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Issue 8 

Proposed Regulatory Language 

 Team II – School-based Loan Issues 

Origin: HEOA section 436 

Issue: Cohort Default Rate Calculation, 

Institutional Eligibility, and Default 

Prevention Plans 

Statutory cites: Sections 435(a) and (m) of the HEA 

Regulatory cites: §§668.183, 668.187, 668.189, and 

668.195 

DCL GEN-08-12 cite: Page 131

Summary of issue: Cohort Default Rate Calculation. The HEOA 

increases the period used to calculate the cohort default rate 

from 2 to 3 years. Under the new calculation, the cohort 

default rate is the percentage of borrowers who default on their 

FFEL or Direct Loans before the end of the second fiscal year

(instead of the first fiscal year) following the fiscal year in 

which those borrowers entered repayment. The new calculation is 

effective for cohort default rates calculated for fiscal year 

2009 and subsequent years. In addition, the HEOA provides for a 

transition period during which sanctions will be continue to be 

imposed based on rates calculated using the 2-year methodology, 

until rates based on the 3-year rate have been calculated for 3 

consecutive years. 

Institutional Eligibility: Beginning with cohort default rates 

calculated for fiscal year 2012, the HEOA increases the 

threshold default percentage from 25 percent to 30 percent. An 
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institution may lose its eligibility to participate in the Pell, 

FFEL, and Direct Loan programs if its cohort default rate is 

equal to or greater than the threshold percentage for 3 

successive years. 

The HEOA changes the provisions for default rate appeals from 3 

year rates. If the institution files a timely appeal and the 

Secretary determines that the institution is successful in 

bringing an appeal from a 3 year rate under the exceptional 

mitigating circumstances criteria specified in the statute, the 

Secretary may not subject the institution to provisional 

certification based solely on its default rate. 

In addition, effective October 1, 2011, the HEOA increases the 

participation rate index for appeal purposes from 0.0375 to 

0.0625. An institution’s participation rate index is calculated 

by: 

(a) Dividing the total number of borrowers in a 12-month 

period by the total number of regular students enrolled on at 

least a half-time basis in the 12-month period, and 

(b) Multiplying the result in (a) by the institution’s 

cohort default rate. 

An institution may avoid sanctions based on three consecutive 

years of cohort default rates that are 30% or higher if its 

participation rate index for any of the three years is 0.0625 or 

lower. 

Default Prevention Plans: The HEOA requires an institution 

whose cohort default rate is greater than or equal to the 30% 

threshold for any fiscal year to establish a default prevention 

task force to prepare a default prevention plan to: 
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● Identify the factors causing the institution’s rate to 

exceed the threshold; 

● Establish measurable objectives and the steps to be taken to 

improve the institution’s default rate; and

● Specify actions the institution can take to improve student 

loan repayment, including appropriate counseling regarding loan 

repayment options. 

The institution must submit its default prevention plan to the 

Department. The Department is required to review the plan and 

provide technical assistance to the institution to promote 

improved student loan repayment. 

If the institution’s cohort default rate exceeds the threshold 

percentage for two consecutive fiscal years, its default 

prevention plan must be reviewed and revised by the task force 

and resubmitted to the Department. The Department is required 

to review the revised plan and may require the institution to 

amend the plan to include actions with measurable objectives 

that the Department determines will promote student loan 

repayment. 

Regulatory language: 

34 CFR 668.16(m) Standards of administrative capability 

(m)(1) Has a cohort default rate—

(i) Calculated under subpart M of this part, t That is less 

than 25 percent for each of the three most recent fiscal years,

to the extent rates for those years are calculated under 34 CFR 

Part 668, Subpart M; for which the Secretary has determined the 

institution's rate; and
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(ii) That is less than 30 percent for at least two of the 

three most recent fiscal years for which the Secretary has 

determined the institution’s rate under 34 CFR Part 668 Subpart 

N; and

(iii) As defined in 34 CFR 674.5, on loans made under the 

Federal Perkins Loan Program to students for attendance at that 

institution that does not exceed 15 percent; 

(2)(i) However, if the Secretary determines that an 

institution's administrative capability is impaired solely 

because the institution fails to comply with paragraph (m)(1) of 

this section, and none of the institution's three most recent 

cohort default rates subject the institution to sanctions under 

Subpart M or N of this Part, the Secretary allows the 

institution to continue to participate in the Title IV, HEA 

programs. In such a case, the Secretary but may provisionally 

certify the institution in accordance with §668.13(c) unless the 

institution has two successive rates calculated under Subpart N 

that equal or exceed 30 percent and the institution either has 

taken a successful economically disadvantaged appeal under 34 

CFR 668.213, or has timely submitted such an appeal and that 

appeal is pending. 

(ii) The institution may appeal the loss of full 

participation in a Title IV, HEA program under paragraph (m)(1) 

of this section by submitting an erroneous data appeal in 

writing to the Secretary in accordance with and on the grounds 

specified in subpart M of this part; 

Subpart M—Two Year Cohort Default Rates 

Source: 65 FR 65638, Nov. 1, 2000, unless otherwise noted. 

§668.181 Purpose of this subpart. 
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Your cohort default rate is a measure we use to determine 

your eligibility to participate in various Title IV, HEA 

programs. We may also use it for determining your eligibility 

for exemptions, such as those for certain disbursement 

requirements under the FFEL and Direct Loan Programs. This 

subpart applies solely to cohorts, as defined in §§668.182(a) 

and 668.183(b), for fiscal years through 2011. For those 

cohorts, this subpart describes how cohort default rates are 

calculated, some of the consequences of cohort default rates, 

and how you may request changes to your cohort default rates or 

appeal their consequences. Under this subpart, you submit a 

―challenge‖ after you receive your draft cohort default rate, 

and you request an ―adjustment‖ or ―appeal‖ after your official 

cohort default rate is published.

Notwithstanding this subpart, we will issue annually two 

sets of draft and official cohort default rates for fiscal years 

2009, 2010, and 2011. You will receive one set under this 

Subpart and set under Subpart N. 

. . . . 

§668.185 Draft cohort default rates and your ability to 

challenge before official cohort default rates are issued. 

(a) General. (1) We notify you of your draft cohort default 

rate before your official cohort default rate is calculated. 

Our notice includes the loan record detail report for the draft 

cohort default rate. 

(2) Regardless of the number of borrowers included in your 

cohort, your draft cohort default rate is always calculated 

using data for that fiscal year alone, using the method 

described in §668.183(d)(1). 
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(3) Your draft cohort default rate and the loan record 

detail report are not considered public information and may not 

be otherwise voluntarily released by a data manager., except 

that we will publish life cohort default rates, including rates 

for the second and third fiscal year after students enter 

repayment.

§668.186 Notice of your official cohort default rate. 

(a) We electronically notify you of your cohort default 

rate after we calculate it, by sending you an eCDR notification 

package to the destination point you designate. After we send 

our notice to you, we publish a list of cohort default rates 

calculated under this subpart for all institutions. 

If your cohort default rate is 10 percent or more, we 

include a copy of the loan record detail report with the notice.

If your school has one or more borrowers entering repayment or 

is subject to sanctions, or if the Department believes your 

school will have an official cohort default rate calculated as 

an average rate, you will receive a loan record detail report 

with your electronic notice. (c) If your cohort default rate is 

less than 10 percent—

(1) You may request a copy of any loan record detail report 

that lists loans included in your cohort default rate 

calculation; and

(2) If you are requesting an adjustment or appealing under 

this subpart, your request for a copy of the loan record detail 

report or reports must be sent to us within 15 days after you 

receive the notice of your cohort default rate.
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(c) You have five business days, from the transmission 

date for eCDR packages as posted on the Department's website, to 

report any problem with the electronic transmission of your eCDR 

package.

(d) Timelines for submitting challenges, adjustments, and 

appeals begin on the sixth business day following the announced 

transmission date.

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

. . . . 

§668.187 Consequences of cohort default rates on your ability 

to participate in Title IV, HEA programs. 

(a) End of participation. (1) Except as provided in 

paragraph (ef) of this section, you lose your eligibility to 

participate in the FFEL and Direct Loan programs 30 days after 

you receive our notice that your most recent cohort default rate 

is greater than 40 percent. 

(2) Except as provided in paragraphs (ed) and (fe) of this 

section, you lose your eligibility to participate in the FFEL, 

Direct Loan, and Federal Pell Grant programs 30 days after you 

receive our notice that your three most recent cohort default 

rates are each 25 percent or greater. 

(b) Length of period of ineligibility. Your loss of 

eligibility under this section continues—

(1) For the remainder of the fiscal year in which we notify 

you that you are subject to a loss of eligibility; and 
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(2) For the next 2 fiscal years. 

(c) Using a cohort default rate more than once. The use of a 

cohort default rate as a basis for a loss of eligibility under 

this section does not preclude its use as a basis for—

(1) Any concurrent or subsequent loss of eligibility under 

this section; or 

(2) Any other action by us. 

(d) Special institutions. If you are a special 

institution that satisfies the requirements for continued 

eligibility under § 668.198, you are not subject to any loss of 

eligibility under this section or to provisional certification 

under § 668.16(m).

 (de) Continuing participation in Pell. If you are subject 

to a loss of eligibility under paragraph (a)(2) of this section, 

based on three cohort default rates of 25 percent or greater, 

you may continue to participate in the Federal Pell Grant 

Program if we determine that you—

(1) Were ineligible to participate in the FFEL and Direct 

Loan programs before October 7, 1998, and your eligibility was 

not reinstated; 

(2) Requested in writing, before October 7, 1998, to 

withdraw your participation in the FFEL and Direct Loan 

programs, and you were not later reinstated; or 

(3) Have not certified an FFELP loan or originated a Direct 

Loan Program loan on or after July 7, 1998. 

