TASFAA Community Blog
Reviewing the Accuracy of Your Cohort Default Rate Reports
By Dave Bowman, Regional Marketing Director
Recently, the first draft three-year cohort default rates (CDRs) were sent to schools. The switch from a two-year rate to a three-year rate means that this calculation includes an additional year of defaulted loans. The draft calculation includes the percentage of borrowers who first entered repayment between October 1, 2008, and September 30, 2009, who subsequently defaulted on or before September 30, 2011. With the additional year included, almost every school is seeing a higher three-year CDR.
The draft three-year rates are for informational purposes only and are not challengeable. However, the Department of Education has provided them to give schools a preview of what to expect once the three-year rates become real. While not every school will need to challenge the information used to calculate their three-year rate once they are officially released, every school should want to ensure that its newly-released rate is accurate and become familiar with the challenge/appeal process before next year. Take time to make sure that correct information was used to calculate your school’s CDR, so that your official rate, when released, is as accurate as possible.
Know what the cohort default rate package contains.
The cohort default rate package comes to you in an electronic format and arrives via the Student Aid Internet Gateway, and is issued in early February of each year. You will find a cover letter and two types of Loan Record Detail Reports (LRDR), the extract-type and the reader-friendly version. The extract-type file is best used for loading CDR data into a database while the reader-friendly version is best used for schools that wish to simply view the information.
Know how to read the LRDR.
Many of the challenges that are submitted to the Department every year are unwarranted. Save your school time and effort by ensuring you are reading your school’s LRDR correctly.
The LRDRundefinedcreated for the Department by the National Student Loan Data System (NSLDS) using the information that schools, data managers, and various offices within the Department have submitted to the NSLDSundefinedlists specific information for each loan that was included in your school’s CDR.
In addition to demographic information about your school, you will be able to find information about the borrowers included in the CDR calculation, and the date the CDR was calculated.
Be aware of the codes used by the Department on this form, including:
•· Loan type codes
•· Enrollment status codes
•· Usage codes
•· Claim reason codes
•· Loan status codes
•· Academic level codes
•· Data manager codes
More information about theses codes is available at http://ifap.ed.gov/DefaultManagement/guide/attachments/Ch2pnt3LRDRpt2.doc, page 2.3-7 and 8.
Know what actions to take.
Save a copy of all of your school’s LRDRs:
•· To use in the event of a challenge, adjustment, or appeal
•· To compare draft and official rates
•· To compare rates from one fiscal year to the next
Also, take the time to review the accuracy of the data used to calculate the draft CDR. Compare the information in the LRDR to your school records to ensure that the students on your system match those listed in the report.
Take action if you find an error.
If any of the information used in the draft rate is inaccurate, your school should file the appropriate challenge. Be aware that a school that fails to challenge the accuracy of its draft CDR may not contest the accuracy of the data in the official CDR. Incorrect data can be resolved by taking these steps:
•· Locate the Guarantor/Servicer number on the LRDR, and use it to obtain the name and address of the data manager who is responsible for the loan. You will need to have this information in order to submitting a challenge, adjustment, and/or appeal. Be aware that there could be a cost for review of your information by a servicer.
•· There are several categories of errors, and it is important to find the correct category for the error you have found. Note that incorrect data challenges apply to the draft rate, while adjustments and appeals apply to the official rate. More information on these categories can be found at http://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html.
•· You must use the eCDR Appeals System to submit a draft rate challenge. The eCDR process includes registering for a user account, creating an organizational and individual profile, creating a new case, uploading the applicable LRDR extracts, adding detail, and submitting the case.
•· If additional documentation is requested, you will be contacted via email by the data manager or the Department of Education, depending on the type of challenge or appeal.
Analyze your default management plan
Always take the time to look at the borrowers from your school who have defaulted. What do borrowers who have defaulted have in common, and how do they compare to your broader student body? Think about what steps you could take to lower your default rate, so that your school can avoid sanctions and benefit from a lower CDR, and your former students can avoid the consequences of default while building a more solid financial future.
Dave Bowman is a Regional Marketing Director with Great Lakes, serving schools in TASFAA. You can reach Dave at (888) 685-1604, or by e-mail at DBowman@glhec.org. Additional information about Great Lakes can be found online at www.mygreatlakes.org
Tips for getting students thinking about repayment while they’re still in school
Doug Savage, TG Senior Regional Account Executive
With student debt balances higher than usual and a job market that remains challenging, worsening cohort default rates are a worry on many campuses.
