Challenging the Draft Rates

Transcription

1 Cohort Default Rates Challenging the Draft Rates Julia Alexander Compliance & Training Officer Nelnet Guarantor Solutions 1

2 Agenda Cohort Default Rate (CDR) overview Challenging draft cohort tdefault rates Incorrect data challenge (IDC) Why? When? What? How? Resources Cohort Default Rate Overview 2

3 What is a Cohort Default Rate? A Cohort Default Rate (CDR) is a headcount of borrowers who enterrepayment repayment during a federal fiscal year (FFY) compared to the number in that group that default by the end of a specified time frame 3 year rate: By the end of the third FFY FFY = 10/1 9/30 FFY 2011: 10/1/10 9/30/11 FFY Year CDR Numerator and then defaulted between these dates 10/01/10 9/30/11 FFY /01/11 9/30/12 FFY /01/12 10/1/13 FFY 2013 Borrower who entered repayment between these dates... Denominator 3

4 3 Year CDR Timeframes Cohort Year Numerator Time Period Fiscal Year Published Denominator Time Period /1/2010 to 9/30/ /1/2010 to 9/30/ /1/2011 to 9/30/ /1/2011 to 9/30/ /1/2012 to 9/30/ /1/2012 to 9/30/ /1/2013 to 9/30/ /1/2013 to 9/30/2014 See CDR Guide Page What loans are included? Loans included in CDR calculation DirectandFFELPStafford Loans Subsidized and unsubsidized Federal Supplemental Loans for Students (SLS) SLS Program was discontinued 7/1/1994 Loans not included in CDR calculation Parent PLUS Loans Graduate/Professional PLUS Loans Federal Insured Student Loans (FISLs) Federal Perkins Loans 4

5 What is the impact of consolidation? Federal and Direct Consolidation Loans are not directly included in the CDR calculation A defaulted consolidation loan may cause a borrower to be included in the numerator This occurs if the consolidation loan defaults within the CDR that is applicable to the underlying loan(s) LRDR includes a Consolidation Indicator Vl Values are: 1 = Consolidation Loan 2 = Underlying Loan Blank See CDR Guide, Pages & FFY 2011 Consolidation Example LDA = 3/20/11 Default = 11/25/12 10/01/10 9/30/11 10/01/11 9/30/12 10/01/12 9/30/13 FFY 2011 FFY 2012 FFY 2013 DER = 9/21/11 Consolidation 11/1/ YR CDR 5

6 When are the CDRs released? Draft rates Released in February Not public No sanctions or benefits apply Official rates Released in September Public Sanctions and benefits apply Draft YR Cl Calculation lti 1/11/2014 Release 2/18/2014 Official YR Cl Calculation lti 7/26/2014 Release 9/15/2014 Technical Update GA When must a draft CDR challenge be submitted? 6

7 What is the submission timeframe? School must submit the Challenge within 45 days of the timeframe begin date set by ED The timeframe begin date is the sixth business day after the draft CDR release date FY YR CDR IDC timeframe Begin date: Feb. 26, 2014 End date: April 11, 2014 Data Manager must respond within 30 days from the date the timely challenge is received from the school DPM sets response date Challenging the Draft Rates 7

8 Why challenge the draft rate? Benefits of Low Official CDRs Institutions with official CDRs below 15% for the 3 most recent fiscal years for which data is available are eligible for benefits Effective for loans first disbursed on or after 10/1/2011 Benefits: Exempt from 30 day delay of first disbursement for first time freshman borrowers Exempt from the requirement for multiple disbursements for a single term loan 8

9 Impact of High Official CDRs Loss of low CDR benefits (see previous slide) Ifone 3YRCDR is greater than 30% Default prevention plan required (34 CFR ) New Submission Overview available at: If the 3 most recent 3YR official CDRs are each greater than 30% Loss of Direct Loans and Pell eligibility Third 3YR official CDR (FY2011) will be released in Sept If the most recent official CDR is greater than 40% Loss of Direct Loan program eligibility 34 CFR Subpart M What are the draft rate challenges? 9

10 Draft CDR Challenges Incorrect Data Challenge (IDC) Correct tincorrect tdt data in the Loan Record ddtilr Detail Report (LRDR) before the official CDRs are released CDR Guide Section 4.1 Participation Rate Index challenge Demonstrate a low borrower participation rate to avoid an anticipated sanction with the official CDR CDR Guide Section 4.2 Incorrect Data Challenge (IDC) An IDC is how a school requests a correction to what it believes to be inaccurate data in the school s s LRDR of the draft CDR If an IDC is successful, NSLDS is to be corrected, and the corrected data is used for calculating the school s official CDR If a school does submit an IDC, the school cannot later contest the accuracy of the official i CDR data in an Uncorrected Data Adjustment (UDA) or an Erroneous Data Appeal (EDA) based on disputed data 10

