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HEA 101: Cohort Default Rate

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(HEA - Sec. 435)
Statutory Language
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Quick Take
As a means of providing a more accurate picture of loan defaults, the Higher Education Opportunity Act extends, by a year, the period in which student loan defaults are counted, (approximately 3 years in total). However, it also eases the thresholds that trigger the negative consequences of high default rates and as well as those that provide benefits of low default rates, such as being allowed early and single disbursement of loan funds. It also changes the appeal process for consideration of mitigating circumstances contributing to a high cohort default rate.

In addition, the Secretary will publish each fiscal year the "life of cohort default rates" of institutions, an aggregate number of defaults. Because of this change, the problems with the economy and the turmoil in the lending industry, schools could see increases in their CDRs.

When Will This Take Effect?
The changes in the collection and reporting of cohort default rates are effective "for purposes of calculating cohort default rates for fiscal year 2009 and succeeding fiscal years."

Who on Campus Needs to be Involved?
Student aid administrators, and business officers if you are close to the trigger rates.


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