Types of Default-Rate Appeals

Incorrect Data Challenge
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Any school that receives a draft cohort-default rate, including those with draft cohort-default rates of less than 25 percent, is provided the opportunity to challenge its most-recent draft cohort-default rate. Because the draft data forms the basis for a school's official cohort-default rate, every school should review its loan-record-detail report for the draft cohort-default rates and, if necessary, submit an incorrect-data challenge. Even schools that have withdrawn from the Federal Family Education Loan Program or William D. Ford Federal Direct Loan Program should review the loan-record-detail report for the draft cohort-default rates and, if appropriate, submit an incorrect-data challenge. Challenging draft cohort-default-rate data enables a school to request a correction to what it believes to be inaccurate data contained in the school's loan-record-detail report for the draft cohort-default rates. A loan-record-detail report for the draft cohort-default rates contains inaccurate data if:

A borrower's information was incorrectly reported in the draft cohort-default-rate calculation.
A borrower was incorrectly included in the draft cohort-default-rate calculation.
A borrower was incorrectly excluded from the draft cohort-default-rate calculation.

Participation Rate Index Challenge
A school is not subject to a sanction based on its cohort-default rates if its participation rate index is 0.0375 or less (for a sanction based on three consecutive cohort-default rates of 25 percent or greater) or 0.06015 or less (for a sanction based on one cohort-default rate of greater than 40 percent). In other words, if a school can demonstrate that the number of students who obtain loans is very low in relation to the number of regular students at the school, the school will be able to avoid sanction. A participation rate index is calculated as follows:

(Total borrowers in 12-month period ÷ Total regular students in 12-month period) multiplied by the school's cohort-default rate. For example, a school with 200 students, 31 of whom were FFELP or direct-loan borrowers, and draft cohort-default rate of 25 percent would have a PRI calculated as (31 ÷ 200) x .25 = .03875.

A school can submit a participation-rate-index challenge for either the most-recent draft cohort-default rate or for either of the two most-recent official cohort-default rates, depending on the nature of the anticipated sanction to which the school may be subject. Any school, regardless of its draft cohort-default rate, can submit a participation-rate-index challenge. Only those schools that will be subject to sanction after the release of the official cohort-default rates will receive any benefit from submitting a participation- rate-index challenge, however.

Uncorrected Data Adjustment
An uncorrected-data adjustment is a request submitted to the U.S. Department of Education's Default Management to ensure that a school's official cohort-default-rate calculation reflects changes that were correctly agreed to as a result of an incorrect-data challenge that the school submitted after the release of the draft cohort-default rates. A school should submit an uncorrected data adjustment when all of the following are true:

It submitted a timely challenge of its draft cohort-default-rate data.
The data manager reviewing the incorrect-data challenge agreed to make changes to the cohort-default-rate data.
The agreed-upon changes are not reflected in the school's loan-record-detail report for the official cohort-default rates.

If a school does not submit an uncorrected-data adjustment after the release of the official cohort-default rates, the school will not have the opportunity to submit an uncorrected-data adjustment at a later time. Any school that receives an official cohort-default rate may request that Default Management adjust its cohort-default rate. These schools would include those that are not subject to sanction and those that have withdrawn from the FFELP or direct-loan programs. A school can request an adjustment only of its most-recent official cohort-default rate.

New Data Adjustment
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A new-data adjustment allows a school to challenge the accuracy of "new data" included in the school's most-recent official cohort-default rate.

New data occurs when loan data reported to the National Student Loan Data System changes during the period between the calculation of the draft and official cohort-default rates. NSLDS is continuously provided with new or updated information. Because the draft cohort-default rates are calculated approximately six months before the official cohort-default rates are calculated, the data used to calculate the draft cohort-default rates may be different from the data used to calculate the official cohort-default rates. New data can be identified by comparing the loan-record-detail reports for the draft and official cohort-default rates for the same cohort fiscal year and determining if any loan data is newly included, excluded, or changed in any manner. The school should then determine if the new data results in the loan data being reported incorrectly. The following are examples of new data:

A loan is included in a school's draft cohort-default-rate calculation but is not included in its official cohort-default-rate calculation.
A loan is included in a school's draft cohort-default-rate calculation as a non-defaulted loan but is included in its official cohort-default-rate calculation as a defaulted loan.