11 What can be challenged in an IDC? Incorrect Data Challenges Borrower s data was incorrectly reported Borrower was incorrectly included Borrower was incorrectly excluded 11

12 IDC Allegations See CDR Guide, Pages 3.1, 9 12 for allegations related: Incorrect date entered repayment Incorrect default status Incorrect inclusion due to multiple loans Incorrect inclusion of borrower Incorrect exclusion of borrower When does a loan enter repayment? A loan enters repayment after a 6 month grace period that begins when a borrower ceased to be enrolled at least half time Graduates, withdraws, or drops below half time LDA/LHD + 6 months + 1 day = official repay date This date is generally used to determine which cohort year the borrower is included in for calculation LDA = 5/15/ month Grace Period + 1 day Repayment Date = 11/16/2010 See CDR Guide, Page

13 When is a loan in default? FFELP Loans Borrower has not made payments on the loan for more than 270 days, and The guarantor purchased the loan as a defaulted loan A lender must file a default claim after 270th day of delinquency GA has 90 days to pay claim Default date is the date the default claim was paid If the date the default (DF) claim is paid is within the CDR period, the loan is included in the numerator FFELP date of default NSLDS loan history Loan detail Date of Default is the date the default claim was paid. 13

14 When is a loan in default? Direct Loans (and ED held FFELP loans) Borrower has not made payments on the loan for 270 days A loan is considered in default for CDR purposes after 360 consecutive days of delinquency If the date the loan reaches 361 consecutive days of delinquency is in the CDR period, the loan is included in the numerator Direct Loan Date of Default NSLDS loan history Loan dtil detail 14

15 How does rehabilitation affect CDRs? In order to rehabilitate a defaulted loan, the borrower must make 9 monthly on time payments py within a 10 month period If the borrower rehabilitates the loan before the end of the CDR period, the borrower is not included in the numerator 3YR 2011 CDR: Must complete rehab by 9/30/2013 If the borrower rehabilitates the loan after the end of the CDR period, the borrower is included in the numerator 3YR 2011 CDR: Rehab completed after 9/30/2013 See CDR Guide, Page Date of Rehabilitation on NSLDS NSLDS loan history Loan dtil detail 15

16 CDR Calculation Numerator Refined for Rehabilitation Denominator FY 11 FY 12 FY Rehabs = or or 4.5% 5.5% Special Circumstances See CDR Guide pages 2.1, for: Special circumstances involving schools Special circumstances involving repayment Special circumstances involving loans that were discharged, canceled, or refunded Special circumstances involving loans that were repurchased 16

17 Special Circumstances Situation: Borrower transfers to a subsequent school before graceperiod expires Case study: Student borrowed 2 loans while attending School A and then withdrew 8/13/2010 Grace period did not expire between enrollments Student enrolled FT at School B on 1/10/2011 and then withdrew on 2/15/2011 DER for loans borrowed at both schools is 8/16/2011; FY11 Effect on denominator: Borrower is included in the cohort year when borrower entered repayment Special Circumstances Situation: Borrower borrows loans at more than 1 school Case study: Student borrowed 2 loans at School A and was HT until withdrawing on 8/13/2010 Student enrolled FT at School B on 8/15/11, borrowed 2 loans, and then withdrew 5/8/2012 Grace period expired between enrollments DER for loans borrowed at School A = 2/14/2011; FY 11 DER for loans borrowed at School B = 11/9/2012; FY 13 Affect on denominator: Borrower is included in the cohort years when the borrower entered repayment for each school where the borrower obtained loans 17

18 Special Circumstances Situation: Borrower paid the loan in full after defaulting duringthecdrperiod but without rehabilitatingtheloanthe loan Case study: Borrower s DER = 11/8/2010; FY 2011 cohort Borrower defaulted on a loan on 6/1/2012 Borrower paid the loan in full on 8/1/2012 Borrower is included in numerator of 3YR 2011 cohort Effect on numerator: The borrower is included because loan was not successfully rehabilitated for CDR purposes within the CDR period Special Circumstances Situation: Borrower enters repayment and defaults during the cohort period and then subsequently, the loan is discharged due to death or disability Case study: Borrower s DER = 11/15/2010; FY 2011 cohort Borrower defaulted on a loan on 2/8/2012 The loan is then discharged due to disability on 5/18/2012 Borrower is included in numerator of 3YR 2011 cohort Effect on numerator: Borrower is included because the borrower defaulted during the CDR period 18

19 Other Circumstances & Allegations Split servicing Not a valid allegation Must demonstrate data is incorrect Borrower did not receive full grace period If a borrower defaulted, the default cannot be removed by the Federal Loan Servicers The DER and date of default (DD) can only be changed to later date based on the correct DER If DM agrees to update DER for a defaulted Direct Loan, the DD should be recalculated to be 360th day of delinquency based on the updated DER How do we challenge for incorrect data? 19

