Nine Ways to Improve Your Cohort Default Rate

Submitted by: Shannon Cross, USA Funds account executive

Taking nine proactive steps toward preventing student loan default really can make a difference in lowering your school’s cohort default rate.

Gleaned from USA Funds®’ work with schools, as well as from recommendations from the U.S. Department of Education, here are ways you can make a positive difference in your school’s cohort default rate:

1. Communicate with borrowers at key decision points.

During application and the first 90 days of a student’s life cycle, find opportunities to provide helpful debt management advice that can be a foundation throughout students’ educational careers. While they are in school, continue to share messages related to default prevention and student retention.

Final year and program completion is the stage to help them understand their student loan repayment options and to connect them to assistance with job searches. Post-graduation, reach out early and follow up frequently to establish connections with borrowers.

2. Introduce financial literacy programs.

Providing your students with financial literacy training can help keep them on track to successful repayment. But your time is limited, so don’t hesitate to get creative, involve the entire campus, and incorporate financial education into existing programs and processes.

3. Communicate across campus.

The Department of Education recommends a campus-wide approach to default prevention. Collaborate on activities and share data with your colleagues in the campus business office, student records, academic advising and enrollment management — to name a few — to promote default prevention and student success.

Involve your institution’s upper administration in default prevention too. Make sure officials understand the potential impact of the three-year cohort default rate calculation as well as your school’s default rate results and plans for default prevention.

4. Focus on retention and student success.

The Department studied its student loan portfolio and found that more than 70 percent of students who defaulted on their federal education loans left school before completing their programs. Many schools dedicate staff to student retention activities, in an effort to boost student and school success and reduce default rates.

But if your school’s resources are limited, consider how you can combine default prevention and retention activities. Encourage your institution to create a cross-departmental team that addresses default prevention and student retention issues. Find ways to promote student success throughout the educational process.

5. Employ early identification and counseling for at-risk students.

Don’t rely on assumptions about the characteristics of borrowers who are most likely to default on their student loans. Analyze data about your school’s borrowers from sources such as school records, the National Student Loan Data System, and your federal Loan Record Detail Report to determine who’s really defaulting.

Reach out to the students you’ve determined are most likely to default. Provide them with the information they need, before they know they need it, and keep them connected with your institution.

6. Use timely and accurate enrollment reporting.

This practice not only is a regulatory requirement, but it also places your borrowers in the correct cohorts for default rate calculations.

Proper enrollment reporting also helps ensure that your borrowers who are in school continue to qualify for deferment, and that those who leave school enter their grace and repayment periods on the correct dates. And loan servicers rely on accurate enrollment information in contacting your borrowers at the appropriate times in the student loan cycle.

7. Review NSLDS and repayment information.

If you look at your reports from NSLDS on a regular basis, then you’ll be a step ahead when you receive draft cohort default rate data each year. Scrubbing your NSLDS data along the way will make it less likely that you’ll need to challenge that draft rate data, and, if you do, the process will be easier.
Keeping tabs on your borrowers’ repayment status also assists you as you provide them with timely messages to help them avoid default. For more information, see Chapter 3.2 of the Federal Student Aid Cohort Default Rate Guide.

8. Maintain contact with former students.

Don’t wait until the last minute to establish your school as a borrower’s trusted adviser regarding student loan repayment. The best approach is to reach out to borrowers from the time they enroll in your school. Then continue connecting with borrowers after they leave school and enter their grace period.
If you build a relationship with students and borrowers early, they’ll be more likely to respond to your attempts to assist if they encounter repayment problems.

Staying in touch also gives you an opportunity to update borrowers’ contact information on a regular basis, and to track the success of your efforts at different stages in borrowers’ loan repayment.

9. Use data to guide your default prevention efforts.

A targeted approach to default prevention provides different levels of outreach to segments of borrowers according to their default risk. In other words, it gives you a bigger bang for your buck.

Use borrower data like that found in the NSLDS School Portfolio file (SCHPR1), borrower demographic files in your student information system, servicer files and other sources that can help you determine who has defaulted in the past. Customize your default prevention strategy according to your cohort default rate goals, focusing on the borrowers you’ve identified as being most at risk of defaulting.

If you’d like to learn more about default prevention planning and getting results from your efforts, visit to learn more about USA Funds Default Prevention Consulting ServicesSM.