Raul Lerma, interim executive director of financial aid and veterans affairs at El Paso Community College, says that his school’s numbers have been bucking the trend. Here are some tips he offers based on his experience. These three methods all involve ways schools can engage current students now to actively prevent default later.
Start repayment now
“The basic challenge,” he says, “is to help the students understand that they really do have to pay this money back. Sometimes it doesn’t seem real to them that they actually will need to make payments at some point.
“Therefore, it’s a good idea to get them making payments while they’re still in school. That might just be $50, but it’s still a good idea, because it creates two benefits. First, it chips away at the amount a little, and that’s obviously good, but the second benefit is more important: that tiny payment creates the habit and makes repayment real for them.”
Use in-person entrance counseling
Another strategy Lerma uses to manage default rates is to require in-person entrance counseling every academic year. “A lot of schools do this counseling online,” he says, “or it’s in-person the first year and online after that. But I think in-person counseling makes more of an impact, so we require it every academic year.”
Besides the impact of being in a session with an actual instructor, Lerma notes that there is also the benefit of teachable moments as students can ask questions, with an expert to answer at that moment.
Reinforce with brochures or even intermediate sessions
Lerma says that his office has also been employing a tactic of reinforcing loan repayment concepts often. “Whenever a student comes in our office for any reason,” he says, “we ask if they have loans. If they do, we give them an informative booklet.” The idea is that it might take several attempts to gain the student’s deep attention and have them engage the subject matter. Reinforcing the material with the brochure boosts the likelihood that students will read and understand the important information they need to grasp.
He adds, “We’re also considering the idea of getting students in for intermediate counseling sessions to reinforce what they may have forgotten from entrance counseling.”
In short, getting students to start repaying their loans while still in school (even if it’s only $50 per month), using in-person rather than online entrance counseling, and reinforcing the importance of repayment at every opportunity, may be effective ways to keep cohort default rates under control. The results at El Paso Community College seem to confirm that they are.
Doug Savage is a Senior Regional Account Executive with TG serving schools in TASFAA. You can reach Doug at (800) 252-9743, ext. 6711, or by email at firstname.lastname@example.org. Additional information about TG can be found online at www.TG.org.
Congratulations are in order for all our following colleagues!
Trevecca Nazareene University is happy to announce that Kylie Pruitt has rejoined the Financial Aid staff as Associate Director of Financial Aid (she was previously Director of FA at Aquinas). Angie Register, Financial Aid Counselor is expecting a new baby in January.
Columbia State: Brenda Burney became the new FA Director at the end of April (formerly at Art Institue of TN). Bill McCord (who formerly was at Nashville State then Morehead State) is back in TN as the Technical Coordinator at Columbia State. Tammy Noragon is now Scholarship Coordinator (previously with Witchita State University). Rakida Sims is the FA Coordinator for the Columbia State Williamson County Campus (previously with Art Institute of TN).
South College: Kim Cintron became Mrs. Jeff Long on a beautiful October day (October 21, 2011).
Rhodes College: Kim Prestridge (Assoc. Director of FA) will be giving birth to a son (Zachary) scheduled Friday Nov. 11th via C-section, and will return to work in January.
MTSU: MTSU's scholarship staff moved to a separate office in April. The new Scholarship Office is located in James Union Building, room 206. The Financial Aid Office has two new employees: Trina Wilson joined MTSU in May and is the Assistant Director responsible for the loan programs. Joanie Walker joined MTSU full-time in September as a Coordinator after serving as the lead person in the school's Call Center this past summer. Leann Eaton has moved up to Associate Director of Operations.
We are at a turning point on federal student aid funding and I am writing to ask you to sign on to a simple statement of support that calls on our lawmakers to Save Student Aid.
Because of our nation's historic economic downturn, we've already seen $30 billion cut from our federal student aid programs. The Joint Select Committee on Deficit Reduction, also known as the Super Committee, has until Nov. 23 to come up with a plan to reduce the nation's debt. Federal student aid could very well be on the chopping block and students need your voice to defend the programs that grant access to postsecondary education.
