dropping below half-time enrollment. If borrowers make no payments for any period of 270 days, they will default on their student loans. Default rates for a federal fiscal year encompass the cohort of borrowers who entered repayment during that year. The U.S. Department of Education (ED) annually calculates the percentage of borrowers who default for each college that has participated in the federal student loan program.
tracking the share of federal student loan borrowers who default on their student loans within two years of entering repayment. The Higher Education Opportunity Act of 2008 expanded that window to three years also known as “three-year” CDRs. CDR Calculation The numerator includes the borrowers in the cohort that defaulted during the monitoring period. The fewer students that defaulted during the monitoring period the lower the rate will be. CDRs determine whether an institution’s student borrowers are successful at repaying federal student loans. A cohort is a group of federal Direct and
ED has calculated the Cohort Default Rate or CDR since the late 1980s, when the measure began
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