20 Obtain the Loan Record Detail Report ED sends the ecdr package to each school through SAIG destination point Cover letter Reader friendly LRDR Extract type LRDR May request electronic LRDR via NSLDS NSLDS Report tab Delivered to SAIG mailbox See CDR Guide, Chapter 2.2 What s in an LRDR? LRDR gives details of each borrower included Name and SSN Loan status Date entered repayment Date of default (if applicable) Loan type (FFELP or Direct) How loan is counted in CDR Numerator, denominator, both, or neither 20

21 Loan Record Detail Report (LRDR) Review Chapter 2.3 of the Cohort Default Rate Guide for information on how to read the LRDR Chapter 2.3 Part 2: LRDR Reader Friendly Format Chapter 2.3 Parts 3 & 4: LRDR Electronic Extract File uidepart2.html LRDR Codes The Usage Code Identifies how the loan is counted in the CDR calculation CDR Guide Page

22 Review the LRDR Data Compare the information in the LRDR to the school s own records and NSLDS to ensure the accuracy of the data Remember that you are looking for: Data incorrectly reported Borrowers incorrectly included Borrowers incorrectly excluded Is a borrower incorrectly included? Review details for the borrowers who defaulted (the numerator) Determine when each borrower left school or ceased to be enrolled at least half time Determine when each borrower should have entered repayment Confirm that the date they entered repayment actually falls within the cohort time frame Submit a challenge of any defaulted borrowers in the numerator who did not enter repayment during that period 22

23 Is a borrower incorrectly excluded? Run a report from your system of all borrowers who would have enteredrepaymentrepayment during CDR time frame Based on Last Date of Attendance (LDA) or Less than Halftime Date (LHD) Then compare to borrowers include in the denominator ofthe CDR Is a borrower incorrectly excluded? If any borrower appears to be missing from the denominator, perform two checks 1. Check NSLDS to determine if student transferred to a subsequent school A transfer before the grace period has expired will delay the date entered repayment 2. Check NSLDS to determine if your school correctly and timely reported the LDA/LHD Holders rely on accurate institution enrollment reporting for correct conversion to repayment If no transfer, and enrollment reporting was accurate and timely, challenge to have borrower added to denominator 23

24 LDA and Repayment Date (DER) ecdr Appeals System Must submit challenge electronically through ecdr Dt Data Managers respond via ecdr Website also provides CDR Guide revised September 2012 IDC, UDA, NDA FAQs School demonstration sessions IDC, UDA, NDA 24

25 ecdr Appeals System The Incorrect Data Challenge Submit the following to the correct DM via ecdr A certification ltt letter for challenge hll Appropriate supporting documentation for each borrower Some examples: NSLDS screen print confirming borrower s withdrawal date or less than half time status date and timely submission Canceled check fully refunding loan within 120 days of disbursement For additional examples see CDR Guide Page

26 What is the Data Manager s role? Data Manager holding the loan reviews the challenge Must issue a decision i within 30 days of receiving i challenge via ecdr If agrees that a change should be made, corrects data in its internal system and NSLDS Prior to date for calculation of the official CDRs What is the DPM s role in IDCs? DPM (or OPD) Reviews Data Manager responses to incorrect data challenges (IDCs) submitted by schools to ensure that the responses are correct Default Prevention and Management (DPM) website agement.html Contact information: Phone: (OPD hotline) fsa.schools.default.management@ed.gov 26

27 NSLDS and CDRs Transition from 2YR to 3YR CDRs will be complete when the official YR CDR arereleased released in September 2014 Enhancements to NSLDS website All cohort default rates will display on NSLDS Under Org tab LRDRisavailable for allrates What resources are available? 27

28 Cohort Default Rate Guide ment/cdrguidemaster.html Provides Information on: How rates are calculated How schools get rates and data Reviewing the LRDR Challenges, Adjustments, & Appeals FAQs areavailableavailable agement/faq/faq.html#faq01 FSA Data Center center/student/default Links to: Links to: Searchable CDR database Lifetime CDRs 28

29 Acronym Key Acronym CDR DD DER DPM/OPD ED FFY IDC LDA LHD LRDR SAIG Meaning Cohort Default Rate Date of Default Date entered repayment Default Prevention Management/Operations Performance Division U.S. Department of Education Federal Fiscal Year Incorrect Data Challenge Last date of attendance Less than half time date Loan Record Detail Report Student Aid Internet Gateway Questions? Julia Alexander Compliance & Training i Officer julia.alexander@nelnet.net Nelnet is glad to help schools access all the information needed to make their jobs easier Nelnet is glad to help schools access all the information needed to make their jobs easier and to best help students. We cannot offer opinion or interpretation of FSA policies in all circumstances. If you have specific questions about your programs and procedures, we recommend that you contact FSA. 29