Career College Association Comments on Cohort Default Rate Calculation Change

The following is CCA's official press release/statement on changes to the calculation of the cohort default rate (CDR). Email here with any questions. Relevant quote:

Cohort Default Rate Reflects Economy, Economic Disadvantage of Students

Washington, DC – The Career College Association today released the following statement from its President, Harris N. Miller, in response to the illustrative, 3-year CDR data released today:

“The substantial increase in the cohort default rate reflects the economic condition of the economy and the fact that over 50 percent of our students come from the lowest economic quintile.  If the reported rates take into account the profile of borrowers and defaulters, the cohort default rates for for-profit students are closest to community college students and those attending Historically Black Colleges and Universities.   And the community college rate would undoubtedly be higher if it were not for the fact that many community colleges refuse to participate in the Federal student lending program because of concern that high defaults will reflect badly on them or lead to loss of Title IV eligibility.   The Income Based Repayment plan, that took effect July 1 of this year, is a far more practical approach to loan repayment than past practice and, we believe, will help reduce cohort default rates.   CCA will continue to work with the Department of Education on other steps, including the Default Prevention Initiative, which involves institutions, ED officials and CCA staff working to gather data on the characteristics of defaulters at various stages (early missed payments, late stage delinquency and defaulters) and developed strategies for identifying potential defaulters before the first late payment.  Finally, we should note that these are nominal rates—rates that are intended to help all involved improve their future CDR standing but have no legal effect currently.“

The Department of Education data shows that cohort default rates, the rate at which borrowers fail to repay their student loans, jumped from 11 percent to 21 percent in the career education sector.  A change in the law increased the period over which CDRs are calculated from two years to three years.