More than 1800 higher education institutions across the country are at risk of losing access to federal student aid due to high rates of nonpayment by student loan borrowers.
In a February 18 Electronic Announcement, the Department of Education released updated data indicating over 1800 institutions have nonpayment rates at or exceeding 25 percent.
An institution’s access to federal student aid is at risk when the cohort default rate (CDR) is higher than 30 percent in a single year. While the nonpayment rate is different than the CDR, the Department said in the announcement “such rates are indicative of both institutions’ success in counseling borrowers on the impact and potential consequences associated with their student loan debt, as well as the extent to which institutions may be at risk of losing access to federal student assistance due to high CDRs in the future.”
The COVID-19 pandemic-related flexibilities for student loan borrowers contributed to many institutions demonstrating an artificially low CDR. According to the Department, the nonpayment rate may be a better indicator of how successful their current borrowers are in repayment.
Institutions with a CDR greater than or equal to 30 percent in a single year are required to develop and submit a default prevention plan to the Department of Education. In addition, they must establish a default prevention task force, identify factors leading to the high default rate, and establish measurable objectives and steps to improve student loan repayment and reduce its CDR.
The announcement also includes a list of best practices for institutions to consider when developing their default prevention plan. A webinar, hosted by the Department, will be held on Wednesday, February 25.