(ef) Requests for adjustments and appeals. (1) A loss of 

eligibility under this section does not take effect while your 

request for adjustment or appeal, as listed in §668.189(a), is 
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pending, provided your request for adjustment or appeal is 

complete, timely, accurate, and in the required format. 

(2) Eligibility continued under paragraph (fg)(1) of this 

section ends if we determine that none of the requests for 

adjustments and appeals you have submitted qualify you for 

continued eligibility under §668.189. Loss of eligibility takes 

effect on the date that you receive notice of our determination 

on your last pending request for adjustment or appeal. 

(3) You do not lose eligibility under this section if we 

determine that your request for adjustment or appeal meets all 

requirements of this subpart and qualifies you for continued 

eligibility under §668.189. 

(4) To avoid liabilities you might otherwise incur under 

paragraph (fg) of this section, you may choose to suspend your 

participation in the FFEL and Direct Loan programs during the 

adjustment or appeal process. 

(fg) Liabilities during the adjustment or appeal process. 

If you continued to participate in the FFEL or Direct Loan 

Program under paragraph (ed)(1) of this section, and we 

determine that none of your requests for adjustments or appeals 

qualify you for continued eligibility—

(1) For any FFEL or Direct Loan Program loan that you 

certified and delivered or originated and disbursed more than 30 

days after you received the notice of your cohort default rate, 

we estimate the amount of interest, special allowance, 

reinsurance, and any related or similar payments we make or are 

obligated to make on those loans; 

(2) We exclude from this estimate any amount attributable 

to funds that you delivered or disbursed more than 45 days after 

you submitted your completed appeal to us; 
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(3) We notify you of the estimated amount; and 

(4) Within 45 days after you receive our notice of the 

estimated amount, you must pay us that amount, unless—

(i) You file an appeal under the procedures established in 

subpart H of this part (for the purposes of subpart H of this 

part, our notice of the estimate is considered to be a final 

program review determination); or 

(ii) We permit a longer repayment period. 

(gh) Regaining eligibility. If you lose your eligibility to 

participate in a program under this section, you may not 

participate in that program until—

(1) The period described in paragraph (b) of this section 

has ended; 

(2) You pay any amount owed to us under this section or are 

meeting that obligation under an agreement acceptable to us; 

(3) You submit a new application for participation in the 

program; 

(4) We determine that you meet all of the participation 

requirements in effect at the time of your application; and 

(5) You and we enter into a new program participation 

agreement. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

. . . . 
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§ 668.188 Preventing evasion of the consequences of cohort 

default rates. 

(a) General. Unless you are a special institution complying 

with § 668.198, yYou are subject to a loss of eligibility that 

has already been imposed against another institution as a result 

of cohort default rates if—

. . . . 

§668.190 Uncorrected data adjustments. 

(a) Eligibility. You may request an uncorrected data 

adjustment for your most recent cohort of borrowers, used to 

calculate your most recent official cohort default rate, if in 

response to your challenge under §668.185(b), a data manager 

agreed correctly to change the data, but the changes are not 

reflected in your official cohort default rate. 

(b) Deadlines for requesting an uncorrected data 

adjustment. (1) If the loan record detail report was not 

included with your official cohort default rate notice, you must 

request it within 15 days after you receive the notice of your 

official cohort default rate.

(2) You must send us a request for an uncorrected data 

adjustment, including all supporting documentation, within 30 

days after you receive your loan record detail report from us. 

(c) Determination. We recalculate your cohort default rate, 

based on the corrected data, if we determine that—

(1) In response to your challenge under §668.185(b), a data 

manager agreed to change the data; 

(2) The changes described in paragraph (c)(1) of this 

section are not reflected in your official cohort default rate; 

and 
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(3) We agree that the data are incorrect. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.191 New data adjustments. 

(a) Eligibility. You may request a new data adjustment for 

your most recent cohort of borrowers, used to calculate your 

most recent official cohort default rate, if—

(1) A comparison of the loan record detail reports that we 

provide to you for the draft and official cohort default rates 

shows that the data have been newly included, excluded, or 

otherwise changed; and 

(2) You identify errors in the data described in paragraph 

(a)(1) of this section that are confirmed by the data manager. 

(b) Deadlines for requesting a new data adjustment.(1) If 

the loan record detail report was not included with your 

official cohort default rate notice, you must request it within 

15 days after you receive the notice of your official cohort 

default rate.

(2) You must send the relevant data manager, or data 

managers, and us a request for a new data adjustment, including 

all supporting documentation, within 15 days after you receive 

your loan record detail report from us. 

(3) Within 20 days after receiving your request for a new 

data adjustment, the data manager must send you and us a 

response that—

(i) Addresses each of your allegations of error; and 
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(ii) Includes the documentation used to support the data 

manager's position. 

(4) Within 15 days after receiving a guaranty agency's 

notice that we hold an FFELP loan about which you are inquiring, 

you must send us your request for a new data adjustment for that 

loan. We respond to your request under paragraph (b)(3) of this 

section. 

(5) Within 15 days after receiving incomplete or illegible 

records or data from a data manager, you must send a request for 

replacement records or clarification of data to the data manager 

and us. 

(6) Within 20 days after receiving your request for 

replacement records or clarification of data, the data manager 

must—

(i) Replace the missing or illegible records; 

(ii) Provide clarifying information; or 

(iii) Notify you and us that no clarifying information or 

additional or improved records are available. 

(7) You must send us your completed request for a new data 

adjustment, including all supporting documentation—

(i) Within 30 days after you receive the final data 

manager's response to your request or requests; or 

(ii) If you are also filing an erroneous data appeal or a 

loan servicing appeal, by the latest of the filing dates 

required in paragraph (b)(7)(i) of this section or in 

§668.192(b)(6)(i) or §668.193(c)(10)(i). 

(c) Determination. If we determine that incorrect data were 

used to calculate your cohort default rate, we recalculate your 

cohort default rate based on the correct data. 
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(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

. . . .

Delete § 668.198

. . . . 

Delete Part 668, Subpart M, Appendix A; Re- letter Appendix B as 

Appendix A 

Subpart N --Cohort Default Rates

§ 668.200. Purpose of this subpart.

Your cohort default rate is a measure we use to determine 

your eligibility to participate in various Title IV, HEA 

programs. We may also use it for determining your eligibility 

for exemptions, such as those for certain disbursement 

requirements under the FFEL and Direct Loan Programs. This 

subpart applies solely to cohorts, as defined in §§ 668.201(a) 

and 668.202(b), for fiscal years 2009 and later. For those 

cohorts, tThis subpart describes how cohort default rates are 

calculated, some of the consequences of cohort default rates, 

and how you may request changes to your cohort default rates or 

appeal their consequences. Under this subpart, you submit a 

―challenge‖ after you receive your draft cohort default rate, 

and you request an ―adjustment‖ or ―appeal‖ after your official 

cohort default rate is published. 

Notwithstanding this subpart, we will issue annually two 

sets of draft and official cohort default rates for fiscal years 

2009, 2010, and 2011. You will receive one set under this 

Subpart and set under Subpart M. 
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 Except as provided in §668.200, the provisions in this 

subpart are effective for cohorts, as defined in §§668.182(a) 

and 668.183(b), for fiscal year 2009 and subsequent fiscal 

years.

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.201182 Definitions of terms used in this subpart. 

We use the following definitions in this subpart: 

(a) Cohort. Your cohort is a group of borrowers used to 

determine your cohort default rate. The method for identifying 

the borrowers in a cohort is provided in §668.183202(b). 

(b) Data manager. (1) For FFELP loans held by a guaranty 

agency or lender, the guaranty agency is the data manager. 

(2) For FFELP loans that we hold, we are the data manager. 

(3) For Direct Loan Program loans, the Direct Loan 

Servicer, as defined in 34 CFR 685.102, is the data manager. 

(c) Days. In this subpart, ―days‖ means calendar days.

(d) Default. A borrower is considered to be in default for 

cohort default rate purposes under the rules in §668.202183(c). 

(e) Draft cohort default rate. Your draft cohort default 

rate is a rate we issue, for your review, before we issue your 

official cohort default rate. A draft cohort default rate is 

used only for the purposes described in §668.185. 

(f) Entering repayment. (1) Except as provided in 

paragraphs (f)(2) and (f)(3) of this section, loans are 

considered to enter repayment on the dates described in 34 CFR 
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682.200 (under the definition of ―repayment period‖) and in 34 

CFR 685.207. 

(2) A Federal SLS loan is considered to enter repayment—

(i) At the same time the borrower's Federal Stafford loan 

enters repayment, if the borrower received the Federal SLS loan 

and the Federal Stafford loan during the same period of 

continuous enrollment; or 

(ii) In all other cases, on the day after the student 

ceases to be enrolled at an institution on at least a half-time 

basis in an educational program leading to a degree, 

certificate, or other recognized educational credential. 

(3) For the purposes of this subpart, a loan is considered 

to enter repayment on the date that a borrower repays it in 

full, if the loan is paid in full before the loan enters 

repayment under paragraphs (f)(1) or (f)(2) of this section. 

(g) Fiscal year. A fiscal year begins on October 1 and ends 

on the following September 30. A fiscal year is identified by 

the calendar year in which it ends. 

(h) Loan record detail report. The loan record detail 

report is a report that we produce. It contains the data used to 

calculate your draft or official cohort default rate. 

(i) Official cohort default rate. Your official cohort 

default rate is the cohort default rate that we publish for you 

under §668.205186. Cohort default rates calculated under this 

subpart are not related in any way to cohort default rates that 

are calculated for the Federal Perkins Loan Program. 

