1. Donna Bellflower and Nichelle Alston | Dec. 2015 U.S. Department of Education 2015 FSA Training Conference for Financial Aid Professionals Challenge and Appeal Cohort Default Rates Session 15

2. Presentation Purpose The purpose of this presentation is to: 2 Define Cohort Default Rates (CDR) and sanctions thresholds Review the loan record report with the management of filing adjustments, challenges and/or appeals Explain how special circumstance effect cohort rates Discuss when, why and how to submit requests for adjustments, challenges and/or appeals

3. 3 Understanding and Managing CDR The CDR Calculation Process

4. 10/1/139/30/16FY 2014 Cohort Default Period The phrase “cohort default period” refers to the three-year period that begins on October 1 of the fiscal year when the borrower enters repayment and ends on September 30 of the second fiscal year following the fiscal year in which the borrower entered repayment. This is the period during which a borrower’s default affects the school’s cohort default rate. 4

5. 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. 5

6. Number of borrowers in the denominator* who defaulted or met the other specified condition during the cohort default period Number of borrowers who entered repayment in the cohort fiscal year Cohort Default Rate *Federal Family Education Loans (FFELs) and/or William D. Ford Federal Direct Loans (DL) Non-Average Rate Formula 6

7. Number of borrowers in the denominator who defaulted or met the other specified condition during the cohort default period applicable to their loans Number of borrowers who entered repayment in the cohort fiscal year and the two preceding fiscal years Cohort Default Rate *Federal Family Education Loans (FFELs) and/or William D. Ford Federal Direct Loans (DL) Average Rate Formula 7

8. 8 Understanding and Managing CDR Sanctions

9. *A school‘s three most recent official cohort default rates are 30.0 percent or greater for the three year calculation A school will lose Direct Loan eligibility A school will lose Federal Pell Grant eligibility *A school‘s current official cohort default rate is greater than 40.0 percent, for the three year CDR calculation A school will lose Direct Loan program eligibility *Except in the event of a successful adjustment or appeal a school will lose eligibility as indicated above for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years. 3-Year Cohort Default Rate SANCTIONS 9

10. 10 Understanding and Managing CDR The Loan Record Detail Report

11. The LRDR Import tool may be found on the Default Management website under the CDR Guide /Templates section The LRDR Import Tool 11

12. The LRDR Import Tool is a new tool that can be used to easily load data generated from the LRDR into the Microsoft Excel spreadsheet application, and is designed to assist schools with reviewing and analyzing their LRDR extract files. An LRDR contains information on the loans that were used to calculate a school’s draft or official cohort default rate (CDR) and is distributed as part of the eCDR notification package. Each eCDR package received contains an extract-type LRDR (message class SHCDREOP). When the LRDR extract is loaded into the LRDR Import Tool, the file is converted into a spreadsheet with assigned column headings, creating a view of the data that is manageable and easy to review for discrepancies and accurate data. The LRDR Import Tool 12

13. Instructions are located on the first tab 13

14. Reading the LRDR 14

15. Body Section - Line 1 Borrower 15

16. Body Section - Line 2 Loan Information 16

17. SUMMARY – bottom of last page of LRDR 17

18. Further Review: LRDR For more information on the LRDR, including codes please see chapter 2.2 and 2.3 of the CDR Guide 18

19. 19 Understanding and Managing CDR Special Circumstances

20. How do special circumstances effect the cohort default rate? 20

21. Special Circumstances 21

22. Special Circumstances cont’d 22

23. Special Circumstances cont’d 23

24. Special Circumstances cont’d 24

25. Special Circumstances cont’d 25

26. Special Circumstances cont’d 26

27. 27 Understanding and Managing CDR Challenges, Adjustments, and Appeals

28. Challenges (Draft) Incorrect Data Challenge (IDC) Participation Rate Index Challenge (PRI) Adjustments (Official) Uncorrected Data Adjustment (UDA) New Data Adjustment (NDA) Appeals (Official) Loan Servicing Appeal (LS) Erroneous Data Appeal (ER) Economically Disadvantaged Appeal (EDA) Participation Rate Index Appeal (PRI) 28

