1. Donna Bellflower and Franka Dennis | Dec. 2014 U.S. Department of Education 2014 FSA Training Conference for Financial Aid Professionals Understanding and Managing the CDR Challenge and Appeal Process Session 25

2. Presentation Purpose The purposes of this presentation are to: Review Cohort Default purpose, sanctions and benefits Review Cohort Default purpose, sanctions and benefits Clarify how understanding the loan record report aids with the management of filing adjustments, challenges and/or appeals Clarify how understanding the loan record report aids with the management of filing adjustments, challenges and/or appeals Explain how special circumstance effect cohort rates Explain how special circumstance effect cohort rates Discuss when, why and how to submit requests for adjustments, challenges and/or appeals Discuss when, why and how to submit requests for adjustments, challenges and/or appeals 2

3. What is a 3-Year Cohort Default Rate? For schools having 30 or more borrowers entering repayment in a fiscal year, the school’s cohort default rate is the percentage of a school’s borrowers who enter repayment on certain Federal Family Education Loans (FFELs) and/or William D. Ford Federal Direct Loans (DL) during that fiscal year and default (or meet the other specified condition) within the cohort default period. For schools with 29 or fewer borrowers entering repayment during a fiscal year, the cohort default rate is an “average rate” based on borrowers entering repayment over a three- year period. 3

4. 3-Year Cohort Default Rate SANCTIONS 4 SchoolSanctions A school‘s three most recent official cohort default rates are 30.0 percent or greater for the three year calculation. Except in the event of a successful adjustment or appeal, a school will lose Direct Loan and Federal Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. A school‘s current official cohort default rate is greater than 40.0 percent, for the three year CDR calculation. Except in the event of a successful adjustment or appeal, a school will lose Direct Loan program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.

5. 3-Year Cohort Default Rate BENEFITS Effective with the Release of the FY 2011 3-year Cohort Default Rates 5 Eligible School Benefits A school whose most recent official cohort default rate is less than 5.0 percent and is an eligible home institution that is originating loans to cover the cost of attendance in a study abroad program. -May disburse loan proceeds in a single installment to a student studying abroad regardless of the length of the student’s loan period. -May choose not to delay the disbursement of the first installment of loan proceeds for first- year, first-time borrowers studying abroad. A school with a cohort default rate of less than 15.0 percent for each of the three most recent fiscal years for which data are available, including eligible home institutions and foreign institutions. -May disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period. -May choose not to delay the first disbursement of a loan for 30 days for first- time, first-year undergraduate borrowers.

6. The Loan Record Detail Report (LRDR) The first step to CDR management of Challenges, Adjustments and Appeals 6

7. Reading the LRDR 7

8. Body Section- Line 1 Borrower 8

9. Body Section- Line 2 Loan Information 9

10. SUMMARY – bottom of last page of LRDR 10

11. Interpreting the LRDR Codes 11

12. Special Circumstances How do special circumstances effect the cohort default rate? Special circumstances only effect the cohort default rate calculation if the school timely submits documentation of the special circumstance to the data manager. 12

13. Special Circumstances 13

14. Special Circumstances cont’d 14

15. Special Circumstances cont’d 15

16. Special Circumstances cont’d 16

17. Special Circumstances cont’d 17

18. Special Circumstances cont’d 18

19. Challenges, Adjustments, and Appeals Challenges Incorrect Data Challenge (IDC) Participation Rate Index Challenge (PRI) Adjustments Uncorrected Data Adjustment (UDA) New Data Adjustment (NDA) Appeals Loan Servicing Appeal (LS) Erroneous Data Appeal (ER) Economically Disadvantaged Appeal (EDA) Participation Rate Index Appeal (PRI) 19

20. When and Why Submit After reviewing your CDR for either the Draft or Official period, you have the option to submit a request for an adjustment, challenge, or appeal. Most of these requests are submitted through the eCDR Appeal system After reviewing your CDR for either the Draft or Official period, you have the option to submit a request for an adjustment, challenge, or appeal. Most of these requests are submitted through the eCDR Appeal system Why submit? If a school’s CDR contains incorrect data causing the rates to be inaccurate, or if there are exceptional mitigating circumstances that would remove the school from being subjected to sanctions, an adjustment, challenge, or appeal should be filed Why submit? If a school’s CDR contains incorrect data causing the rates to be inaccurate, or if there are exceptional mitigating circumstances that would remove the school from being subjected to sanctions, an adjustment, challenge, or appeal should be filed A review of the LRDR is required for most submissions A review of the LRDR is required for most submissions 20