(j) We. We are the Department, the Secretary, or the 

Secretary's designee. 
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(k) You. You are an institution.(Approved by the Office of 

Management and Budget under control number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.202183 Calculating and applying cohort default rates. 

(a) General. This section describes the four steps that we 

follow to calculate and apply your cohort default rate for a 

fiscal year: 

(1) First, under paragraph (b) of this section, we identify 

the borrowers in your cohort for the fiscal year. If the total 

number of borrowers in that cohort is fewer than 30, we also 

identify the borrowers in your cohorts for the 2 most recent 

prior fiscal years. 

(2) Second, under paragraph (c) of this section, we 

identify the borrowers in the cohort (or cohorts) who are 

considered to be in default by the end of the second fiscal year 

following the fiscal year those borrowers entered repayment. If 

more than one cohort will be used to calculate your cohort 

default rate, we identify defaulted borrowers separately for 

each cohort. 

(3) Third, under paragraph (d) of this section, we 

calculate your cohort default rate. 

(4) Fourth, we apply your cohort default rate to all of 

your locations—

(i) As you exist on the date you receive the notice of your 

official cohort default rate; and 

(ii) From the date on which you receive the notice of your 

official cohort default rate until you receive our notice that 

the cohort default rate no longer applies. 
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(b) Identify the borrowers in a cohort. (1) Except as 

provided in paragraph (b)(3) of this section, your cohort for a 

fiscal year consists of all of your current and former students 

who, during that fiscal year, entered repayment on any Federal 

Stafford loan, Federal SLS loan, Direct Subsidized loan, or 

Direct Unsubsidized loan that they received to attend your 

institution, or on the portion of a loan made under the Federal 

Consolidation Loan Program or the Federal Direct Consolidation 

Loan Program (as defined in 34 CFR 685.102) that is used to 

repay those loans. 

(2) A borrower may be included in more than one of your 

cohorts and may be included in the cohorts of more than one 

institution in the same fiscal year. 

(3) A TEACH Grant that has been converted to a Federal 

Direct Unsubsidized Loan is not considered for the purpose of 

calculating and applying cohort default rates. 

(c) Identify the borrowers in a cohort who are in default. 

(1) (1) Except as provided in paragraph (c)(2) of this section, 

a borrower in a cohort for a fiscal year is considered to be in 

default if, before the end of the following second fiscal year 

following the fiscal year the borrower entered repayment--,

(i) tThe borrower defaults on any FFELP loan that was used 

to include the borrower in the cohort or on any Federal 

Consolidation Loan Program loan that repaid a loan that was used 

to include the borrower in the cohort (however, a borrower is 

not considered to be in default unless a claim for insurance has 

been paid on the loan by a guaranty agency or by us); 

(ii) Before the end of the following fiscal year, tThe 

borrower fails to make an installment payment, when due, on any 

Direct Loan Program loan that was used to include the borrower 
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in the cohort or on any Federal Direct Consolidation Loan 

Program loan that repaid a loan that was used to include the 

borrower in the cohort, and the borrower's failure persists for 

360 days (or for 270 days, if the borrower's first day of 

delinquency was before October 7, 1998); or 

(iii) Before the end of the following fiscal year, yYou or 

your owner, agent, contractor, employee, or any other affiliated 

entity or individual make a payment to prevent a borrower's 

default on a loan that is used to include the borrower in that 

cohort. 

(2) A borrower is not considered to be in default based on 

a loan that is, before the end of the second fiscal year 

immediately following the fiscal year in which it entered 

repayment—

(i) Rehabilitated under 34 CFR 682.405 or 34 CFR 

685.211(e); or 

(ii) Repurchased by a lender because the claim for 

insurance was submitted or paid in error. 

(d) Calculate the cohort default rate. Except as provided 

in §668.203184, if there are—

(1)(i) Thirty or more borrowers in your cohort for a fiscal 

year, your cohort default rate is the percentage that is derived

calculated by-- dividing—

(ii) Dividing Tthe number of borrowers in the cohort who 

are in default, as determined under paragraph (c) of this 

section; by (ii)T the number of borrowers in the cohort, as 

determined under paragraph (b) of this section. 
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(2)(i) Fewer than 30 borrowers in your cohort for a fiscal 

year, your cohort default rate is the percentage that is 

calculated derived by dividing—

(ii) Dividing Tthe total number of borrowers in that cohort 

and in the two most recent prior cohorts who are in default, as 

determined for each cohort under paragraph (c) of this section;

by (ii) T the total number of borrowers in that cohort and the 

two most recent prior cohorts, as determined for each cohort 

under paragraph (b) of this section. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1070g, 1082, 1085, 1094, 1099c) 

[65 FR 65638, Nov. 1, 2000, as amended at 67 FR 67075, Nov. 1, 

2002; 73 FR 35494, June 23, 2008] 

§668.203184 Determining cohort default rates for institutions 

that have undergone a change in status. 

(a) General. (1) If you undergo a change in status 

identified in this section, your cohort default rate is 

determined under this section. 

(2) In determining cohort default rates under this section, 

the date of a merger, acquisition, or other change in status is 

the date the change occurs. 

(3) A change in status may affect your eligibility to 

participate in Title IV, HEA programs under §668.206187 or 

§668.188207. 

(4) If another institution's cohort default rate is 

applicable to you under this section, you may challenge, request 

an adjustment, or submit an appeal for the cohort default rate 
21 

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under the same requirements that would be applicable to the 

other institution under §§668.204185 and 668.189208. 

(b) Acquisition or merger of institutions. If your 

institution acquires, or was created by the merger of, one or 

more institutions that participated independently in the Title 

IV, HEA programs immediately before the acquisition or merger—

(1) For the cohort default rates published before the date 

of the acquisition or merger, your cohort default rates are the 

same as those of your predecessor that had the highest total 

number of borrowers entering repayment in the two most recent 

cohorts used to calculate those cohort default rates; and 

(2) Beginning with the first cohort default rate published 

after the date of the acquisition or merger, your cohort default 

rates are determined by including the applicable borrowers from 

each institution involved in the acquisition or merger in the 

calculation under §668.202183. 

(c) Acquisition of branches or locations. If you acquire a 

branch or a location from another institution participating in 

the Title IV, HEA programs—

(1) The cohort default rates published for you before the 

date of the change apply to you and to the newly acquired branch 

or location; 

(2) Beginning with the first cohort default rate published 

after the date of the change, your cohort default rates for the 

next 3 fiscal years are determined by including the applicable 

borrowers from your institution and the other institution 

(including all of its locations) in the calculation under 

§668.202183; 
22 

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(3) After the period described in paragraph (c)(2) of this 

section, your cohort default rates do not include borrowers from 

the other institution in the calculation under §668.202183; and 

(4) At all times, the cohort default rate for the 

institution from which you acquired the branch or location is 

not affected by this change in status. 

(d) Branches or locations becoming institutions. If you are 

a branch or location of an institution that is participating in 

the Title IV, HEA programs, and you become a separate, new 

institution for the purposes of participating in those programs—

(1) The cohort default rates published before the date of 

the change for your former parent institution are also 

applicable to you; 

(2) Beginning with the first cohort default rate published 

after the date of the change, your cohort default rates for the 

next 3 fiscal years are determined by including the applicable 

borrowers from your institution and your former parent 

institution (including all of its locations) in the calculation 

under §668.202183; and 

(3) After the period described in paragraph (d)(2) of this 

section, your cohort default rates do not include borrowers from 

your former parent institution in the calculation under 

§668.183202. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.204185 Draft cohort default rates and your ability to 

challenge before official cohort default rates are issued. 
23 

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3/25/2009 

(a) General. (1) We notify you of your draft cohort default 

rate before your official cohort default rate is calculated. 

Our notice includes the loan record detail report for the draft 

cohort default rate. 

(2) Regardless of the number of borrowers included in your 

cohort, your draft cohort default rate is always calculated 

using data for that fiscal year alone, using the method 

described in §668.202183(d)(1). 

(3) Your draft cohort default rate and the loan record 

detail report are not considered public information and may not 

be otherwise voluntarily released by a data manager, except that 

we will publish life cohort default rates, including rates for 

the second and third fiscal year after students enter repayment. 

(4) Any challenge you submit under this section and any 

response provided by a data manager must be in a format 

acceptable to us. This acceptable format is described in the 

―Cohort Default Rate Guide‖ that we provide to you. If your 

challenge does not comply with the requirements in the ―Cohort 

Default Rate Guide,‖ we may deny your challenge.

(b) Incorrect data challenges. (1) You may challenge the 

accuracy of the data included on the loan record detail report 

by sending a challenge to the relevant data manager, or data 

managers, within 45 days after you receive the data. Your 

challenge must include—

(i) A description of the information in the loan record 

detail report that you believe is incorrect; and 

(ii) Documentation that supports your contention that the 

data are incorrect. 

(2) Within 30 days after receiving your challenge, the data 

manager must send you and us a response that—
24 

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3/25/2009 

(i) Addresses each of your allegations of error; and 

(ii) Includes the documentation that supports the data 

manager's position. 

(3) If your data manager concludes that draft data in the 

loan record detail report are incorrect, and we agree, we use 

the corrected data to calculate your cohort default rate. 

(4) If you fail to challenge the accuracy of data under 

this section, you cannot contest the accuracy of those data in 

an uncorrected data adjustment, under §668.209190, or in an 

erroneous data appeal, under §668.192211. 

(c) Participation rate index challenges. (1)(i) You may 

challenge an anticipated loss of eligibility under 

§668.206187(a)(1), based on one cohort default rate over 40 

percent, if your participation rate index for that cohort's 

fiscal year is equal to or less than 0.06015. 

