Cohort Default Rates for 2014, In Four Charts

This afternoon, the Department of Education released updated cohort default rates (CDR) for all colleges currently receiving federal student loan dollars. The CDR measures the share of borrowers who have defaulted on their loans within three years of entering repayment and is the only accountability metric tied to the performance of student loans. Overall, 580,671 out of 5,047,954 borrowers who entered repayment in 2014 defaulted on their student loans by the end of 2017, for a CDR of 11.5% nationally. (Note: The Department compiled data on some 6,173 schools to generate this estimate. However, due to privacy concerns data for schools with cohorts of less than 30 borrowers has not been made public. The figures below use publicly available figures and may vary slightly from official estimates.)

To remain eligible for federal student loans, a school’s CDR must not exceed 40% for any single year, and cannot exceed 30% for three continuous years. These requirements are fairly minimal, and CDRs are commonly criticized as highly subject to manipulation. As a result, very few schools will exceed these benchmarks each year. According to the new data, few schools will risk losing loan eligibility, six for surpassing the 40% threshold and nine for having a CDR in excess of 30% for three consecutive repayment cohorts.

The existence of numerous federal protections for borrowers, including forbearance, deferment, and most critically, income-based repayment, have been a necessary lifeline for many students. But these back-end approaches have inadvertently created ways for schools to (intentionally or otherwise) help students avoid default long enough to avoid the consequences tied to a failing CDR.  However, while CDRs are not useful for accountability efforts, in the aggregate CDRs can provide good information on loan performance across institutions, and provides one useful measure of relative quality. Of borrowers entering repayment in 2014, 11.3% of those at public institutions defaulted by the end of 2017, the comparable number for for-profit institutions was 14.7%, and at nonprofit institutions, the rate was much lower, at 8.2%. While for-profit and public institutions had similar default rates, higher enrollment at public institutions means that there were more borrowers who had defaulted at these schools within three years of leaving than any other sector.

Differences also emerge when comparing institutions by the highest degree offered. For example, although institutions offering only Associate's degrees and below serve a relatively small number of students, they have some of the highest CDRs on average over the last three years. Similarly, students at schools that offer at least a Master's degree default at much lower rates than their peers at other institutions. 

At the state-level, students attending schools in the southwest and southeast tended to default at higher rates than those attending schools in the midwest or northeast. New Mexico schools had the highest overall default rate, at 18.3%, while Vermont, Massachusetts, North Dakota and Nebraska schools all had CDRs that were less than half that of New Mexico. Foreign schools typically had much lower cohort default rates than those based in the United States, likely because it is relatively uncommon for foreign-based schools to access our federal student aid systems in the first place.