§ 668.502 - Calculating program cohort default rates.

§ 668.502 Calculating program cohort default rates.

(a) General. This section describes the four steps that we follow to calculate your program cohort default rate for a fiscal year:

(1) First, under paragraph (b) of this section, we identify the borrowers in your GE program's cohort for the fiscal year. If the total number of borrowers in that cohort is fewer than 10, we also include the borrowers in your cohorts for the two most recent prior fiscal years for which we have data that identifies those borrowers who entered repayment during those fiscal years.

(2) Second, under paragraph (c) of this section, we identify the borrowers in the cohort (or cohorts) who are considered to be in default by the end of the second fiscal year following the fiscal year those borrowers entered repayment. If more than one cohort will be used to calculate your program cohort default rate, we identify defaulted borrowers separately for each cohort.

(3) Third, under paragraph (d) of this section, we calculate your program cohort default rate.

(4) Fourth, we apply your program cohort default rate to your program at all of your locations -

(i) As you exist on the date you receive the notice of your official program cohort default rate; and

(ii) From the date on which you receive the notice of your official program cohort default rate until you receive our notice that the program cohort default rate no longer applies.

(b) Identify the borrowers in a cohort.

(1) Except as provided in paragraph (b)(3) of this section, your cohort for a fiscal year consists of all of your current and former students who, during that fiscal year, entered repayment on any Federal Stafford Loan, Federal SLS Loan, Direct Subsidized Loan, or Direct Unsubsidized Loan that they received to attend the GE program, or on the portion of a loan made under the Federal Consolidation Loan Program or the Federal Direct Consolidation Loan Program that is used to repay those loans.

(2) A borrower may be included in more than one of your cohorts and may be included in the cohorts of more than one institution in the same fiscal year.

(3) A TEACH Grant that has been converted to a Federal Direct Unsubsidized Loan is not considered for the purpose of calculating and applying program cohort default rates.

(c) Identify the borrowers in a cohort who are in default.

(1) Except as provided in paragraph (c)(2) of this section, a borrower in a cohort for a fiscal year is considered to be in default if, before the end of the second fiscal year following the fiscal year the borrower entered repayment -

(i) The borrower defaults on any FFELP loan that was used to include the borrower in the cohort or on any Federal Consolidation Loan Program loan that repaid a loan that was used to include the borrower in the cohort (however, a borrower is not considered to be in default on a FFELP loan unless a claim for insurance has been paid on the loan by a guaranty agency or by us);

(ii) The borrower fails to make an installment payment, when due, on any Direct Loan Program loan that was used to include the borrower in the cohort or on any Federal Direct Consolidation Loan Program loan that repaid a loan that was used to include the borrower in the cohort, and the borrower's failure persists for 360 days;

(iii) You or your owner, agent, contractor, employee, or any other affiliated entity or individual make a payment to prevent a borrower's default on a loan that is used to include the borrower in that cohort; or

(iv) The borrower fails to make an installment payment, when due, on a Federal Stafford Loan that is held by the Secretary or a Federal Consolidation Loan that is held by the Secretary and that was used to repay a Federal Stafford Loan, if such Federal Stafford Loan or Federal Consolidation Loan was used to include the borrower in the cohort, and the borrower's failure persists for 360 days.

(2) A borrower is not considered to be in default based on a loan that is, before the end of the second fiscal year following the fiscal year in which it entered repayment -

(i) Rehabilitated under 34 CFR 682.405 or 34 CFR 685.211(e); or

(ii) Repurchased by a lender because the claim for insurance was submitted or paid in error.

(d) Calculate the program cohort default rate. Except as provided in § 668.503, if there are -

(1)

(i) Ten or more borrowers in your cohort for a fiscal year, your program cohort default rate is the percentage that is calculated by -

(ii) Dividing the number of borrowers in the cohort who are in default, as determined under paragraph (c) of this section, by the number of borrowers in the cohort, as determined under paragraph (b) of this section.

(2) Fewer than 10 borrowers in your cohort for a fiscal year, your program cohort default rate is the percentage that is calculated by -

(i) For the first two years we attempt to calculate program cohort default rates under this part for a program, dividing the total number of borrowers in that program's cohort and in the two most recent prior cohorts for which we have data to identify the individuals comprising the cohort who are in default, as determined for each program's cohort under paragraph (c) of this section, by the total number of borrowers in that program cohort and the two most recent prior cohorts for which we have data to identify the individuals comprising the cohort, as determined for each program cohort under paragraph (b) of this section.

(ii) For other fiscal years, by dividing the total number of borrowers in that program cohort and in the two most recent prior program cohorts who are in default, as determined for each program cohort under paragraph (c) of this section, by the total number of borrowers in that program cohort and the two most recent prior program cohorts as determined for each program cohort under paragraph (b) of this section.

(iii) If we identify a total of fewer than ten borrowers under paragraph (d)(2) of this section, we do not calculate a draft program cohort default rate for that fiscal year.

(Authority: 20 U.S.C. 1001, 1002, 1088)