Oakland, CA – With more than one million students defaulting on their loans every year, policymakers need to do more to prevent unaffordable debts. In a new report released today, the Institute for College Access & Success (TICAS) underscores the importance of strengthening the cohort default rate (CDR) in order to further reduce the risk of student loan default.
Created on a bipartisan basis more than 30 years ago, the CDR is well-established and widely understood, and its use in college accountability has successfully reduced the risk of default. Yet, the combination of growing concern about persistently poor student loan outcomes and real shortcomings that have emerged after decades of use point to critical opportunities to address the CDR’s weaknesses and strengthen default-focused accountability.
“When students invest in themselves by borrowing for college, they shouldn’t be left worse off than if they never went to college at all,” said TICAS president James Kvaal. “But already vulnerable groups, including low-income students, Black students, and single parents are at much higher risk of being left with unaffordable debts and defaulting on their loans.”
Efforts to improve the CDR system must begin with ensuring the measure itself is meaningful and protected from manipulation. In addition, policymakers should move away from an all or-nothing system to one that provides greater incentives for all colleges to continuously improve. The enactment of CDR rules helped drive down default rates for nearly two decades, and a lower threshold could also help continue that progress and better account for the impact of student loan repayment policy changes that separately reduce default risk.
“The CDR’s use in college accountability is grounded in the strong federal interest in tracking and preventing schools from persistently leaving their students at high risk of default,” said Lindsay Ahlman, report author and TICAS associate director of research and knowledge management. “The cohort default rate has successfully driven down default rates in the past, and it’s long past time policymakers modernize the CDR so that it can continue achieving its goals.”
To strengthen the CDR and further reduce student loan defaults, TICAS recommends that policymakers:
- Introduce interim consequences for schools with CDRs below the failing threshold in order to provide incentives for more colleges to reduce student loan defaults;
- Publish five-year default rates and hold schools accountable when patterns of default suggest forbearance abuse;
- Prevent colleges from evading CDR accountability by shifting how they group campuses together; and
- Account for a school’s borrowing rate in the CDR itself to more transparently target colleges posing high risk of default to their students.
The Institute for College Access & Success is a trusted source of research, design, and advocacy for student-centered public policies that promote affordability, accountability, and equity in higher education. For more information see www.ticas.org or follow us on Twitter and Facebook.