What is a cohort default rate?
The term cohort default rate is defined in Section 435(m) of the HEA. The formula for calculating the cohort default rate is described below. # of students who entered repayment in FY 1998 and defaulted on or before the end of FY 1999 (Numerator) 100 X # of students who entered repayment in FY 1998 (Denominator) Example: A lender has made 100 loans to students entering repayment in FY 1998 (October 1, 1997 through September 30, 1998). Of those 100 students, 25 defaulted on their student loans prior to October 1, 1999 and had a default claim paid by the guaranty agency. This lender’s FY 1998 cohort default rate is calculated by dividing 25 by 100 and multiplying the result by 100 to produce a cohort default rate of 25.0 percent. When is a loan considered to be in default? A loan is considered in default for cohort default rate purposes if 1) a default claim on the loan was paid by the guarantor during the cohort period and 2) the claim reason/code is listed as “DF” (defaulted loan). Whe