Any school that receives an official cohort-default rate may request that the U.S. Department of Education's Default Management adjust its cohort default rate. These schools include those that are not subject to sanction and those that have withdrawn from the FFELP or direct-loan programs. A school can request an adjustment only of its most-recent official cohort-default rate.

Erroneous Data Appeal
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An erroneous-data appeal alleges that, because of "new data" or "disputed data" included in the official cohort-default-rate calculation, a school's official cohort-default rate is inaccurate.

New data occurs when loan data reported to the NSLDS changes during the period between the calculation of the draft and official cohort-default rates. NSLDS is continuously provided with new or updated information. Because the draft cohort-default rates are calculated approximately six months before the official cohort-default rates are calculated, the data used to calculate the draft cohort-default rates may be different from the data used to calculate the official cohort-default rates. New data can be identified by comparing the loan-record-detail reports for the draft and official cohort-default rates for the same cohort fiscal year and determining if any loan data are newly included, excluded, or changed in any manner. The school should then determine if the new data result in the loan data being reported incorrectly. The following are examples of new data:

A loan is included in a school's draft cohort-default-rate calculation but is not included in its official cohort-default-rate calculation.
A loan is included in a school's draft cohort-default-rate calculation as a non-defaulted loan but is included in its official cohort-default rate calculation as a defaulted loan.

Disputed data result when a school submitted an incorrect-data-challenge allegation, the data manager for the loan disagreed with the incorrect-data-challenge allegation, the school believed the data manager was incorrect, and the same alleged error exists in the school's official cohort-default rate data.

To submit an erroneous-data appeal, a school must meet all of the following criteria:

The school's official cohort-default-rate calculation must include new or disputed data.
The school must be subject to official cohort-default-rate sanctions or provisional certification based solely on the school's cohort-default rate.
The school's successful erroneous-data appeal, either by itself or in combination with an uncorrected-data adjustment, a new-data adjustment, or a loan-servicing appeal, will result in a recalculated cohort-default rate below the sanction threshold.

Loan Servicing Appeal
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A loan-servicing appeal alleges that a school's official cohort-default rate includes defaulted FFELP or direct loans that are considered improperly serviced for cohort-default-rate purposes. A defaulted FFELP loan is considered improperly serviced for cohort-default-rate purposes if one or more of the following occur:

The borrower never made a loan payment, and the school can document that the lender was required but failed to send at least one letter (other than the final demand letter) urging the borrower to make payments on the loan.
The borrower never made a loan payment, and the school can document that the lender was required but failed to attempt at least one telephone call to the borrower.
The borrower never made a loan payment, and the school can document that the lender was required but failed to submit a request for pre-claims assistance or default-aversion assistance to the guarantor.
The borrower never made a loan payment, and the school can document that the lender was required but failed to send a final-demand letter to the borrower.
The borrower never made a loan payment, and the school can document that the lender was required but failed to submit a certification (or other documentation) to the guarantor to demonstrate that the lender performed skip-tracing.

Any school that receives an official cohort-default rate may submit a loan-servicing appeal if it believes that its official cohort-default-rate calculation includes one or more defaulted FFELP or direct loans that were improperly serviced for cohort-default-rate purposes. These schools include those that are not subject to sanction and those that have withdrawn from the FFELP or direct-loan program.

Any school may submit a loan-servicing appeal for its most-recent official cohort-default rate. In general, schools that are subject to sanction may submit a loan-servicing appeal for any official cohort-default rate upon which the loss of eligibility is based. A school may not submit a loan-servicing appeal for an official cohort-default rate if the school previously submitted a loan-servicing appeal for that official cohort-default rate, however. Furthermore, a school may not submit a loan-servicing appeal for an official cohort-default rate that was the basis, either entirely or partially, of a previous sanction.

Economically Disadvantaged Appeal
An economically disadvantaged appeal alleges that a school should not be subject to sanction because it has a high number of low-income students. There are two types of economically disadvantaged appeals: an economically disadvantaged appeal based on low-income rate and placement rate and an economically disadvantaged appeal based on low-income rate and completion rate.

The type of economically disadvantaged appeal a school may submit depends on whether the school is a non-degree-granting school or a degree-granting school. For an economically disadvantaged appeal to be successful, a non-degree-granting school must submit an independent auditor's written opinion that both of the following are true:

The school's low-income rate (generally, the percentage of students with low incomes) is two-thirds or more.
The school's placement rate (generally, the percentage of students who became employed in the occupation for which the school trained them) is 44 percent or greater.