21. Incorrect Data Challenges (IDC) IDC: A school has “DATA” to show that borrowers on the LRDR are incorrectly reported. See chapter 4.1 of the CDR guide When should a school file an IDC? During the Draft Period Why File? The correction of incorrect data will impact the official rate. Possible incorrect data may be: Borrower did not enter repayment during cohort year Borrower did not enter repayment during cohort year Borrower did not default for CDR purposes during the monitoring period Borrower did not default for CDR purposes during the monitoring period Other borrowers entered repayment during cohort period Other borrowers entered repayment during cohort period How to File? Use the LRDR codes to determine how borrowers are counted for the cohort year. Submit the IDC if the data you have reported to NSLDS contradicts the information on the LRDR. Ensure that you have the borrower’s SSN, name, basis of alleged error and copies of relevant supporting documentation 21

22. Participation Rate Index Challenges/Appeals (PRI) PRI : Alleges that a school should not be subject to loss of eligibility or potential placement on provisional certification based solely on its CDR because the school has a PRI that meets a specific criteria. See chapters 4.2 and 4.8 of the CDR guide When should a school file a PRI? During Draft and/or Official Periods Why File? The draft CDR suggests that the school will be subject to loss of eligibility or potential provisional certification after the release of the official CDR. The official CDR release confirms that the school is subject to sanction or provisional certification How to File? Using paper submission, a school must send its PRI challenge to the Department within 45 calendar days for the draft process, or 30 calendar days for the PRI appeal for the official process 22

23. Uncorrected Data Adjustments (UDA) UDA : Reflects changes that were correctly agreed to by a data manager (DM), as a result of an IDC submitted after the release of the draft CDR, but not reflected in the official release. See chapter 4.3 of the CDR guide When should a school file a UDA? During the Official Period Why File? The school’s LRDR report indicates that one or more borrower’s agreed upon changes from the IDC are not reflected in the official CDR. An adjustment may possibly decrease the current CDR How to File? This adjustment is filed through the eCDR Appeals system. The system will compare the LRDR for the draft and official rates and determine if agreed upon changes were made 23

24. New Data Adjustment (NDA) NDA: A new data adjustment allows a school to challenge the accuracy of “new data” included in the school’s most recent official cohort default rate. See chapter 4.4 of the CDR guide When should a school file an NDA? During the Official Period Why File? A school’s review of the LRDR for the draft and official rates show data newly included, excluded, or otherwise changed during the period between the calculation of the draft and official CDR. If errors are confirmed by the DM, a school’s rate will be adjusted How to File? This adjustment is available via eCDR Appeals only for most recent cohort of borrowers, used to calculate most recent official rate 24

25. Erroneous Data Appeals (ER) ER: Alleges that a school’s LRDR for the official rate includes disputed data from the IDC, or incorrect new data. Because of the new and/or disputed data, a school’s official CDR is inaccurate. See chapter 4.5 of the CDR guide When should a school file an ER? During the Official Period Why File? A school’s official CDR includes new and/or disputed data, is subject to sanctions or provisional certification based solely on the official CDR, the successful ER either by itself or in combination with a UDA or LSA will result in a recalculated CDR below the sanction threshold How to File? This adjustment is filed by paper submission. A school begins the process by sending its ER to the DM responsible for the loan within 15 calendar days of the timeframe begin date 25

26. Loan Servicing Appeals (LSA) LSA: Alleges a school’s official cohort default rate includes defaulted Federal Family Education Loans (FFELs) or William D. Ford Federal Direct Loans (DL) that are considered improperly serviced for CDR purposes. See chapter 4.6 of the CDR guide When should a school file an IDC? During the Official Period Why File? A school believes that the CDR calculation includes one or more defaulted FFEL or DL improperly serviced for CDR purposes. How to File? A school begins the process by sending its request for loan servicing records to the relevant DM(s) responsible for a loan within 15 calendar days of the timeframe begin date via the eCDR Appeals System. 26

27. When is a defaulted FFEL considered improperly serviced for cohort default rate purposes? A defaulted FFEL 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 lender 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 lender 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 lender was required but failed to submit a request for pre-claims assistance or default aversion assistance to the guaranty agency. The borrower never made a loan payment, and the school can document that the lender 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 lender was required but failed to submit a certification (or other documentation) to the guaranty agency to demonstrate that the lender performed skip tracing. 27

28. 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. 28

29. Economically Disadvantaged Appeals (EDA) EDA: Alleges that a school should not be subject to loss of eligibility (or potential placement on provisional certification if based on two successive three ‐ year rates of 30.0% or more), because it has a high number of low ‐ income students and meets the placement or completion thresholds. See chapter 4.7 of the CDR guide When should a school file an EDA? During the Official Period Why File? If an EDA is successful, it exempts the school from loss of eligibility or placement on provisional certification until the next official cohort default rates are released. How to File? Within 30 calendar days, an eligible school may submit a paper copy of an EDA along with the management’s written assertion to the Department. Within 60 calendar days, the school must submit an independent auditor’s opinion to the Department. 29

