Six Default Rate Appeals Errors to Avoid
By Carol Buchli, USA Funds Consultant
You’re likely reviewing your school’s draft 2011 two-year cohort default rate data, released last week, and draft 2010 three-year cohort default rate data, released on Monday. If you’re planning to appeal your rates, keep in mind six common errors to avoid in the cohort default rate appeals process:
Student leaves one school and enrolls at another school before the grace period expires from the original school. If a student’s grace period has not expired, loans will not enter repayment until the student withdraws, drops to less than half-time attendance or graduates from the subsequent schools. A borrower is not included in a cohort default rate calculation until one of that borrower’s loans enters repayment.
To determine if students have enrolled in another institution, you should review National Student Loan Data System information for all schools for students. Providing information that a student left school in a different fiscal year is not, by itself, sufficient for challenging the data. Your school must be able to show that a student did not attend another institution after withdrawal.
If you’re filing a cohort data challenge, include a screen print from NSLDS showing enrollment detail “For All Schools” for each student included in the challenge. If your school files enrollment status updates through the National Student Clearinghouse, you should include screen prints from the Clearinghouse so that the guarantor can verify when status updates were reported.
Untimely or inaccurate updates. When a school never has reported that a student has withdrawn or dropped to less than half-time attendance, a lender often will use the anticipated graduation date (shown on the loan certification by the school) as the last date of attendance. In a cohort data challenge, you have to be able to show that student status changes were reported in a timely and accurate manner. The fact that a student withdrew or dropped to less than half-time attendance is one element of the challenge, but you must be able to verify that the information was reported to the lender or the guarantor in a timely manner.
Chapter 3.2 of the Department’s Cohort Default Rate Guide  has more information.
Student attends a school for a term, drops out for a term (or longer), and then later re-enrolls. When you receive the Loan Record Detail Report, you may see the name of a student who currently is enrolled and decide that the data must be in error. But if the student did not attend the school for a period of at least six months, some of the student’s loans may have entered repayment before the student re-enrolled.
Prior to filing a data challenge, look carefully at the loans listed in the LRDR to be sure that the information listed for the specific loans actually is the information that needs to be corrected. In the data challenge, if you provide information that may be pertinent to other loans but has no effect on the loan listed on the LRDR, your challenge for that loan will be denied.
Correct cohort year for the date entered repayment versus the last date of attendance. The “date entered repayment” is six months plus one day after the last day of attendance (or the last date of half-time attendance). For example, if the student’s LDA was March 30, 2009, or March 31, 2009, the DER would be Oct. 1, 2009 (2010 cohort year). If the student’s LDA was March 30, 2010, or March 31, 2010, the DER would be Oct. 1, 2010 (2011 cohort year).
Inclusion of Stafford loans that have been canceled, or PLUS or consolidation loans. Schools sometimes mistakenly try to include Stafford loans that have been canceled by the student before the loan enters repayment. But Stafford loans that are canceled before entering repayment are not included in the cohort default rate calculation.
PLUS loans never are included in the cohort default rate. Consolidation loans may appear in the cohort default rate calculation when the underlying Stafford loans of the consolidation loan entered repayment during the cohort default period. If the consolidation loan defaults in the same cohort period that the underlying Stafford loans entered repayment, then the borrower will count as a default in the calculation.
Chapter 2.1 (pages 2.1-12 through 2.1-15) of the Cohort Default Rate Guide  has more information.
Failure to include supporting documentation. Challenges and appeals must include documentary evidence that the school believes is appropriate in support of its challenge or appeal. Read Chapter 3.1 (pages 3.1-7 and 3.1-8) of the Cohort Default Rate Guide to learn more.
Tips for reviewing your rates. Don’t forget the 10 tips that Michael Bertonaschi, my colleague on USA Funds®’ team of consultants, shared for reviewing your draft rates and potentially submitting an incorrect data challenge.
For assistance with the review of your draft cohort default rate, contact your USA Funds representative. USA Funds Ask PolicySM is another great resource — use the online form to submit your questions about default rate appeals or other federal financial aid policy issues.