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We Will Discuss
Why and how to forecast your institution’s cohort default rates
How to set a target default rate or maximum number of defaults within a cohort year
Tools for tracking your institution’s rate
Explanation of the new three-year default rate calculation
Default Rate Forecasting
A proactive way of tracking your rate as it progresses throughout the year
Predicting what will happen to your rate if certain conditions exist
Forecasting Your Rate
Enables you to make a difference while there’s still time
You have until September 30, 2010, to impact your 2-year 2009 cohort rate
Forecasting Your Rate
Allows you to be proactive with your default prevention efforts Implement or enhance default prevention
efforts to reach those borrowers in the cohort period
Helps you to determine if you need additional resources for default prevention
Helps to you make appropriate recommendations to your administration
Calculating Your 2009 CDR
Number of borrowers who enter repayment between 10/1/2008 and 9/30/2009
Number of borrowers who enter repayment between 10/1/2008 and 9/30/2009 and default between 10/1/2008 and 9/30/20102009 Cohort
Default Rate= x 100
Tracking Your Rate
Default Rate Forecaster Allows you to calculate your rate
anytime during the year Enables you to assess the impact of
each defaultAllows you to calculate your rate anytime during the year
Enables you to assess the impact of each default
Default Rate Forecaster
Default Rate Forecaster available as Excel spreadsheet
You can track your cohort default rate for the CFY for loans guaranteed by any guarantor or FDLP
Available at mygreatlakes.org
Cohort Rate Elements
Borrowers who entered repayment in current cohort fiscal year (CFY) and have already defaulted
Borrowers who entered repayment in CFY and are >= 320 days delinquent
Borrowers who entered repayment in CFY
Loans Included in Your CDR?
Federal Loans Subsidized and unsubsidized loans Federal Supplemental Loans for
Students (SLS loans)
– Federal SLS loans have not been made since
July 1994. However, it is possible for a
Federal SLS loan to be included in a current
cohort default rate calculation under certain
circumstances. Direct Loans
Subsidized and unsubsidized loans
Not Included in Your CDR
Federal Consolidation Loans and Federal Direct Consolidation Loans
Federal PLUS Loans Federal Graduate/Professional PLUS
Loans Federal Direct Graduate/Professional
PLUS Loans Federal Insured Student Loans
(FISLs) Federal Perkins Loans c
Set a Target Default Rate
Factors to consider when setting a target rate? Institution’s mission and goals Changes in enrollment Changes in the economy Prior year’s default rate Available resources to allocate to
default prevention Increase or decrease in borrowing
Maximum Number of Defaults Allowed
Target cohort default rate4.00
%
Number of borrowers who entered repayment between 10-01-08 and 9-30-09
5,000
Maximum number of defaults allowed by 9-30-10
200
Increase in 2009 cohort default rate for every borrower who defaults during the cohort period
0.02%
When Two Becomes Three
Beginning with the FY 2009, the new default rate formula will include three years
Borrowers who enter repayment between October 1, 2008, and September 30, 2009, and default on or before September 30, 2011, will be used to determine the rate
Calculation Change Impact
Three-year rate calculation will mean higher default rates for virtually every postsecondary institution
Rates are expected to increase approximately 60%
How Much Higher?
2-Year 3-Year Increas
e
Public 2-year 5.7% 9.7% 70%
Public 4-year 3.5% 5.3% 51%
Private 4-year 2.8% 4.5% 61%
Proprietary 8.6% 16.7% 94%
OVERALL 5.1% 8.6% 69%Basis: FY2004 Cohort Default Rate data
Source: U.S. Department of Education data released by Inside Higher Ed
What You Can Do Now
Forecast your 2-year 2009 rate Inform your administration of the
changes to the rate Provide an estimate of your 3-year rate Show the 3-year rate average by school
type Develop or enhance your default
prevention efforts Send emails and letters to delinquent
borrowers Conduct in-person loan counseling
How to Estimate Your 3-year Rate
Start with your 2007 cohort default rate Keep your denominator (borrowers who
entered repayment in FFY 07) Add to your numerator (borrowers who
defaulted in FFY07 and FFY 08) with those additional borrowers who defaulted in FFY 09 (between 10/1/08 and 9/30/09)
Ask your guarantor or Direct Loan servicer for the number of default borrowers for FFY 09