As you know, this is an incredibly challenging time for students all over the country, including those you serve on a daily basis. The recession has driven more students back to campus to improve their skills and job prospects, and a lot of those students have higher economic needs. Meanwhile, federal and state governments have cut back their support. It is critical to preserve what financial aid is still available for deserving students so they can better qualify for the jobs that will help our economy grow.
As student aid administrators you see evidence of these situations everyday on your college campus. But Super Committee members and other members of Congress need to hear more-and they need to hear it from as many people as possible, particularly those of you who work directly with students.
That's why the Student Aid Alliance, a coalition of national higher education organizations representing thousands of campuses and millions of presidents, students, faculty and administrators has organized a campaign to Save Student Aid. The campaign will reach to out to all campus constituencies, encouraging grassroots involvement. As one of the founding members of the Alliance, NASFAA encourages you to join us in this campaign.
As the Super Committee's deadline nears, we need your help. Please sign our statement of support, expressing the opinion that for our country's short- and long-term economic health, student aid funding must be preserved. This is a simple and easy step to make your voice heard.
If you're interested in getting more involved after you've signed on, you'll see other options for actions you can take by visiting NASFAA's Save Student Aid Facebook campaign.
Your voice is powerful and students need it now more than ever. Please join your fellow administrators as well as the students from across the country in asking the Super Committee and our lawmakers to Save Student Aid.
Statement of Support link:
Publication Date: October 20, 2011
DCL ID: GEN-11-17
Subject: Fraud in Postsecondary Distance Education Programs - URGENT CALL TO ACTION
Summary: The purpose of this letter is to provide guidance to address potential fraud in the Federal student aid programs at institutions of higher education that offer distance education programs. This letter provides an overview of the fraud schemes that the Department's Inspector General (IG) detected, and recommends immediate steps that institutions can take to detect and prevent fraud. In this letter, we also describe further actions that institutions can take and that the Federal government is committed to taking, including increasing technical assistance to institutions of higher education, the convening of a Department-wide task force on distance education fraud, and plans for recommending legislative and regulatory changes to address the relevant issues.
We appreciate the efforts that institutions routinely take to protect the integrity of the Federal student aid programs. Some of the fraud described in this letter was detected as a direct result of vigilant efforts pursued by institutions that have implemented comprehensive internal controls and fraud detection measures. Despite these efforts, more needs to be done by all institutions to prevent, identify, and report suspected distance education fraud in the Federal student aid programs and enable the successful prosecution of offenders. As evidenced by our recent work with the community on program integrity, we are committed to being a strong steward of the taxpayer investment in the student assistance programs and to ensuring their integrity. For these reasons, the Department determined a swift response was necessary and, through this Dear Colleague Letter (DCL), we are asking for your continued partnership to eliminate this and other attempts to defraud the Federal st udent aid programs. It is imperative that institutions comply with all existing statutory and regulatory requirements to disburse aid only to eligible students, to identify and resolve discrepancies in student information, to ensure that all requirements regarding "regular student" status are met, and to report any suspected fraud to the Department's IG. In doing so, your efforts will help curb these abuses and ensure that Federal student aid is provided to needy students as intended.
On September 26, 2011, the Department's IG issued a report about fraud rings operating on distance education programs offered by institutions participating in the Federal student aid programs (http://www2.ed.gov/about/offices/list/oig/invtreports/l42l0001.pdf). The IG's report identified an increasing number of cases involving large, loosely affiliated groups of individuals (fraud rings) who conspire to defraud title IV programs through distance education programs. These fraud rings generally target institutions with low tuition in the context of distance education programs and involve a ringleader who:
Obtains identifying information from straw students - individuals who willingly provide the information - including some who were incarcerated, by promising financial gain.
Completes multiple financial aid applications using the information collected (name, Social Security number, date of birth, etc.).
Applies for admission under the institution's open admissions program, where little or no third-party documentation is required.
Participates in the amount of on-line interaction necessary to establish participation in the academic program and secure disbursements under an institution's procedures.
Once the ringleader has submitted the Federal student financial aid application and completed enrollment at the institution, the institution draws down Federal student aid funds, deducts the institutional charges assessed the straw student, and disburses the credit balances to the straw student by check or debit card. Straw students then give a portion of the proceeds to the ringleaders while keeping the remaining portion. If needed to secure disbursements under an institution's procedures, a ringleader may also participate as the straw student in sufficient academic work to appear to be an eligible student.
