1 3 year CDR-Managing, Understanding & Utilizing the Challenge & Appeal process ECMC Solutions Presented by Tommy Sims, Sr. Debt Management Program Advisor

2 The Changing Landscape Loan default rate increasing for most schools Educational costs continue to rise More students borrowing more money Combination of Stafford and private loans equals greater debt Schools require uninterrupted loan capital and high CDRs may cause access issues Changes to CDR calculation accompanied by new sanctions

3 Default Prevention Challenges Increasing loan default in a changing landscape The consequences of loan default The recession The dollars in default Our new servicing partners The “new” three-year cohort default rate calculation

4 Cohort Default Rate Trends FY 2008,FY 2009, & FY2010 Cohort Default Rates

5 National Student Loan Cohort Default Rates Cohort Default Rate Trends

6 FY Year Official National Cohort Default Rates Cohort Default Rate Trends

7 Not only does student loan default impact the integrity of the student loan programs, but there are significant consequences for: Taxpayers Schools Borrowers The Consequences of Default

8 The Consequences of Default For Schools The CDR is a measure of a school’s administrative capability High CDRs may Result in adverse publicity Negatively reflect on school quality Result in loss of Title IV eligibility Threaten continued access to both Stafford and private loan funds Result in extra work to reverse high rates

9 The Recession CDR data is retrospective, so the impact of the recession will be seen in FY 09, FY 10 and FY 11 CDR calculations More borrowers are having difficulty repaying their loans The recession is (unfortunately) occurring concurrent with the change from a 2-year to a 3- year CDR calculation Some schools may face compliance difficulties due to CDRs in the coming years

10 3-Year CDR Sanctions Beginning with the 2011 CDR (published September 2014) Schools with CDRs of 30% or higher must take certain corrective actions: Create a default prevention team Submit a default prevention plan to FSA for review Note: These are solid default prevention strategies already recommended by FSA

11 CDR Sanction Threshold Changes

12 Default Prevention Best Practices Form a default prevention team Develop or adopt a default prevention plan Utilize traditional financial aid office-based default prevention strategies Utilize non-traditional student success-focused default prevention strategies Best option: Use a combination of these four approaches

13 “Traditional” Approach Primarily involves the financial aid office Focus is on helping borrowers to develop a healthy relationship with their loans to include: Understanding loan repayment Teaching financial literacy Updating enrollment status changes Reaching out when help is needed

14 NSLDS Reports for Schools

15 ReportDescription DRC016This report provides the current repayment status of certain borrowers in the FFEL and Direct Loan programs who attended a school during a specific period DER001The Date Entered Repayment Report (DER001) is a list of student borrowers who are scheduled to go into repayment during a specified date range, with their loan histories SCHDF2The Borrower Default Summary Report (SCHDF2) provides a list of loans that currently have a defaulted loan status (DB, DL, DO, DT, DU, DW, DF, or DZ) and a loan status date that falls within the requested date range SCHPR2The School Portfolio Report (SCHPR2) provides school users with information about all Direct Loan and/or FFEL program loans for a specified school DELQ01The Delinquent Borrower Report (DELQ01) provides school users a report of borrowers who have been reported as delinquent in making loan payments to one of the federal loan servicers NSLDS Report Overview

16 Draft and official CDRs The numerator and denominator Formulas used for CDR calculations CDRs – a historical perspective Understanding Cohort Default Rates (CDRs) – a Quick Review

17 CDRs: The Formula Numerator Denominator Borrowers who entered repayment in one year, and defaulted in that year or the next Borrowers who entered repayment during the one-year cohort period

18 CDRs Are Released Twice A Year February (DRAFT) Not public No sanctions No benefits September (OFFICIAL) Public Sanctions apply Benefits apply

19 The Draft CDR Data Files * Verify that the overall CDR (Num/Den) on the Letter matches the SHCDRROP (Loan Record Detail Report)

20 Data collected in the SHCDREOP File

21 2 Year Cohort /1/099/30/10 Feb-12 Draft Rate Sep-12 Official Rate 9/30/11 CY /30/13 9/30/11 Draft Rate Feb /30/12 10/1/10 CY Fiscal Year 10/1/089/30/09 Feb-11 Draft Rate Sep-11 Official Rate 9/30/10 CY

22 Publications of 3-Year CDR Institutional CDR Calculations by CDR Year

23 Challenges, Adjustments, and Appeals

24 Cohort Default Rate Guide

25 eCDR System Login Page

26 Processes IDC, UDA and NDA electronically 1 st became available in February 2008 (FY 2006 draft CDR) Available at the following link: eCDR Appeals

27 Loan Servicing Appeal Loan Servicing Appeals. Schools request loan servicing records from GA for FFEL loans held by the GA and the Department of Education (ED) servicers/not-for-profits for FFEL loans held by ED and for Direct Loans Schools may appeal their most recent official rate; or any official rate upon which loss of eligibility is based A successful appeal will result in adjustments to numerator and denominator Should be available via eCDR Appeals beginning in Fall 2013

28 Loan Servicing Appeal When is a defaulted Direct Loan or FFEL PUT to the Department considered improperly serviced for cohort default rate purposes? A defaulted Direct Loan is considered improperly serviced for cohort default rate purposes if one or more of the following occur: The borrower never made a loan payment, and the school can document that the Federal Servicer was required but failed to send at least one letter (other than the final demand letter) urging the borrower to make payments on the loan. The borrower never made a loan payment, and the school can document that the Federal Servicer was required but failed to attempt at least one telephone call to the borrower. The borrower never made a loan payment, and the school can document that the Federal Servicer was required but failed to send a final demand letter to the borrower. The borrower never made a loan payment, and the school can document that the Federal Servicer was required but failed to document that skip tracing was performed if the Federal Servicer determined it did not have the borrower’s current address.

29 Loan Servicing Appeal Timeframe

Submitting Appeals/Adjustments Starting in 2012 schools may submit challenges/appeals/adjustments for both the 2-year CDR and the 3-year CDR Use eCDR Appeals (at ecdrappeals.ed.gov) to submit IDC, UDA, and NDA (LS beginning in Fall 2013)ecdrappeals.ed.gov At this time, all other CDR appeals will continue to be submitted via hard copy

31 Default Mgt. Resource IFAP website: Default Prevention and Management website: t.html t.html eCDR Appeals website:

32 Thank You! Questions?

33 Contact Information: Tommy Sims