(ii) You may challenge an anticipated loss of eligibility 

under §668.206187(a)(2), based on three cohort default rates of 

2530 percent or greater, if your participation rate index is 

equal to or less than 0.0375 0.0625 for any of those three 

cohorts' fiscal years. 

(2) For a participation rate index challenge, your 

participation rate index is calculated as described in 

§668.214195(b), except that—

(i) The draft cohort default rate is considered to be your 

most recent cohort default rate; and 

(ii) If the cohort used to calculate your draft cohort 

default rate included fewer than 30 borrowers, you may calculate 

your participation rate index for that fiscal year using either 

your most recent draft cohort default rate or the average rate 
25 

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3/25/2009 

that would be calculated for that fiscal year, using the method 

described in §668.202183(d)(2). 

(3) You must send your participation rate index challenge, 

including all supporting documentation, to us within 45 days 

after you receive your draft cohort default rate. 

(4) We notify you of our determination on your 

participation rate index challenge before your official cohort 

default rate is published. 

(5) If we determine that you qualify for continued 

eligibility based on your participation rate index challenge, 

you will not lose eligibility under §668.206187 when your next 

official cohort default rate is published. A successful 

challenge that is based on your draft cohort default rate does 

not excuse you from any other loss of eligibility. However, if 

your successful challenge of a loss of eligibility under 

paragraph (c)(1)(ii) of this section is based on a prior, 

official cohort default rate, and not on your draft cohort 

default rate, we also excuse you from any subsequent loss of 

eligibility, under §668.206187(a)(2), that would be based on 

that official cohort default rate. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.205186 Notice of your official cohort default rate. 

(a) We electronically notify you of your cohort default 

rate after we calculate it, by sending you an eCDR notification 

package to the destination point you designate. After we send 

our notice to you, we publish a list of cohort default rates for 

all institutions. 
26 

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(b) If your cohort default rate is 10 percent or more, we 

include a copy of the loan record detail report with the notice.

If your school had one or more borrowers entering repayment in 

the fiscal year for which the rate is calculated, or is subject 

to sanctions, or if the Department believes your school will 

have an official cohort default rate calculated as an average 

rate, you will receive a loan record detail report with your 

electronic notice.

(c) If your cohort default rate is less than 10 percent—

(1) You may request a copy of any loan record detail report 

that lists loans included in your cohort default rate 

calculation; and

(2) If you are requesting an adjustment or appealing under 

this subpart, your request for a copy of the loan record detail 

report or reports must be sent to us within 15 days after you 

receive the notice of your cohort default rate. You have five 

business days, from the transmission date for eCDR packages as 

posted on the Department's website, to report any problem with 

the electronic transmission of your eCDR package.

(d) Timelines for submitting challenges, adjustments, and 

appeals begin on the sixth business day following the announced 

transmission date.

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.206187 Consequences of cohort default rates on your 

ability to participate in Title IV, HEA programs. 

(a) End of participation. (1) Except as provided in 

paragraph (fe) of this section, you lose your eligibility to 
27 

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participate in the FFEL and Direct Loan programs 30 days after 

you receive our notice that your most recent cohort default rate 

is greater than 40 percent. 

(2) Except as provided in paragraphs (de) and (ef) of this 

section, you lose your eligibility to participate in the FFEL, 

Direct Loan, and Federal Pell Grant programs 30 days after you 

receive our notice that your three most recent cohort default 

rates are each 25 30 percent or greater. 

(b) Length of period of ineligibility. Your loss of 

eligibility under this section continues—

(1) For the remainder of the fiscal year in which we notify 

you that you are subject to a loss of eligibility; and 

(2) For the next 2 fiscal years. 

(c) Using a cohort default rate more than once. The use of a 

cohort default rate as a basis for a loss of eligibility under 

this section does not preclude its use as a basis for—

(1) Any concurrent or subsequent loss of eligibility under 

this section; or 

(2) Any other action by us. 

(d) Special institutions. If you are a special institution 

that satisfies the requirements for continued eligibility under 

§668.198, you are not subject to any loss of eligibility under 

this section or to provisional certification under §668.16(m).

(ed) Continuing participation in Pell. If you are subject 

to a loss of eligibility under paragraph (a)(2) of this section, 

based on three cohort default rates of 30 25 percent or greater, 

you may continue to participate in the Federal Pell Grant 

Program if we determine that you—
28 

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(1) Were ineligible to participate in the FFEL and Direct 

Loan programs before October 7, 1998, and your eligibility was 

not reinstated; 

(2) Requested in writing, before October 7, 1998, to 

withdraw your participation in the FFEL and Direct Loan 

programs, and you were not later reinstated; or 

(3) Have not certified an FFELP loan or originated a Direct 

Loan Program loan on or after July 7, 1998. 

(fe) Requests for adjustments and appeals. (1) A loss of 

eligibility under this section does not take effect while your 

request for adjustment or appeal, as listed in §668.208189(a), 

is pending, provided your request for adjustment or appeal is 

complete, timely, accurate, and in the required format. 

(2) Eligibility continued under paragraph (ef)(1) of this 

section ends if we determine that none of the requests for 

adjustments and appeals you have submitted qualify you for 

continued eligibility under §668.189208. Loss of eligibility 

takes effect on the date that you receive notice of our 

determination on your last pending request for adjustment or 

appeal. 

(3) You do not lose eligibility under this section if we 

determine that your request for adjustment or appeal meets all 

requirements of this subpart and qualifies you for continued 

eligibility under §668.189208. 

(4) To avoid liabilities you might otherwise incur under 

paragraph (gf) of this section, you may choose to suspend your 

participation in the FFEL and Direct Loan programs during the 

adjustment or appeal process. 

(gf) Liabilities during the adjustment or appeal process. 

If you continued to participate in the FFEL or Direct Loan 
29 

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Program under paragraph (fe)(1) of this section, and we 

determine that none of your requests for adjustments or appeals 

qualify you for continued eligibility—

(1) For any FFEL or Direct Loan Program loan that you 

certified and delivered or originated and disbursed more than 30 

days after you received the notice of your cohort default rate, 

we estimate the amount of interest, special allowance, 

reinsurance, and any related or similar payments we make or are 

obligated to make on those loans; 

(2) We exclude from this estimate any amount attributable 

to funds that you delivered or disbursed more than 45 days after 

you submitted your completed appeal to us; 

(3) We notify you of the estimated amount; and 

(4) Within 45 days after you receive our notice of the 

estimated amount, you must pay us that amount, unless—

(i) You file an appeal under the procedures established in 

subpart H of this part (for the purposes of subpart H of this 

part, our notice of the estimate is considered to be a final 

program review determination); or 

(ii) We permit a longer repayment period. 

(gh) Regaining eligibility. If you lose your eligibility to 

participate in a program under this section, you may not 

participate in that program until—

(1) The period described in paragraph (b) of this section 

has ended; 

(2) You pay any amount owed to us under this section or are 

meeting that obligation under an agreement acceptable to us; 

(3) You submit a new application for participation in the 

program; 
30 

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(4) We determine that you meet all of the participation 

requirements in effect at the time of your application; and 

(5) You and we enter into a new program participation 

agreement. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§ 668.207188 Preventing evasion of the consequences of cohort 

default rates. 

(a) General. Unless you are a special institution complying 

with §668.198, yYou are subject to a loss of eligibility that 

has already been imposed against another institution as a result 

of cohort default rates if—

(1) You and the ineligible institution are both parties to 

a transaction that results in a change of ownership, a change in 

control, a merger, a consolidation, an acquisition, a change of 

name, a change of address, any change that results in a location 

becoming a freestanding institution, a purchase or sale, a 

transfer of assets, an assignment, a change of identification 

number, a contract for services, an addition or closure of one 

or more locations or branches or educational programs, or any 

other change in whole or in part in institutional structure or 

identity; 

(2) Following the change described in paragraph (a)(1) of 

this section, you offer an educational program at substantially 

the same address at which the ineligible institution had offered 

an educational program before the change; and 
31 

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(3) There is a commonality of ownership or management 

between you and the ineligible institution, as the ineligible 

institution existed before the change. 

(b) Commonality of ownership or management. For the 

purposes of this section, a commonality of ownership or 

management exists if, at each institution, the same person (as 

defined in 34 CFR 600.31) or members of that person's family, 

directly or indirectly—

(1) Holds or held a managerial role; or 

(2) Has or had the ability to affect substantially the 

institution's actions, within the meaning of 34 CFR 600.21. 

(c) Teach-outs. Notwithstanding paragraph (b)(1) of this 

section, a commonality of management does not exist if you are 

conducting a teach-out under a teach-out agreement as defined in 

34 CFR 602.3 and administered in accordance with 34 CFR 

602.24(c), and—

(1)(i) Within 60 days after the change described in this 

section, you send us the names of the managers for each facility 

undergoing the teach-out as it existed before the change and for 

each facility as it exists after you believe that the 

commonality of management has ended; and 

(ii) We determine that the commonality of management, as 

described in paragraph (b)(1) of this section, has ended; or 

(2)(i) Within 30 days after you receive our notice that we 

have denied your submission under paragraph (c)(1)(i) of this 

section, you make the management changes we request and send us 

a list of the names of the managers for each facility undergoing 

the teach-out as it exists after you make those changes; and 
32 

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(ii) We determine that the commonality of management, as 

described in paragraph (b)(1) of this section, has ended. 

(d) Initial determination. We encourage you to contact us 

before undergoing a change described in this section. If you 

write to us, providing the information we request, we will 

provide a written initial determination of the anticipated 

change's effect on your eligibility. 