30. Other Cohort Default Rate Appeals Average Rate Appeals A school whose 3 most recent CDRs are at or above 30% is not subject to sanction if at least 2 of the 3 CDRs were calculated as average rates and would have been less than 30% if calculated using only data for those cohort fiscal years alone, or, if most recent CDR is above 40% and was calculated as an average rate, the school is not subject to sanction. See chapter 4.9 of the CDR guide A school whose 3 most recent CDRs are at or above 30% is not subject to sanction if at least 2 of the 3 CDRs were calculated as average rates and would have been less than 30% if calculated using only data for those cohort fiscal years alone, or, if most recent CDR is above 40% and was calculated as an average rate, the school is not subject to sanction. See chapter 4.9 of the CDR guide Before notice of official rate Department will make an initial determination that school may qualify for an average rate appeal Before notice of official rate Department will make an initial determination that school may qualify for an average rate appeal If school qualifies they will receive notice of that determination at the same time they receive notice of official rate If school qualifies they will receive notice of that determination at the same time they receive notice of official rate 30

31. Other Cohort Default Rate Appeals Thirty-or-Fewer Borrower Appeals If combined total of all three years of borrowers entering repayment is less than 30, there will be no loss of eligibility. See chapter 4.10 of the CDR guide If combined total of all three years of borrowers entering repayment is less than 30, there will be no loss of eligibility. See chapter 4.10 of the CDR guide Before notice of official rate Department will make an initial determination that school may qualify for a thirty-or-fewer borrower appeal Before notice of official rate Department will make an initial determination that school may qualify for a thirty-or-fewer borrower appeal If school qualifies they will receive notice of that determination at the same time they receive notice of official rate If school qualifies they will receive notice of that determination at the same time they receive notice of official rate 31

32. Appeals, Adjustment and Challenge Quick Reference 32 Draft/ Official Type of Action Purpose DraftIDC Correct data before the official cohort default rates are released. Draft PRI (Challenge) Demonstrate a low borrower participation rate to avoid an anticipated sanction with the official cohort default rate. OfficialUDA Contest a data error that was agreed upon in the draft process but is still reflected in the official cohort default rate data. OfficialNDA For a school that is not subject to sanction, contest official cohort default rate data that was not included in draft cohort default rate data or that is different from the draft cohort default rate data.

33. Appeals, Adjustment and Challenge Quick Reference 33 Draft/ Official Type of Action Purpose OfficialER For a school that is subject to sanction, contest official cohort default rate data that was not included in the draft cohort default rate data (new data) and/or contest the (DM) decision (disputed data). OfficialLSA Contest servicing of the borrower’s loan account. OfficialEDA Demonstrate a high number of low-income students and high placement or completion rates.

34. Appeals, Adjustment and Challenge Quick Reference 34 Draft/ Official Type of Action Purpose Official PRI (Appeal) Demonstrate a low borrower participation rate. Official Average Rates Appeal Demonstrate a low number of borrowers. Official Thirty-or-Fewer Borrowers Appeal Demonstrate a low number of borrowers.

35. Additional Resources Chapter 2.1 of the Cohort Default Rate Guide Contains tables listing these and other special circumstances and how they affect the cohort default rate, beginning on page 2.1-10.Contains tables listing these and other special circumstances and how they affect the cohort default rate, beginning on page 2.1-10. Chapter 3.1 of the Cohort Default Rate Guide Contains helpful information regarding how a school should prepare for the draft and official cohort default rate release, how a school can determine if they should submit a cohort default rate challenge/adjustment/appeal, and types of supporting documentation.Contains helpful information regarding how a school should prepare for the draft and official cohort default rate release, how a school can determine if they should submit a cohort default rate challenge/adjustment/appeal, and types of supporting documentation. Chapter 4 of the Cohort Default Rate Guide Contains information on each type of challenge/adjustment/appeal.Contains information on each type of challenge/adjustment/appeal. 35

36. Submitting Appeals/Adjustments Use eCDR Appeals at ecdrappeals.ed.gov) to submit IDC, UDA, LSA, and NDAecdrappeals.ed.gov At this time, all other CDR appeals will continue to be submitted via hard copy 36

37. Operations Performance Division 202-377-4259 Operations Performance Division 202-377-4259 Phone: 202-377-4259 E-mail: FSA.Schools.Default.Management@ed.govFSA.Schools.Default.Management@ed.gov Website: ifap.ed.gov/DefaultManagement/ DefaultManagement.html E-Appeals: https://ecdrappeals.ed.gov/ecdra/https:// index.html Contact Information 37

38. QUESTIONS? 38