29. 29

30. Incorrect Data Challenges (IDC) 30 School receives Draft CDR data School analyzes the LRDR for incorrect data Any alleged incorrect data is submitted through the eCDR Appeals system See chapters 4.1 CDR guide

31. 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 default for CDR purposes during the monitoring 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. 31

32. Participation Rate Index Challenges/Appeals (PRI) 32 A school believes it 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 Draft: The School determines it may be subject to sanction Official: The school receives notification that is it subject to sanction Using paper submission, a school must send its PRI challenge to the Department See chapters 4.2 and 4.8 of the CDR guide

33. 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. 33

34. 34 School receives Official CDR data School analyzes the LRDR for changes that were correctly agreed to by a data manager as a result of an IDC submitted after the release of the draft CDR, but not reflected in the official release 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 See chapter 4.3 of the CDR guide Uncorrected Data Adjustments (UDA)

35. 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. 35

36. 36 School receives new data that was not received during the Draft cycle School analyzes the new LRDR for incorrect data Any alleged new incorrect data is submitted through the eCDR Appeals system See chapter 4.4 of the CDR guide New Data Adjustment (NDA)

37. 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. 37

38. 38 A school alleges that the 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 determines its official CDR is inaccurate Using paper submission, a school must send its ER appeal to the Department See chapter 4.5 of the CDR guide Erroneous Data Appeals (ER)

39. 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. 39

40. 40 A school alleges that its official cohort default rate includes defaulted Loans that are considered improperly serviced for CDR purposes Because of the improperly serviced loans a school determines its official CDR is inaccurate A school submits the alleged improperly serviced loans via the eCDR Appeals System See chapter 4.6 of the CDR guide Loan Servicing Appeals (LSA)

41. 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. 41

42. 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. 42 Loan Servicing Appeals (LSA)

43. 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. 43 Loan Servicing Appeals (LSA)

44. 44 A school alleges that it not be subject to loss of eligibility or potential placement on provisional certification because it has a high number of low ‐ income students The school determines that it meets the low income placement or completion thresholds Using paper submission, a school must send its EDA appeal to the Department See chapter 4.7 of the CDR guide Economically Disadvantaged Appeals (EDA)

45. 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. 45

46. 46 Understanding and Managing CDR Contact Information and Additional Resources

47. On the Horizon Data Challenge Appeal System Data Challenge Appeal System Gainful Employment Program CDR Gainful Employment Program CDR PLUS CDR PLUS CDR Graduate PLUS CDR Graduate PLUS CDR 47

48. 48 Additional Resources: CDR Guide:

49. What's New with eCDR Appeals User Guide eCDR Appeals IDC User Guide eCDR Appeals UDA User Guide eCDR Appeals NDA User Guide eCDR Appeals LSA User Guide The eCDR Appeals User Guides are designed to lead users through the online, paper-less IDC, UDA, NDA, and LSA processes. These User Guides assume a basic knowledge of cohort default rates and associated processes. They complement the CDR Guide. In the event of any discrepancy between the IDC, UDA, NDA or LSA User Guides and the CDR Guide, the CDR Guide is the authoritative source for regulatory considerations and constraints. Additional Resources: eCDR User Guides 49

50. Federal Student Aid has also recorded short online demonstration sessions of the system for schools and Data Managers as a training aid: School demonstration sessions Registration for eCDR Appeals Preparing and submitting an IDC Preparing and submitting a NDA Preparing and submitting a UDA Additional Resources: eCDR Demonstrations 50

51. 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 51

52. 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 52 Operations Performance Division 202-377-4259 Operations Performance Division 202-377-4259

53. QUESTIONS? 53