(e) Notice of accountability. (1) We notify you in writing 

if, in response to your notice or application filed under 34 CFR 

600.20 or 600.21, we determine that you are subject to a loss of 

eligibility, under paragraph (a) of this section, that has been 

imposed against another institution. 

(2) Our notice also advises you of the scope and duration 

of your loss of eligibility. The loss of eligibility applies to 

all of your locations from the date you receive our notice until 

the expiration of the period of ineligibility applicable to the 

other institution. 

(3) If you are subject to a loss of eligibility under this 

section that has already been imposed against another 

institution, you may only request an adjustment or submit an 

appeal for the loss of eligibility under the same requirements 

that would be applicable to the other institution under 

§668.189208. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.208189 General requirements for adjusting official cohort 

default rates and for appealing their consequences. 
33 

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(a) Remaining eligible. You do not lose eligibility under 

§668.206187 if—

(1) We recalculate your cohort default rate, and it is 

below the percentage threshold for the loss of eligibility as 

the result of—

(i) An uncorrected data adjustment submitted under this 

section and §668.209190; 

(ii) A new data adjustment submitted under this section and 

§668.210191; 

(iii) An erroneous data appeal submitted under this section 

and §668.192211; or 

(iv) A loan servicing appeal submitted under this section 

and §668.212193; or 

(2) You meet the requirements for—

(i) An economically disadvantaged appeal submitted under 

this section and §668.213194; 

(ii) A participation rate index appeal submitted under this 

section and §668.195214; 

(iii) An average rates appeal submitted under this section 

and §668.196215; or 

(iv) A thirty-or-fewer borrowers appeal submitted under 

this section and §668.216197. 

(b) Limitations on your ability to dispute your cohort 

default rate. (1) You may not dispute the calculation of a 

cohort default rate except as described in this subpart. 

(2) You may not request an adjustment or appeal a cohort 

default rate, under §668.209190, §668.191210, §668.192211, or 

§668.212193, more than once. 
34 

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(3) You may not request an adjustment or appeal a cohort 

default rate, under §668.209190, §668.210191, §668.192211, or 

§668.193212, if you previously lost your eligibility to 

participate in a Title IV, HEA program, under §668.206187, based 

entirely or partially on that cohort default rate. 

(c) Content and format of requests for adjustments and 

appeals. We may deny your request for adjustment or appeal if it 

does not meet the following requirements: 

(1) All appeals, notices, requests, independent auditor's 

opinions, management's written assertions, and other 

correspondence that you are required to send under this subpart 

must be complete, timely, accurate, and in a format acceptable 

to us. This acceptable format is described in the ―Cohort 

Default Rate Guide‖ that we provide to you.

(2) Your completed request for adjustment or appeal must 

include—

(i) All of the information necessary to substantiate your 

request for adjustment or appeal; and 

(ii) A certification by your chief executive officer, under 

penalty of perjury, that all the information you provide is true 

and correct. 

(d) Our copies of your correspondence. Whenever you are 

required by this subpart to correspond with a party other than 

us, you must send us a copy of your correspondence within the 

same time deadlines. However, you are not required to send us 

copies of documents that you received from us originally. 

(e) Requirements for data managers' responses. (1) Except 

as otherwise provided in this subpart, if this subpart requires 

a data manager to correspond with any party other than us, the 
35 

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data manager must send us a copy of the correspondence within 

the same time deadlines. 

(2) If a data manager sends us correspondence under this 

subpart that is not in a format acceptable to us, we may require 

the data manager to revise that correspondence's format, and we 

may prescribe a format for that data manager's subsequent 

correspondence with us. 

(f) Our decision on your request for adjustment or appeal. 

(1) We determine whether your request for an adjustment or 

appeal is in compliance with this subpart. 

(2) In making our decision for an adjustment, under 

§668.209190 or §668.191210, or an appeal, under §668.211192 or 

§668.212193—

(i) We presume that the information provided to you by a 

data manager is correct unless you provide substantial evidence 

that shows the information is not correct; and 

(ii) If we determine that a data manager did not provide 

the necessary clarifying information or legible records in 

meeting the requirements of this subpart, we presume that the 

evidence that you provide to us is correct unless it is 

contradicted or otherwise proven to be incorrect by information 

we maintain. 

(3) Our decision is based on the materials you submit under 

this subpart. We do not provide an oral hearing. 

(4) We notify you of our decision—

(i) If you request an adjustment or appeal because you are 

subject to a loss of eligibility under §668.206187 or bring an 

economically disadvantaged appeal under §668.213(a)(2), within 
36 

DRAFT for discussion at 2nd session 

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45 days after we receive your completed request for an 

adjustment or appeal; or 

(ii) In all other cases, except for appeals submitted under 

§668.211192(a) to related to avoid provisional certification, 

before we notify you of your next official cohort default rate. 

(5) You may not seek judicial review of our determination 

of a cohort default rate until we issue our decision on all 

pending requests for adjustments or appeals for that cohort 

default rate. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.209190 Uncorrected data adjustments. 

(a) Eligibility. You may request an uncorrected data 

adjustment for your most recent cohort of borrowers, used to 

calculate your most recent official cohort default rate, if in 

response to your challenge under §668.185204(b), a data manager 

agreed correctly to change the data, but the changes are not 

reflected in your official cohort default rate. 

(b) Deadlines for requesting an uncorrected data 

adjustment. (1) If the loan record detail report was not 

included with your official cohort default rate notice, you must 

request it within 15 days after you receive the notice of your 

official cohort default rate.

(2) You must send us a request for an uncorrected data 

adjustment, including all supporting documentation, within 30 

days after you receive your loan record detail report from us. 

(c) Determination. We recalculate your cohort default rate, 

based on the corrected data, if we determine that—
37 

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(1) In response to your challenge under §668.204185(b), a 

data manager agreed to change the data; 

(2) The changes described in paragraph (c)(1) of this 

section are not reflected in your official cohort default rate; 

and 

(3) We agree that the data are incorrect. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.210191 New data adjustments. 

(a) Eligibility. You may request a new data adjustment for 

your most recent cohort of borrowers, used to calculate your 

most recent official cohort default rate, if—

(1) A comparison of the loan record detail reports that we 

provide to you for the draft and official cohort default rates 

shows that the data have been newly included, excluded, or 

otherwise changed; and 

(2) You identify errors in the data described in paragraph 

(a)(1) of this section that are confirmed by the data manager. 

(b) Deadlines for requesting a new data adjustment.(1) If 

the loan record detail report was not included with your 

official cohort default rate notice, you must request it within 

15 days after you receive the notice of your official cohort 

default rate.

(2) You must send the relevant data manager, or data 

managers, and us a request for a new data adjustment, including 

all supporting documentation, within 15 days after you receive 

your loan record detail report from us. 
38 

DRAFT for discussion at 2nd session 

3/25/2009 

(3) Within 20 days after receiving your request for a new 

data adjustment, the data manager must send you and us a 

response that—

(i) Addresses each of your allegations of error; and 

(ii) Includes the documentation used to support the data 

manager's position. 

(4) Within 15 days after receiving a guaranty agency's 

notice that we hold an FFELP loan about which you are inquiring, 

you must send us your request for a new data adjustment for that 

loan. We respond to your request under paragraph (b)(3) of this 

section. 

(5) Within 15 days after receiving incomplete or illegible 

records or data from a data manager, you must send a request for 

replacement records or clarification of data to the data manager 

and us. 

(6) Within 20 days after receiving your request for 

replacement records or clarification of data, the data manager 

must—

(i) Replace the missing or illegible records; 

(ii) Provide clarifying information; or 

(iii) Notify you and us that no clarifying information or 

additional or improved records are available. 

(7) You must send us your completed request for a new data 

adjustment, including all supporting documentation—

(i) Within 30 days after you receive the final data 

manager's response to your request or requests; or 

(ii) If you are also filing an erroneous data appeal or a 

loan servicing appeal, by the latest of the filing dates 
39 

DRAFT for discussion at 2nd session 

3/25/2009 

required in paragraph (b)(7)(i) of this section or in 

§668.211192(b)(6)(i) or §668.212193(c)(10)(i). 

(c) Determination. If we determine that incorrect data were 

used to calculate your cohort default rate, we recalculate your 

cohort default rate based on the correct data. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.21192 Erroneous data appeals. 

(a) Eligibility. Except as provided in §668.189208(b), you 

may appeal the calculation of a cohort default rate upon which a 

loss of eligibility, under §668.206187, or provisional 

certification, under §668.16(m), is based if—

(1) You dispute the accuracy of data that you previously 

challenged on the basis of incorrect data, under §668.204185(b); 

or 

(2) A comparison of the loan record detail reports that we 

provide to you for the draft and official cohort default rates 

shows that the data have been newly included, excluded, or 

otherwise changed, and you dispute the accuracy of that data. 

(b) Deadlines for submitting an appeal. (1) You must send a 

request for verification of data errors to the relevant data 

manager, or data managers, and to us within 15 days after you 

receive the notice of your loss of eligibility or provisional 

certification. Your request must include a description of the 

information in the cohort default rate data that you believe is 

incorrect and all supporting documentation that demonstrates the 

error. 
40 

DRAFT for discussion at 2nd session 

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(2) Within 20 days after receiving your request for 

verification of data errors, the data manager must send you and 

us a response that—

(i) Addresses each of your allegations of error; and 

(ii) Includes the documentation used to support the data 

manager's position. 

(3) Within 15 days after receiving a guaranty agency's 

notice that we hold an FFELP loan about which you are inquiring, 

you must send us your request for verification of that loan's 

data errors. Your request must include a description of the 

information in the cohort default rate data that you believe is 

incorrect and all supporting documentation that demonstrates the 

error. We respond to your request under paragraph (b)(2) of this 

section. 