For an economically disadvantaged appeal to be successful, a degree-granting school must submit an independent auditor's written opinion that both of the following are true:

The school's low-income rate (generally, the percentage of students with low incomes) is two-thirds or more.
The school's completion rate (generally, the percentage of students who completed their program) is 70 percent or greater.

Participation Rate Index Appeal
A participation-rate-index appeal differs from a participation-rate-index challenge.

A school can submit a participation-rate-index appeal for any cohort-default rates upon which a sanction is based, depending on the sanction to which the school is subject. For example, if a school is subject to sanction due to three consecutive years of an official cohort default rate that is 25.0 percent or greater, for example cohort fiscal years 2002, 2001, and 2000, the school can submit a participation-rate-index appeal based on the official cohort-default rate for 2002, 2001, or 2000. If the sanction is due to an official cohort-default rate for 2002 that is greater than 40.0 percent, the school can submit a participation-rate-index appeal based only on the official cohort default rate for 2002.

Only a school that is subject to sanction because of its official cohort-default rate may submit a participation-rate-index appeal. To avoid sanction based on three consecutive years of an official cohort-default rate that is 25 percent or greater, a school must have a participation-rate index of 0.0375 or less. To avoid sanction based on an official cohort-default rate that is greater than 40 percent, a school must have a participation-rate index of 0.06015 or less.

Average Rates Appeal
A school facing sanction based on three consecutive official cohort-default rates of 25 percent or greater is not subject to that sanction if at least two of these official cohort-default rates are average rates and would have been less than 25 percent if they had been calculated using only the data for that cohort fiscal year alone. In addition, a school facing sanction based on one official cohort-default rate that is greater than 40 percent is not subject to that sanction if the official cohort default rate was calculated as an average rate.

The U.S. Department of Education's Default Management will automatically determine if a school meets the criteria associated with an average-rates appeal. This initial determination will take place prior to the release of the official cohort-default rates. Default Management will notify the school if it is not subject to sanction at the same time Default Management notifies the school of its official cohort-default rate. In addition, if a school's official cohort default rate changes because of an adjustment or appeal that the school submitted, Default Management will automatically determine if the change in the cohort-default rate results in the school meeting the criteria for an average-rates appeal.

If a school disagrees with the initial determination by Default Management, the school may submit an average-rates appeal to Default Management. For a school attempting to avoid a sanction based on three consecutive years of a cohort-default rate that is 25 percent or greater, the average-rates appeal must include supporting documentation showing that two of the three official cohort-default rates in question were calculated as average rates and would be less than 25 percent if calculated only for those cohort fiscal years alone. For a school attempting to avoid a sanction based on a cohort-default rate that is greater than 40 percent, the average rates appeal must include supporting documentation showing that the current cohort-default rate is an average rate. For all average rates appeals, a school must include a certification from the school’s chief executive officer that all information is true and correct. A school must send the average-rates appeal within 30 calendar days of receiving the department's notice of a loss of eligibility.

Thirty-or-Fewer Borrowers Appeal
If a combined total of 30 or fewer borrowers entered repayment in the three most-recent cohort fiscal years used to calculate a school's cohort default rates, the school is not subject to sanction.

The U.S. Department of Education's Default Management automatically will determine if a school meets the criteria associated with a thirty-or-fewer-borrowers appeal. This initial determination will take place prior to the release of the official cohort-default rates. Default Management will notify the school that it is not subject to sanction at the same time Default Management notifies the school of its official cohort-default rate. In addition, if a school's official cohort-default rate changes because of an adjustment or appeal that the school submitted, Default Management will automatically determine if the change in the cohort default rate results in the school meeting the criteria for a thirty-or-fewer borrowers appeal.

If a school disagrees with the initial determination by Default Management, the school may submit a thirty-or-fewer borrowers appeal to Default Management. The thirty-or-fewer borrowers appeal must include supporting documentation showing that there were a total of thirty or fewer borrowers in the three most-recent cohort fiscal years used to calculate its cohort default rates. The school must include a certification from the school's chief executive officer that all information is true and correct. The school must send the thirty-or-fewer-borrowers appeal within 30 calendar days of receiving the Department's notice of a loss of eligibility.