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TRANSCRIPT
Cohort Default Rates
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Challenging the Draft Rates
Julia Alexander Compliance & Training Officer Nelnet Guarantor Solutions
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Agenda
• Cohort Default Rate (CDR) overview • Challenging draft CDR rates
– Incorrect data challenge (IDC) • Why? • When? • What? • How?
• Resources
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Cohort Default Rate Overview
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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
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FFY 2010 2-Year CDR
10/01/10 10/1/11
FFY 2011
…and then defaulted between these datesNumerator
10/01/09 9/30/10
FFY 2010
Borrower who entered repayment between these dates...
Denominator
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FFY 2010 3-Year CDR
10/01/10 9/30/11
FFY 2011
…and then defaulted between these datesNumerator
10/01/09 9/30/10
FFY 2010
Borrower who entered repayment between these
dates...
Denominator
10/01/11 10/1/12
FFY 2012
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CDR Calculation: 2-Yr vs. 3-Yr 2010 Rates
Numerator
Denominator
30
1,000= .030 or 3.0%
55
1,000= .055 or 5.5%
10 20
1,000
10 20
1,000
25
FY 10 FY 11
FY 10 FY 11 FY 12
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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
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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)
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FFY 2010 Consolidation Example
10/01/10 9/30/11
FFY 2011
10/01/09 9/30/10
FFY 2010
10/01/11
FFY 2012
LDA = 5/20/09
DER = 11/21/09
Default = 2/26/12
9/30/12
Consolidation 2/1/11
2010 3-YR CDR
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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-2012-05
When must the draft CDR challenge be submitted?
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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
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Challenging the Draft Rates
Why challenge the draft rate?
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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
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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 668.217
• Loss of eligibility if the most recent CDR is > 40%
34 CFR Subpart M 668.187
What are the draft rate challenges?
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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
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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
What can be challenged in an IDC?
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Incorrect Data Challenges
• Borrower’s data was incorrectly reported
• Borrower was incorrectly included
• Borrower was incorrectly excluded
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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
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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
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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
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FFELP date of default
• NSLDS loan history – Loan detail
Date of Default is the date the default claim was paid
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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
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Direct Loan Date of Default
• NSLDS loan history – Loan detail
Date of DF for CDR = 361st day of delinquency for ED held loans
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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
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CDR Calculation: 2-Yr vs. 3-Yr 2010 Rates
Numerator
Denominator
30
1000= .030 or 3.0%
55
1000= .055 or 5.5%
Refined for Rehabilitation
10 20
1000
10 20
1000
25
FY 10 FY 11
FY 10 FY 11 FY 12
Rehabs-0
Rehabs45
1000= .045 or 4.5%-10
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Special Circumstances
• See CDR Guide pages 2.1, 12-15 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
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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
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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
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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
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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
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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
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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
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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 682.209
How do we challenge for incorrect data?
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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 2.2-4 for more info
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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
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Loan Record Detail Report (LRDR)
• Learn how to read the LRDR – See CDR Guide Quick Reference
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Loan Record Detail Report (LRDR) Codes
CDR Guide Page 2.3-7
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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)
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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
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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
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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
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LDA and Scheduled Repayment Date (DER)
Enrollment Detail
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eCDR Appeals System
• Must submit challenge electronically through eCDR – Data Managers respond via eCDR – https://ecdrappeals.ed.gov
• Website also provides – CDR Guide – revised November 2011 – eCDR User guides
• IDC, UDA, NDA – FAQs – School demonstration sessions
• IDC, UDA, NDA
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eCDR Appeals System
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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
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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
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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 – http://www.ifap.ed.gov/DefaultManagement/
DefaultManagement.html
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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 – http://www.ifap.ed.gov/ifap/ref.jsp – NSLDS Reference Materials
What resources are available?
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CDR Quick Reference & Guide
• www.ifap.ed.gov/DefaultManagement/finalcdrg.html – 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
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FSA Data Center
• Links to – Searchable CDR database – Trial 3-Year CDRs – Lifetime CDRs
• http://studentaid.ed.gov/about/data-center/student/default
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Acronym Key
Acronym MeaningCDR Cohort Default RateDER Date entered repaymentDPM Default Prevention ManagementED U.S. Department of EducationFFY Federal Fiscal YearIDC Incorrect Data ChallengeLDA Last date of attendanceLHD Less than half-time dateLRDR Loan Record Detail ReportSAIG Student Aid Internet Gateway
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Questions?
Julia Alexander
Compliance & Training Officer [email protected]
303.696.3606
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.