(4) Within 15 days after receiving incomplete or illegible 

records or data, you must send a request for replacement records 

or clarification of data to the data manager and us. 

(5) Within 20 days after receiving your request for 

replacement records or clarification of data, the data manager 

must—

(i) Replace the missing or illegible records; 

(ii) Provide clarifying information; or 

(iii) Notify you and us that no clarifying information or 

additional or improved records are available. 

(6) You must send your completed appeal to us, including 

all supporting documentation—

(i) Within 30 days after you receive the final data 

manager's response to your request; or 
41 

DRAFT for discussion at 2nd session 

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(ii) If you are also requesting a new data adjustment or 

filing a loan servicing appeal, by the latest of the filing 

dates required in paragraph (b)(6)(i) of this section or in 

§668.210191(b)(7)(i) or §668.193212(c)(10)(i). 

(c) Determination. If we determine that incorrect data were 

used to calculate your cohort default rate, we recalculate your 

cohort default rate based on the correct data. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.212193 Loan servicing appeals. 

(a) Eligibility. Except as provided in §668.208189(b), you 

may appeal, on the basis of improper loan servicing or 

collection, the calculation of—

(1) Your most recent cohort default rate; or 

(2) Any cohort default rate upon which a loss of 

eligibility under §668.206187 is based. 

(b) Improper loan servicing. For the purposes of this 

section, a default is considered to have been due to improper 

loan servicing or collection only if the borrower did not make a 

payment on the loan and you prove that the FFEL Program lender 

or the Direct Loan Servicer, as defined in 34 CFR 685.102, 

failed to perform one or more of the following activities, if 

that activity applies to the loan: 

(1) Send at least one letter (other than the final demand 

letter) urging the borrower to make payments on the loan; 

(2) Attempt at least one phone call to the borrower; 

(3) Send a final demand letter to the borrower; 
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(4) For a Direct Loan Program loan only, document that skip 

tracing was performed if the Direct Loan Servicer determined 

that it did not have the borrower's current address; and 

(5) For an FFELP loan only—

(i) Submit a request for preclaims or default aversion 

assistance to the guaranty agency; and 

(ii) Submit a certification or other documentation that 

skip tracing was performed to the guaranty agency. 

(c) Deadlines for submitting an appeal. (1) If the loan 

record detail report was not included with your official cohort 

default rate notice, you must request it within 15 days after 

you receive the notice of your official cohort default rate. 

(2) You must send a request for loan servicing records to 

the relevant data manager, or data managers, and to us within 15 

days after you receive your loan record detail report from us. 

If the data manager is a guaranty agency, your request must 

include a copy of the loan record detail report. 

(3) Within 20 days after receiving your request for loan 

servicing records, the data manager must—

(i) Send you and us a list of the borrowers in your 

representative sample, as described in paragraph (d) of this 

section (the list must be in social security number order, and 

it must include the number of defaulted loans included in the 

cohort for each listed borrower); 

(ii) Send you and us a description of how your 

representative sample was chosen; and 

(iii) Either send you copies of the loan servicing records 

for the borrowers in your representative sample and send us a 

copy of its cover letter indicating that the records were sent, 
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or send you and us a notice of the amount of its fee for 

providing copies of the loan servicing records. 

(4) The data manager may charge you a reasonable fee for 

providing copies of loan servicing records, but it may not 

charge more than $10 per borrower file. If a data manager 

charges a fee, it is not required to send the documents to you 

until it receives your payment of the fee. 

(5) If the data manager charges a fee for providing copies 

of loan servicing records, you must send payment in full to the 

data manager within 15 days after you receive the notice of the 

fee. 

(6) If the data manager charges a fee for providing copies 

of loan servicing records, and—

(i) You pay the fee in full and on time, the data manager 

must send you, within 20 days after it receives your payment, a 

copy of all loan servicing records for each loan in your 

representative sample (the copies are provided to you in hard 

copy format unless the data manager and you agree that another 

format may be used), and it must send us a copy of its cover 

letter indicating that the records were sent; or 

(ii) You do not pay the fee in full and on time, the data 

manager must notify you and us of your failure to pay the fee 

and that you have waived your right to challenge the calculation 

of your cohort default rate based on the data manager's records. 

We accept that determination unless you prove that it is 

incorrect. 

(7) Within 15 days after receiving a guaranty agency's 

notice that we hold an FFELP loan about which you are inquiring, 

you must send us your request for the loan servicing records for 
44 

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that loan. We respond to your request under paragraph (c)(3) of 

this section. 

(8) Within 15 days after receiving incomplete or illegible 

records, you must send a request for replacement records to the 

data manager and us. 

(9) Within 20 days after receiving your request for 

replacement records, the data manager must either—

(i) Replace the missing or illegible records; or 

(ii) Notify you and us that no additional or improved 

copies are available. 

(10) You must send your appeal to us, including all 

supporting documentation—

(i) Within 30 days after you receive the final data 

manager's response to your request for loan servicing records; 

or 

(ii) If you are also requesting a new data adjustment or 

filing an erroneous data appeal, by the latest of the filing 

dates required in paragraph (c)(10)(i) of this section or in 

§668.210191(b)(7)(i) or §668.192211(b)(6)(i). 

(d) Representative sample of records. (1) To select a 

representative sample of records, the data manager first 

identifies all of the borrowers for whom it is responsible and 

who had loans that were considered to be in default in the 

calculation of the cohort default rate you are appealing. 

(2) From the group of borrowers identified under paragraph 

(d)(1) of this section, the data manager identifies a sample 

that is large enough to derive an estimate, acceptable at a 95 

percent confidence level with a plus or minus 5 percent 

confidence interval, for use in determining the number of 
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borrowers who should be excluded from the calculation of the 

cohort default rate due to improper loan servicing or 

collection. 

(e) Loan servicing records. Loan servicing records are the 

collection and payment history records—

(1) Provided to the guaranty agency by the lender and used 

by the guaranty agency in determining whether to pay a claim on 

a defaulted loan; or 

(2) Maintained by our Direct Loan Servicer that are used in 

determining your cohort default rate. 

(f) Determination. (1) We determine the number of loans, 

included in your representative sample of loan servicing 

records, that defaulted due to improper loan servicing or 

collection, as described in paragraph (b) of this section. 

(2) Based on our determination, we use a statistically 

valid methodology to exclude the corresponding percentage of 

borrowers from both the numerator and denominator of the 

calculation of your cohort default rate. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

[65 FR 65638, Nov. 1, 2000, as amended at 67 FR 67075, Nov. 1, 

2002] 

§668.213194 Economically disadvantaged appeals. 

(a) Eligibility General. As provided in this section

described in this section, you may appeal—

(1) aA notice of a loss of eligibility under §668.206187; 

or
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(2) a notice of a second successive official cohort default 

rate calculated under this subpart that is equal to or greater 

than 30 percent but less than or equal to 40 percent, 

potentially subjecting you to provisional certification.

(b) Eligibility. You may appeal under this section if an 

independent auditor's opinion certifies that your low income 

rate is two-thirds or more and—

(1) You offer an associate, baccalaureate, graduate, or 

professional degree, and your completion rate is 70 percent or 

more; or 

(2) You do not offer an associate, baccalaureate, graduate, 

or professional degree, and your placement rate is 44 percent or 

more. 

(bc) Low income rate. (1) Your low income rate is the 

percentage of your students, as described in paragraph (bc)(2) 

of this section, who—

(i) For an award year that overlaps the 12-month period 

selected under paragraph (b)(2) of this section, have an 

expected family contribution, as defined in 34 CFR 690.2, that 

is equal to or less than the largest expected family 

contribution that would allow a student to receive one-half of 

the maximum Federal Pell Grant award, regardless of the 

student's enrollment status or cost of attendance; or 

(ii) For a calendar year that overlaps the 12-month period 

selected under paragraph (b)(2) of this section, have an 

adjusted gross income that, when added to the adjusted gross 

income of the student's parents (if the student is a dependent 

student) or spouse (if the student is a married independent 

student), is less than the amount listed in the Department of 
47 

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Health and Human Services poverty guidelines for the size of the 

student's family unit. 

(2) The students who are used to determine your low income 

rate include only students who were enrolled on at least a halftime basis in an eligible program at your institution during any 

part of a 12-month period that ended during the 6 months 

immediately preceding the cohort's fiscal year. 

(cd) Completion rate. (1) Your completion rate is the 

percentage of your students, as described in paragraph (cd)(2) 

of this section, who—

(i) Completed the educational programs in which they were 

enrolled; 

(ii) Transferred from your institution to a higher level 

educational program; 

(iii) Remained enrolled and are making satisfactory 

progress toward completion of their educational programs at the 

end of the same 12-month period used to calculate the low income 

rate; or 

(iv) Entered active duty in the Armed Forces of the United 

States within 1 year after their last date of attendance at your 

institution. 

(2) The students who are used to determine your completion 

rate include only regular students who were—

(i) Initially enrolled on a full-time basis in an eligible 

program; and 

(ii) Originally scheduled to complete their programs during 

the same 12-month period used to calculate the low income rate. 

(de) Placement rate. (1) Except as provided in paragraph 

(de)(2) of this section, your placement rate is the percentage 
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of your students, as described in paragraphs (de)(3) and (de)(4) 

of this section, who—

(i) Are employed, in an occupation for which you provided 

training, on the date following 1 year after their last date of 

attendance at your institution; 

(ii) Were employed for at least 13 weeks, in an occupation 

for which you provided training, between the date they enrolled 

at your institution and the first date that is more than a year 

after their last date of attendance at your institution; or 

(iii) Entered active duty in the Armed Forces of the United 

States within 1 year after their last date of attendance at your 

institution. 

