Lowering Cohort Default Rates

Unlike the Reinsurance Trigger rate, which takes into account an agency’s entire loan portfolio, the Cohort Default Rate only tracks a portion of borrowers. The CDR is the percentage of borrowers who default within the first 1 to 2 years of repayment. For example, the 2005 CDR is the percentage of borrowers who began repaying their loans between October 1, 2003 and September 30, 2004, and who defaulted before September 30, 2005. The Education Department compiles CDRs annually for each higher education institution, lender and guarantor that participates in the FFELP. CDRs are used to monitor a FFELP participant’s effectiveness in default prevention, and a high CDR can cause an institution to lose its eligibility to administer federal aid.

Since implementing our VFA, our CDR has dropped significantly faster than the national average:

ASA’s Cohort Default Rate has consistently been among the lowest in the nation. At just 1.4%, ASA’s 2006 cohort default rate is the lowest among all national guarantors, and well below the national average rate of 5.2%.

And it’s not just our CDR that’s dropped. We’ve helped schools lower their CDRs as well. As part of our Journeys 2004 program, several colleges joined ASA in sending information on loan repayment, financial literacy and career advice to their recent graduates. These schools experienced lower CDRs for their students with ASA-guaranteed loans than for those with loans guaranteed by another agency.