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It is Elementary, Dear Watson… the Draft Cohort Default Rates, that is.

The statement in the title of this edition of the Regulatory Bulletin is often attributed to the fictional character of Sherlock Holmes of Sir Arthur Conan Doyle’s famous works.  However, that exact phrase never appeared in his works.  Nevertheless, it has become associated with the character of Sherlock Holmes who was known for his amazing detective skills, enhanced by his deductive reasoning capabilities.  With the ongoing popularity of the character of Holmes, as evidenced by a current television program based upon the original works’ premise, there is an apparent interest in the concept of applying detective skills.  In the world of financial aid, it is not uncommon that financial aid directors are charged with the responsibility to play detective.  Now is one of those times.  It is time to pull out the magnifying glass (or other symbolic tools of the trade) and begin investigating the details of your newly released draft Cohort Default Rates (CDR).  Yes, close inspection of the underlying data in this most recent draft 3-year CDR—the FY 2012 edition—is critical.  The accuracy of data in this draft rate is important to your institution’s continued participation in Title IV Federal Student Aid programs.  Thus, it is necessary to follow all of the evidence provided (and that on record at your institution) in making your determination of the precision of your calculated rate in this current case of the draft CDR review.

New FY 2012 Draft 3-Year CDR is on the Scene

The U. S. Department of Education (ED) announced the release of the new FY 2012 3-year draft CDR in an Electronic Announcement on February 23, 2015.  This is the second year in which only a 3-year draft CDR is being provided.  In the recent past, there had been two CDRs calculated—the 2-year CDR and the 3-year CDR.  Since the implementation of the 3-year CDR as the only rate being calculated last year (effective with the FY 2011 CDR), a 2-year rate is no longer calculated.  This is in accordance with the provisions of the Higher Education Opportunity Act (HEOA) of 2008.

The FY2012 CDR is calculated as the percentage of borrowers in the FY 2012 cohort who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment.  For example, a school’s FY 2012 3-year CDR will be calculated as the percentage of borrowers who were included in the 2012 cohort (i.e., began repayment in FY 2012) but then defaulted on or before September 30, 2014.  This is the same manner in which future years’ CDRs will also be calculated.  As a reminder, the federal fiscal year that is used in the CDR calculations runs from October 1 of one year to September 30 of the following year, e.g., FY 2012 began October 1, 2011 and ended on September 30, 2012.

Importance of the Draft 3-Year CDR Evidence

As most schools are aware, the CDR is an item that requires careful attention on an ongoing basis.  The provision of this draft CDR allows schools the opportunity to review the data ED currently has recorded for the institution.  If there are perceived errors in the data, now is the time to address them since when the final official CDRs are released in September of this year, it will be too late to affect any desired changes.

Ensuring that the draft CDR data is accurate is critical to the best possible outcome for your official CDR in September.  This is because if a school has a 3-year CDR of 30% or more when the official CDR is published, the school will have to establish a Default Prevention Task Force and implement a default prevention plan.  If the school has three years in which their 3-year CDR has been 30% or more, then the school is subject to potential loss of eligibility to participate in Title IV.  This impact can also be the result if the school has an FY 2012 3-year CDR of 40% or more for the one year’s calculation.  Therefore, reviewing the draft CDR is very important to ensure there are no errors in the data.

Inspecting the Draft CDR Data

Schools that have signed up for the Electronic Cohort Default Rate (eCDR) notification process were notified of the draft CDR via the Student Aid Internet Gateway (SAIG).  If a school has not signed up for the eCDR notification process, they will need to download the CDRs and the Loan Record Detail Report (LRDR) that accompanies the rates by accessing the National Student Loan Data System (NSLDS) Professional Access Web site.

The time frame for beginning the appeal of a school’s draft CDR starts on Tuesday, March 3, 2015.  Schools have 45 days from the announced appeal begin date in which to ensure they have reviewed their data and submitted any challenge or appeal to the data utilized in the calculation of their draft FY 2012 CDR.  A school may question the accuracy of the data utilized in the draft CDR by reviewing the LRDR.  Once a school determines that it believes there is incorrect data in the LRDR it may submit an Incorrect Data Challenge (IDC).  The IDC must be submitted via the eCDR Appeals application on the eCDR Appeals Web site.  If a school’s official is not registered to use this site, one may do so at the eCDR Appeals Web site.  Schools may also appeal their Participation Rate Index (PRI).  The PRI is a ratio of borrowers to the total number of regular students during an acceptable 12-month period.  Schools that wish to challenge the PRI must continue to do so by means of submitting hard copy documentation.  For more information on these challenge opportunities and the specific details of what is necessary, the school should refer to the instructions provided in the Cohort Default Rate Guide at

This annual draft CDR review is important to every school.  And, proper use of your detective skills in the review can assist in determining whether default management has become an “elementary” matter at your institution—one which results in the desired final resolution of the case.  That desired resolution is the announcement that your institution has a favorable official CDR when released in this fall.

This article is presented for informational and educational purposes only and should not be considered to be giving legal advice.


(EA 02232015)

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