(2) For the purposes of this section, a former student is 

not considered to have been employed based on any employment by 

your institution. 

(3) The students who are used to determine your placement 

rate include only former students who—

(i) Were initially enrolled in an eligible program on at 

least a half-time basis; 

(ii) Were originally scheduled, at the time of enrollment, 

to complete their educational programs during the same 12-month 

period used to calculate the low income rate; and 

(iii) Remained in the program beyond the point at which a 

student would have received a 100 percent tuition refund from 

you. 

(4) A student is not included in the calculation of your 

placement rate if that student, on the date that is 1 year after 

the student's originally scheduled completion date, remains 
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enrolled in the same program and is making satisfactory 

progress. 

(ef) Scheduled to complete. In calculating a completion or 

placement rate under this section, the date on which a student 

is originally scheduled to complete a program is based on—

(1) For a student who is initially enrolled full-time, the 

amount of time specified in your enrollment contract, catalog, 

or other materials for completion of the program by a full-time 

student; or 

(2) For a student who is initially enrolled less than fulltime, the amount of time that it would take the student to 

complete the program if the student remained at that level of 

enrollment throughout the program. 

(fg) Deadline for submitting an appeal. (1) Within 30 days 

after you receive the notice of your loss of eligibility, you 

must send us your management's written assertion, as described 

in the Cohort Default Rate Guide. 

(2) Within 60 days after you receive the notice of your 

loss of eligibility, you must send us the independent auditor's 

opinion described in paragraph (g) of this section. 

(gh) Independent auditor's opinion. (1) The independent 

auditor's opinion must state whether your management's written 

assertion, as you provided it to the auditor and to us, meets 

the requirements for an economically disadvantaged appeal and is 

fairly stated in all material respects. 

(2) The engagement that forms the basis of the independent 

auditor's opinion must be an examination-level compliance 

attestation engagement performed in accordance with—
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(i) The American Institute of Certified Public Accountant's 

(AICPA) Statement on Standards for Attestation Engagements, 

Compliance Attestation (AICPA, Professional Standards, vol. 1, 

AT sec. 500), as amended (these standards may be obtained by 

calling the AICPA's order department, at 1–888–777–7077); and 

(ii) Government Auditing Standards issued by the 

Comptroller General of the United States. 

(hi) Determination. You do not lose eligibility under 

§668.206187, and we do not provisionally certify you under 34 

CFR 668.16(m), if—

(1) Your independent auditor's opinion agrees that you meet 

the requirements for an economically disadvantaged appeal; and 

(2) We determine that the independent auditor's opinion and 

your management's written assertion—

(i) Meet the requirements for an economically disadvantaged 

appeal; and 

(ii) Are not contradicted or otherwise proven to be 

incorrect by information we maintain, to an extent that would 

render the independent auditor's opinion unacceptable. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§ 668.214195 Participation rate index appeals. 

(a) Eligibility. (1) You may appeal a notice of a loss of 

eligibility under §668.206187(a)(1), based on one cohort default 

rate over 40 percent, if your participation rate index for that 

cohort's fiscal year is equal to or less than 0.06015. 
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(2) You may appeal a notice of a loss of eligibility under 

§668.206187(a)(2), based on three cohort default rates of 25 30

percent or greater, if your participation rate index is equal to 

or less than 0.0375 0.0625 for any of those three cohorts' 

fiscal years. 

(b) Calculating your participation rate index. (1) Except 

as provided in paragraph (b)(2) of this section, your 

participation rate index for a fiscal year is determined by 

multiplying your cohort default rate for that fiscal year by the 

percentage that is derived by dividing—

(i) The number of students who received an FFELP or a 

Direct Loan Program loan to attend your institution during a 

period of enrollment, as defined in 34 CFR 682.200 or 685.102, 

that overlaps any part of a 12-month period that ended during 

the 6 months immediately preceding the cohort's fiscal year, by 

(ii) The number of regular students who were enrolled at 

your institution on at least a half-time basis during any part 

of the same 12-month period. 

(2) If your cohort default rate for a fiscal year is 

calculated as an average rate under §668.183202(d)(2), you may 

calculate your participation rate index for that fiscal year 

using either that average rate or the cohort default rate that 

would be calculated for the fiscal year alone using the method 

described in §668.202183(d)(1). 

(c) Deadline for submitting an appeal. You must send us 

your appeal under this section, including all supporting 

documentation, within 30 days after you receive the notice of 

your loss of eligibility. 
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(d) Determination. (1) You do not lose eligibility under 

§668.187 206 if we determine that you meet the requirements for 

a participation rate index appeal. 

(2) If we determine that your participation rate index for 

a fiscal year is equal to or less than 0.0375 0.06015 or 0.0625, 

under paragraph (d)(1) of this section, we also excuse you from 

any subsequent loss of eligibility under §668.206187(a)(2) that 

would be based on the official cohort default rate for that 

fiscal year. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.215196 Average rates appeals. 

(a) Eligibility. (1) You may appeal a notice of a loss of 

eligibility under §668.187206(a)(1), based on one cohort default 

rate over 40 percent, if that cohort default rate is calculated 

as an average rate under §668.202183(d)(2). 

(2) You may appeal a notice of a loss of eligibility under 

§668.206187(a)(2), based on three cohort default rates of 25 30

percent or greater, if at least two of those cohort default 

rates—

(i) Are calculated as average rates under 

§668.202183(d)(2); and 

(ii) Would be less than 25 30 percent if calculated for the 

fiscal year alone using the method described in 

§668.202183(d)(1). 

(b) Deadline for submitting an appeal. (1) Before notifying 

you of your official cohort default rate, we make an initial 

determination about whether you qualify for an average rates 
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appeal. If we determine that you qualify, we notify you of that 

determination at the same time that we notify you of your 

official cohort default rate. 

(2) If you disagree with our initial determination, you 

must send us your average rates appeal, including all supporting 

documentation, within 30 days after you receive the notice of 

your loss of eligibility. 

(c) Determination. You do not lose eligibility under 

§668.187206 if we determine that you meet the requirements for 

an average rates appeal. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§668.216197 Thirty-or-fewer borrowers appeals. 

(a) Eligibility. You may appeal a notice of a loss of 

eligibility under §668.206187 if 30 or fewer borrowers, in 

total, are included in the 3 most recent cohorts of borrowers 

used to calculate your cohort default rates. 

(b) Deadline for submitting an appeal. (1) Before notifying 

you of your official cohort default rate, we make an initial 

determination about whether you qualify for a thirty-or-fewer 

borrowers appeal. If we determine that you qualify, we notify 

you of that determination at the same time that we notify you of 

your official cohort default rate. 

(2) If you disagree with our initial determination, you 

must send us your thirty-or-fewer borrowers appeal, including 

all supporting documentation, within 30 days after you receive 

the notice of your loss of eligibility. 
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(c) Determination. You do not lose eligibility under 

§668.206187 if we determine that you meet the requirements for a 

thirty-or-fewer borrowers appeal. 

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c) 

§ 668.198 Relief from the consequences of cohort default rates 

for special institutions.

(a) Eligibility. You are only eligible for relief from the 

consequences of cohort default rates under this section if you 

are a—

(1) Historically black college or university as defined in 

section 322(2) of the HEA;

(2) Tribally controlled community college as defined in section 

2(a)(4) of the Tribally Controlled Community College Assistance 

Act of 1978; or

(3) Navajo community college under the Navajo Community College 

Act.

(b) Applicability of requirements. We may determine that the 

loss of eligibility provisions in §668.187 and the prohibition 

against full certification in §668.16(m) do not apply to you for 

each 1-year period beginning on July 1 of 1999 through 2003, if 

you meet the requirements in paragraph (a) of this section and 

you send us—

(1) By July 1 of the first 1-year period that begins after you 

receive our notice of a loss of eligibility under §668.187—

(i) A default management plan; and
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(ii) A certification that you have engaged an independent third 

party, as described in this section; and

(2) By July 1 of each subsequent 1-year period—

(i) Evidence that you have implemented your default management 

plan during the preceding 1-year period;

(ii) Evidence that you have made substantial improvement in the 

preceding 1-year period in your cohort default rate; and

(iii) A certification that you continue to engage an independent 

third party, as described in this section.

(c) Default management plan. (1) Your default management plan 

must provide reasonable assurance that you will, no later than 

July 1, 2004, have a cohort default rate that is less than 25 

percent. Measures that you must take to provide this assurance 

include but are not limited to—

(i) Establishing a default management team by engaging your 

chief executive officer and relevant senior executive officials 

and enlisting the support of representatives from offices other 

than the financial aid office;

(ii) Identifying and allocating the personnel, administrative, 

and financial resources appropriate to implement the default 

management plan;

(iii) Defining the roles and responsibilities of the independent 

third party;

(iv) Defining evaluation methods and establishing a data 

collection system for measuring and verifying relevant default 

management statistics, including a statistical analysis of the 

borrowers who default on their loans;

(v) Establishing annual targets for reductions in your cohort 

default rate; and
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(vi) Establishing a process to ensure the accuracy of your 

cohort default rate.

(2) We will determine whether your default management plan is 

acceptable, after considering your history, resources, dollars 

in default, and targets for default reduction in making this 

determination.

(3) If we determine that your proposed default management plan 

is unacceptable, you must consult with us to develop a revised 

plan and submit the revised plan to us within 30 days after you 

receive our notice that your proposed plan is unacceptable.

