Cohort Default

The Cohort Default Rate Challenge

A college or university’s cohort default rate (CDR) is a measure of the number of student loan borrowers that attended the college, and who also defaulted on their student loan within a certain period of time.  Defaults bring serious consequences for both the borrower and their college or university.

Borrowers with federally guaranteed student loans generally must begin repaying their student loans six months after leaving school. That is called the grace period. The obligation to repay doesn’t begin until the grace period ends.  The end of the grace period is called “in repayment”. A borrower in repayment defaults after 270 days (9 months) of nonpayment.  Once a borrower is deemed defaulted on their obligation they are subject to collections and serious financial penalties. The college or university of the borrower may also be impacted depending upon the CDR.

The Penalty For A High CDR

Colleges with high CDR rates may lose future eligibility to participate in federal Title IV programs.  Title IV programs include both Pell grants and student loans.  Managing the CDR is important for the continued operation of a college or university.  Below is a table with the average 2016 starting salaries for graduates in specific degree programs.  If these are the average numbers, average means half of the graduates will earn above these averages and half of the graduates are below these averages.  If the average borrower that graduated in 2016 owed $37,000, only borrowers who earn more than $51,000 per year will be able to afford the standard repayment plan payments.  Everyone else will need assistance to repay their student loans on-time.  According to Money Magazine, below is a table of average starting salaries for 2016 grads.

Bachelor's Degree Major 2016 Average Salary
Engineering $64891
Computer Science $61321
Math and Sciences $55087
Business $52236
Agriculture/Natural Resources $48729
Heathcare $48712
Communications $47047
Social Sciences $46065
Humanities $46065
Education $34891
*data from Money Magazine article

Of the 10 majors listed above, only the graduates in the first four of the above majors can afford to re-pay the average student loan debt.  The graduates in the bottom six majors are in trouble the day they leave college if they have the average student loan debt.  Colleges can take a leading role in ensuring that all borrowers in every major have an affordable payment plan and that they enter repayment on time, and ensure that the cohort default rate for your school is well managed.  The tools that needed to set up a program with the most accurate information for borrowers is available now. Set up an appointment today.

The Missing Middle

Borrowers with a repayment status of delinquent, in forbearance or deferment, or in repayment plans where the balance is growing rather than shrinking are called the “missing middle” for the purposes of understanding the CDR.  For all schools about 22% of borrowers are in the missing middle.  Eventually, these borrowers will show up in the CDR unless they are appropriately advised on an affordable payment and actually enroll in an affordable payment.  The table shows the schools most at risk for “missing middle” impact to the CDR.  Make an appointment to find out options to implement affordable repayment plan programs, where borrowers will actually enroll.  A healthy CDR is everyone’s opportunity.


Institution Type Missing Middle Borrowers
For-Profit  79%
Public 4-year  3%
Public 2-year  8%
Non-Profit 11%

*data from US Department of Education College Scorecard.

Do You Have A CDR Plan

Or You Kicking The Problem Done The Road?

The cure for excess Cohort Default Rate (CDR) is prevention.  Colleges and universities have the option to ensure that each of their graduates leaves college with an affordable student loan repayment plan.  If every graduate has an affordable repayment plan, it serves as a fault line to stop the CDR from going up.  Once the CDR is stabilized, the same program can be used to help bring the CDR down.

Explore the options of using IDR to tame your CDR.  Call for an appointment

48 Million Borrowers and Growing

93% of all student loans have a federal guarantee. The Federal Government has a program for borrowers to have affordable student loan payments. Qualifying for these payment programs can be a bit challenging. But, with guidance employers can help employees take advantage of these programs. The benefit to the borrower is lower payments and loan forgiveness without the added financial risk of private loan refinancing.

What’s in it for the colleges? Colleges and Universities that fail to ensure that their borrowers enroll in student loan repayment programs may lose their Title IV aid.  The impact of losing Title IV aid is so severe, that colleges that have been penalized with the withdrawal of Title IV aid have had no choice but to close their doors.

Loans Grow Because Other Aid Is Declining

Students have been hard hit by changes to federal financial aid requiring more of them to take out student loans.  In 1980, the max Pell award covered over 75% of the in-state cost to attend a four-year public university. By last year that number dropped to 31%, leading to an increased dependence on student loans. The decline in purchasing power coupled with tuition hikes continues to exert an influence. During the same period, a Pell grant went from covering nearly all of the costs at community colleges to covering less than half.

Also, colleges that undertake to participate in these programs are taking the lowest cost way to help alumni manage their student loan debt. And, the earlier borrowers take advantage of the plans the more likely they will earn loan forgiveness. Loan forgiveness allows borrowers to save significant dollars on student loan repayment. Graduates with manageable student loan debt are happier with their choice of college, and have a better connection and alumni relationship with their college or university. It’s a win’win for colleges and their alumni to ensure that their loans have are both repaid and that the payments are reasonable.

How Everyone Wins!

Colleges that enroll in this program get the best of all worlds. There is no borrower risk like there would be in changing from federally guaranteed student loans to private student loans. Student loan borrowers will enter repayment earlier, and with affordable payments, making them less likely to be delinquent or to default on their debt.

Effectively this is a great way for colleges to ensure that all of graduates, no matter what major or job prospects have the opportunity to enter into an affordable student loan repayment program early. It also allows for those borrowers to complete their student loan obligations earlier, than borrowers who wait to enroll in an affordable payment plan. To find out more about your options contact us at