The IG's report found that complaints about distance education fraud rings are expected to continue, given that distance education is the fastest growing segment of higher education. Institutions offer the front line of protection and are essential to the Department's efforts to thwart fraud and protect taxpayer dollars. As you know, accrediting agencies are required to review the policies and procedures institutions have in place to verify the identity of the students enrolled in those courses and programs (34 CFR 602.17(g)). Affected institutions should follow these reviewed processes to help detect efforts to defraud the Federal student aid programs. We also expect institutions to take steps necessary to ensure that students are academically engaged prior to disbursing Title IV student aid funds. If students do not begin attendance, Title IV funds must be returned (34 CFR 668.21(a)). We strongly encourage institutions that suspect potential fraud to question an appl
icant's intent to seriously pursue the academic program by requiring the student to demonstrate that he or she has an academic purpose in order to establish eligibility for Federal student aid. If a student does not demonstrate academic purpose or resolve other concerns regarding identity or eligibility, the institution should not disburse Title IV funds.
Detecting fraud before funds have been disbursed is the best way to combat this crime. We therefore seek the help of institutions and advise that you take the following additional actions to identify and prevent the kind of student aid fraud identified in the IG's report:
Implement automated protocols that monitor information in your student information data system to identify instances where a number of students -
Use the same Internet Protocol (IP) address to complete and submit an admissions application.
Use the same IP address to participate in the on-line academic program.
Use the same e-mail address to submit an admissions application.
Use the same e-mail address to participate in the on-line academic program Appear to reside in a geographic location that is anomalous to the locations of most students in the program.
Modify your disbursement rules for students participating exclusively in distance learning programs, which would immediately reduce the amount that fraud ring participants can receive. Institutions have the authority to:
Delay disbursement of Title IV funds until the student has participated in the distance education program for a longer and more substantiated period of time (e.g., until an exam has been given, completed, and graded or a paper has been submitted).
Make more frequent disbursements of Title IV funds so that not all of the payment period's award is disbursed at the beginning of the period.
Our recent program integrity rules include two additional requirements that help identify potential fraud. First, we now require institutions to have procedures in place to address what may appear to be a fraudulent claim of high school completion (34 CFR 668.16(p)). Since we now collect high school completion information on the Free Application for Federal Student Aid (FAFSA), institutions can use these procedures to help detect potential fraud. In addition, in the future, we may in our annual verification notice (which we publish in the Federal Register pursuant to recently-revised verification regulations found in Subpart E of 34 C.F.R. Part 668) specify certain additional items that would need to be verified, including high school diploma information and applicant identity for all or some of an institution's Title IV applicants who are engaged in distance education. The selection of these applicants for verification may be based on common addresses and other patterns and discrepancies noted in the OIG's investigations. Institutions are encouraged to verify identity of individuals whenever the institution, through use of similar methods and triggering events, finds cause for doing so as a best practice for preventing fraud.
The Department is taking this issue very seriously and has established a Department-wide anti-fraud ring task force, chaired by Jeff Baker, Director, Policy Liaison and Implementation in Federal Student Aid, to address the issues raised in the IG's report as well as emerging future threats. If you have comments and suggestions that you believe will help us address fraud rings or have specific concerns that do not rise to a level that you believe appropriate to refer to the IG, please contact the task force at FraudTaskForce@ed.gov or call 202-377-4340.
Finally, we have added sessions to the upcoming FSA Conference in Las Vegas scheduled for November 29-December 2, 2011, to more fully discuss the IG report and possible institutional responses. We plan to release additional guidance after those sessions and will also consider suggestions for additional statutory and regulatory changes to help institutions combat fraud and protect students and taxpayers from fraudulent activity.
James W. Runcie
Chief Operating Officer
Federal Student Aid
Eduardo M. Ochoa
for Postsecondary Education
TASFAA FALL TRAINING WORKSHOPS
Hello friends and colleagues! TASFAA and TSAC are once again partnering together to provide training opportunities for financial aid administrators that will take place in three locations across the state.
Workshop West Union University Jackson, TN November 9th
Workshop Central Lipscomb University Nashville, TN November 14th
Workshop East South College Knoxville, TN November 15th
Contact Us: email@example.com