(4) If we determine, based on the evidence you submit under 

paragraph (b)(2) of this section, that your default management 

plan is no longer acceptable, you must develop a revised plan in 

consultation with us and submit the revised plan to us within 60 

days after you receive our notice that your plan is no longer 

acceptable.

(5) A sample default management plan is provided in appendix B 

to this subpart. The sample is included to illustrate components 

of an acceptable default management plan. Since institutions' 

family income profiles, student borrowing patterns, histories, 

resources, dollars in default, and targets for default reduction 

are different, you must consider your own, individual 

circumstances in developing and submitting your plan.

(d) Independent third party. (1) An independent third party may 

be any individual or entity that—

(i) Provides technical assistance in developing and implementing 

your default management plan; and

(ii) Is not substantially controlled by a person who also 

exercises substantial control over your institution.
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(2) An independent third party need not be paid by you for its 

services.

(3) The services of a lender, guaranty agency, or secondary 

market as an independent third party under this section are not 

considered to be inducements under 34 CFR 682.200 or 682.401(e).

(e) Substantial improvement. (1) For the purposes of this 

section, your substantial improvement is determined based on—

(i) A reduction in your most recent draft or official cohort 

default rate;

(ii) An increase in the percentage of delinquent borrowers who 

avoid default by using deferments, forbearances, and job 

placement assistance;

(iii) An increase in the academic persistence of student 

borrowers;

(iv) An increase in the percentage of students pursuing graduate 

or professional study;

(v) An increase in the percentage of borrowers for whom a 

current address is known;

(vi) An increase in the percentage of delinquent borrowers that 

you contacted;

(vii) The implementation of alternative financial aid award 

policies and development of financial resources that reduce the 

need for student borrowing; or (viii) An increase in the 

percentage of accurate and timely enrollment status changes that 

you submitted to the National Student Loan Data System (NSLDS) 

on the Student Status Confirmation Report (SSCR).

(2) When making a determination of your substantial improvement, 

we consider your performance in light of—
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(i) Your history, resources, dollars in default, and targets for 

default reduction;

(ii) Your level of effort in meeting the terms of your approved 

default management plan during the previous 1-year period; and

(iii) Any other mitigating circumstance at your institution 

during the 1-year period.

(f) Determination. (1) If we determine that you are in 

compliance with this section, the provisions of §§668.187 and 

668.16(m) do not apply to you for that 1-year period, beginning

on July 1 of 1999 through 2003.

(2) If we determine that you are not in compliance with this 

section, you are subject to the provisions of §§668.187 and 

668.16(m). You lose your eligibility to participate in the FFEL, 

Direct Loan, and Federal Pell Grant programs on the date you 

receive our notice of the determination.

(Approved by the Office of Management and Budget under control 

number 1845–0022) 

(Authority: 20 U.S.C. 1082, 1085, 1094, 1099c)

[65 FR 65638, Nov. 1, 2000, as amended at 69 FR 12276, Mar. 16, 

2004]

§668.218 Default prevention plans.

(a) First year. If your cohort default rate is equal to or 

greater than 30 percent you must establish a default prevention 

task force that prepares a plan to--

(1) Identify the factors causing your cohort default rate 

to exceed the threshold;

(2) Establish measurable objectives and the steps you will 

take to improve your cohort default rate; 
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(3) Specify the actions you will take to improve student 

loan repayment, including counseling students on repayment 

options; and

(4) Submit your default prevention plan to us. We will 

review your plan and offer technical assistance intended to 

improve student loan repayment.

(b) Second year. If your cohort default rate is equal to or 

greater than 30 percent for two consecutive fiscal years, you 

must revise your default prevention plan and submit it to us for 

review. We may require you to revise your plan or specify 

actions you need to take to improve student loan repayment.

Appendix A to Subpart M of Part 668—Summaries of Eligibility and 

Submission Requirements for Challenges, Adjustments, and Appeals

I. Summary of Submission Eligibility

Some types of appeals may be submitted only if you are 

subject to a loss of eligibility under §668.187 or to 

provisional certification under §668.16(m). These types of 

appeals are identified in the following table. Submission 

deadlines are described in the paragraphs and sections that are 

cited in the table. For example, although you may submit an 

uncorrected data adjustment, new data adjustment, or loan 

servicing appeal if you are subject to provisional 

certification, the deadlines for those submissions are based on 

the date you receive your cohort default rate, not the date you 

receive the notice of your provisional certification.
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View or download PDF 

II. Summary of Submission Deadlines

1. General. The deadlines you must meet when submitting a 

challenge, a request for adjustment, or an appeal are summarized 

in the following table. The full, official requirements for 

these deadlines are in §668.189 and in the sections and 

paragraphs cited in the table.

2. Timeframes. The timeframes provided in the table (―30 Days‖, 

―15 Days‖, etc.) identify the number of calendar days within 

which that action must be performed. Timeframes begin on the 
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date that the previous action (connected to that timeframe with 

an arrowed line) is completed:

(i) For your first action (and for both actions, during an 

economically disadvantaged appeal), the timeframe begins on the 

date that you receive your draft cohort default rate, official 

cohort default rate, notice of loss of eligibility, or notice of 

provisional certification.

(ii) For all other actions, the timeframe begins on the date you 

receive the response to your pending request. If you are waiting 

for responses from more than one data manager, the timeframe 

begins on the date that you receive the final response from the 

last data manager.

3. Dotted borders. Some actions identified in the table are 

required only in certain circumstances. For example, if we don't 

send you a loan record detail report, because your cohort 

default rate is less than 10 percent, you must request one 

before you can request an adjustment or appeal. Timeframes for 

actions that aren't always required are identified in the table 

by dotted borders:

(i) If you are required to perform that action, the timeframes 

begin on the same dates that they would if the timeframe borders 

were not dotted.

(ii) If you are not required to perform that action, the 

timeframe for your next required action is determined as if the 

timeframes with the dotted borders were not there. The timeframe 

for your next required action begins on the date that the last 

required action was completed.
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View or download PDF

Appendix AB to Subpart NM of Part 668—Sample Default Management 

Prevention Plan for Special Institutions to Use When Complying 

With §668.198

This appendix is provided as a sample plan for those 

institutions developing a default management prevention plan in 

accordance with §668.198199(a)(1). It describes some measures 

you may find helpful in reducing the number of students that 

default on federally funded loans. These are not the only 

measures you could implement when developing a default 
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management prevention plan. In developing a default management 

plan, you must consider your history, resources, dollars in 

default, and targets for default reduction to determine which 

activities will result in the most benefit to your students and 

to you.

I. Core Default Reduction Strategies (From §668.198(c)(1))

1. Establish a your default management prevention team by 

engaging your chief executive officer and relevant senior 

executive officials and enlisting the support of representatives 

from offices other than the financial aid office. Consider 

including individuals independent of your institution that have 

experience in preventing title IV loan defaults.

2. Consider your history, resources, dollar in default, and 

targets for default reduction to determine which activities will 

result in the most benefit to you and your students.

3. Define evaluation methods and establish a data 

collection system for measuring and verifying relevant default 

prevention statistics, including a statistical analysis of the 

borrowers who default on their loans.

2(4). Identify and allocate the personnel, administrative, 

and financial resources appropriate to implement the default 

management prevention plan. 

3. Define the roles and responsibilities of the independent 

third party.

4. Define evaluation methods and establish a data collection 

system for measuring and verifying relevant default management 

statistics, including a statistical analysis of the borrowers 

who default on their loans.

5. Establish annual targets for reductions in your rate. 
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DRAFT for discussion at 2nd session 

3/25/2009 

6. Establish a process to ensure the accuracy of your rate. 

II. Additional Default Reduction Strategies

1. Enhance the borrower's understanding of his or her loan 

repayment responsibilities through counseling and debt 

management activities. 

2. Enhance the enrollment retention and academic 

persistence of borrowers through counseling and academic 

assistance. 

3. Maintain contact with the borrower after he or she 

leaves your institution by using activities such as skip tracing 

to locate the borrower. 

4. Track the borrower's delinquency status by obtaining 

reports from data managers and FFEL Program lenders. 

5. Enhance student loan repayments through counseling the 

borrower on loan repayment options and facilitating contact 

between the borrower and the data manager or FFEL Program 

lender. 

6. Assist a borrower who is experiencing difficulty in 

finding employment through career counseling, job placement 

assistance, and facilitating unemployment deferments. 

7. Identify and implement alternative financial aid award 

policies and develop alternative financial resources that will 

reduce the need for student borrowing in the first 2 years of 

academic study. 

8. Familiarize the parent, or other adult relative or 

guardian, with the student's debt profile, repayment 

obligations, and loan status by increasing, whenever possible, 

the communication and contact with the parent or adult relative 

or guardian. 
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DRAFT for discussion at 2nd session 

3/25/2009 

III. Defining the Roles and Responsibilities of Independent 

Third Party

1. Specifically define the role of the independent third party.

2. Specify the scope of work to be performed by the independent 

third party.

3. Tie the receipt of payments, if required, to the performance 

of specific tasks.

4. Assure that all the required work is satisfactorily 

completed.

IIIV. Statistics for Measuring Progress

1. The number of students enrolled at your institution 

during each fiscal year. 

2. The average amount borrowed by a student each fiscal 

year. 

3. The number of borrowers scheduled to enter repayment 

each fiscal year. 

4. The number of enrolled borrowers who received default 

prevention counseling services each fiscal year. 

5. The average number of contacts that you or your agent 

had with a borrower who was in deferment or forbearance or in 

repayment status during each fiscal year. 

6. The number of borrowers at least 60 days delinquent each 

fiscal year. 

7. The number of borrowers who defaulted in each fiscal 

year. 

8. The type, frequency, and results of activities performed 

in accordance with the default management prevention plan.