Appealing & Challenging Your Cohort Default Rate

1. Appealing & Challenging Your Cohort Default Rate Presented by: Tommy Sims, Sr. Debt Mgmt. Program Advisor, ECMC & Eric Johnson, President, Student Outreach Solutions Moderator: Tom Le, Manager of Default Prevention, Wyotech Long Beach

2. The Changing Landscape • Loan default rate increasing for most schools • Educational costs continue to rise • More students borrowing more money • Combination of Stafford and private loans equals greater debt • Schools require uninterrupted loan capital and high CDRs may cause access issues • Changes to CDR calculation accompanied by new sanctions and regulatory oversight • FFELP to FDLP transition and loss of guarantor’s financial literacy and default aversion efforts

3. Cohort Default Rate TrendsFY 2009,FY 2010, & FY2011 Cohort Default Rates

4. Cohort Default Rate Trends

5. FY 2009 Three-Year Official National Cohort Default Rates

6. FY 2010 Three-Year Official National Cohort Default Rates

7. The Consequences of Default Not only does student loan default impact the integrity of the student loan programs, but there are significant consequences for: • Taxpayers • Schools • Borrowers

8. The Consequences of Default • High CDRs may result in adverse publicity • Negatively reflect on school quality • May result in loss of Title IV eligibility • Threaten continued access to both Stafford and private loan funds • Result in extra work to reverse high rates

9. The Recession • CDR data is retrospective, so the impact of the recession will be seen in FY 09, FY 10 and FY 11 vintages • More borrowers are having difficulty repaying their loans • The recession is (unfortunately) occurring concurrently with the change from a 2-year to a 3-year CDR calculation • Some schools may face compliance difficulties due to CDRs in the coming years • Contributes to an un/under-employed alumni

10. 3-Year CDR Sanctions • Beginning with the 2011 CDR (published September 2014) • Schools with CDRs of 30% or higher must take certain corrective actions: • Create a default prevention team • Submit a default prevention plan to FSA for review Note: These are solid default prevention strategies already recommended by FSA

11. CDR Sanction Threshold Changes

12. Disbursement “Relief” Thresholds

13. Default Prevention Best Practices • Form a default prevention team (task force) • Develop or adopt a default prevention plan • Utilize traditional financial aid office-based default prevention strategies • Utilize non-traditional student success-focused default prevention strategies • Best option: Use a combination of these four (4) approaches

14. “Traditional” Approach • Primarily involves the financial aid office • Focus is on helping student borrowers to develop a healthy relationship with their loans to include: • Understanding loan repayment • Teaching financial literacy • Updating enrollment status changes • Reaching out when help is needed

15. NSLDS Reports for Schools

16. NSLDS Report Overview

17. Understanding Cohort Default Rates (CDRs) – a Quick Review • Draft and official CDRs • CDR numerator and denominator • Formulas used for CDR calculations • CDRs – a historical perspective

18. CDRs: the Formula Borrowers who entered repayment in one year, and defaulted in that year or the next Numerator Borrowers who entered repayment during the one-year cohort period Denominator

19. 3-Year CDR Formula # of students who defaulted who entered repayment in Fiscal Year 1 FISCAL YEAR 1 FISCAL YEAR 3 FISCAL YEAR 2 # of students who entered repayment = Cohort Default Rate (CDR)

20. CDRs Are Released Twice A Year February (DRAFT) Not public No sanctions No benefits September (OFFICIAL) Public Sanctions apply Benefits apply

21. Draft CDR Data Files * Verify that the overall CDR (Num/Den) on the Letter matches the SHCDRROP (Loan Record Detail Report)

22. Data collected in the SHCDREOP File

23. 2-Year CDR Evaluation Draft Rate Draft Rate Official Rate Official Rate CY 2010 CY 2009 Feb-12 Feb-11 Sep-12 Sep-11 9/30/11 9/30/10 10/1/09 10/1/08 9/30/10 9/30/09 CY 2011 Draft Rate Feb. 2013 09/30/13 9/30/12 9/30/11 10/1/10 2009 2010 Fiscal Year 2011 2012

24. Institutional CDR Calculations by CDR Year Publications of 3-Year CDR

25. Challenges, Adjustments, and Appeals

26. Cohort Default Rate Guide

27. eCDR System Login Page

28. eCDR Appeals • Processes IDC, UDA, and NDA electronically • First became available in February 2008 (FY 2006 draft CDR) • Available at the following link: • https://ecdrappeals.ed.gov/ecdra/index.html

29. Loan Servicing Appeal • Schools request loan servicing records from the guaranty agency (GA) for FFEL loans held by the GA and the Department of Education(ED) servicers/not-for-profits for FFEL loans held by ED and for Direct Loans • Schools may appeal their most recent official rate; or any official rate upon which loss of eligibility is based • A successful appeal will result in adjustments to numerator and denominator • Should be available via eCDR Appeals beginning in Fall 2013

30. Loan Servicing Appeal When is a defaulted Direct Loan or FFEL PUT to the Department considered improperly serviced for Cohort Default Rate purposes?

31. Loan Servicing Appeal Timeframe

32. Submitting Appeals/Adjustments • Starting in 2012 schools may submit challenges/appeals/adjustments for both the 2-year CDR and 3-year CDR • Use eCDR Appeals (at ecdrappeals.ed.gov) to submit IDC, UDA, and NDA (LS beginning in Fall 2013) • At this time, all other CDR appeals will continue to be submitted via hard copy

33. Default Management Resources • IFAP website: http://www.ifap.ed.gov • Default Prevention and Management website: http://www.ifap.ed.gov/DefaultManagement/DefaultManagement.html • eCDR Appeals website: https://ecdrappeals.ed.gov/

34. Thank You! Questions?

35. Contact Information: Tommy Sims 651-253-4299 tsims@ecmc.org Eric Johnson 317-348-9119 eric.johnson@salliemae.com