ED to Adjust Institutional CDRs Based on Certain Defaulted Borrowers with Split-Servicing

By Erin Timmons, Communications Staff 

The Department of Education (ED) announced yesterday that it has adjusted how it calculates cohort default rates (CDRs) for institutions that would have been subject to potential loss of Title IV eligibility due to high rates of default, and who have borrowers with split servicers. 

ED noted in the announcement that though it has tried to make the transition from the Federal Family Education Loan (FFEL) Program to the Federal Direct Loan (DL) Program as seamless as possible, “the incidence of borrowers with loans held by multiple lenders and serviced by more than one servicer has increased.”

Many federal student loan borrowers now find themselves in a “split-servicing” situation where they have at least one loan being serviced by a FFEL servicer and also have one or more loans being serviced by a federal loan servicer. 

The cohorts of borrowers who are included in the three-year Fiscal Year (FY) 2011 Cohort Default Rates (CDRs), released Monday to schools via electronic message, have high instances of split-servicing, the announcement reported.

Taking into account that having multiple servicers can complicate the repayment process for borrowers, ED adjusted the CDR calculation to exclude from the “numerator certain borrowers who defaulted on a loan but who had one or more other Direct or FFEL Program loans in a repayment, deferment, or forbearance status for at least 60 consecutive days and that did not default during the applicable CDR monitoring period.” 

The adjustments to the calculation were applied to all of the most recent three-year CDRs (FY 2009, FY2010, FY2011) “for any institution that otherwise would have been subject to potential loss of eligibility with the release of the FY 2011 CDRs.”

For more in depth information about the adjustments to the calculation, refer to the electronic announcement

 

Publication Date: 9/24/2014


Kathy B | 9/24/2014 10:32:10 AM

The decision to adjust the calculation of the 3-Year CDR to a select group of institutions is unfair. I believe it is unjust to delay Federal Direct Loan (FDL) disbursements for certain future FDL borrowers once an institution reaches a 15% CDR, if in fact, former borrowers in repayment did not receive coordinated treatment from multiple servicers.

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