Earlier today the U.S. Department of Education (Department) released the official three-year Cohort Default Rates (CDRs) for FY 2011.  For the uninitiated, this is a measure of the number of students entering repayment in FY 2011 (entering repayment between October 1, 2010 and September 30, 2011)  that defaulted on their loans (experienced 270 or more days of delinquency on their loan payments). Previously, the Department utilized a two-year CDR metric and merely published three-year CDRs for information purposes.  Of course, if an institution’s 3-year CDR exceed 30% for three consecutive years (or exceeds 40% in any one year), that institution is no longer eligible for Title IV.

As the chart below shows, the CDR has gone down from last year’s 14.7% mark to 13.7%.  Importantly, each school group – save for the 43 private non-profit 2-year colleges — have improved on the previous years’ CDR.   Also, proprietary schools have accomplished their third straight year of declining 3-year CDRs – and have seen CDRs fall from 22.7% in FY2009 to 19.1% in FY2011.

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It is also interesting that the highest default group remains the 2-year and 2-3 year colleges no matter the sector (public, private non-profit or proprietary).  I would be interested in hearing explanations for this discrepancy and, in particular, why 2-3 years schools have such high default rates.  Indeed, public 2-3 year schools actually have higher default rates than their proprietary peers.  What is it about those schools that make them so susceptible to higher default rates?

Of course, any schools suffering loss of Title IV due to high default rates (there were 21 schools subject to this sanction this year) may appeal for a host of reasons.  The deadlines for doing so are very short – and institutions must advise the Department of the intent to appeal within five business days after the official CDRs are released to the public.