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Student Loan Law: 6.2.1 Federal Student Loan Default

Borrowers are in default on Federal Family Education Loan (FFEL) Program loans or Direct Loan Program loans (Direct Loans) if they fail to make required payments for 270 days for loans repayable in monthly installments.4 This nine-month period is a relatively long time and advocates should take advantage of this period to help borrowers seek alternatives to default, such as more affordable repayment plans, cancellation, deferment, and/or forbearance.5

Student Loan Law: 6.2.2 Private Loan Default

Default conditions for private student loans are specified in the loan contracts. In most cases, borrowers will not have the protection of a nine-month period if they miss payments on a private student loan.

Student Loan Law: 6.4.1 Cohort Default Rates

The cohort default rate (CDR) is the most frequently cited default measure because it is the basis for sanctioning schools with persistently high default rates.34 The cohort for a particular year consists of all current and former students who, during that fiscal year, entered into repayment on a Federal Stafford Loan, a federal Supplemental Loan for Students (SLS) loan, a Direct Subsidized Loan, or a Direct Unsubsidized Loan that they received to attend the school, or on the portion of a loan made under the FFEL or Direct Consolidation Loan

Student Loan Law: 6.4.2 Problems with the Cohort Default Rate Measure

The Government Accountability Office (GAO) and the Department’s Office of the Inspector General (OIG) have released reports describing the ways in which the CDRs understate the scope of the default problem—and the ways in which schools manipulate the CDR.44 One OIG report, for example, cited a number of problems, including that the rates reflected defaults during a limited time period and not the life of the loan, that PLUS loans and certain consolidation loans are excluded, and that the rates are calculated based on the number of borrowers i

Student Loan Law: 6.4.3 Other Federal Default Measures

The Department releases three types64 of default rates—cohort default rates (CDRs), cumulative default rates, and new Direct Loans entering default.65 The cumulative default rate includes all federal loans that are more than 360 days delinquent, whereas the rate for new Direct Loans entering default measures only Direct Loans that defaulted in a given year.

Student Loan Law: 6.5.2 Default Risk Factors and Racial Disparities

Researchers have identified a number of risk factors for student loan default and there are well-documented racial disparities in default rates.80 While there is still insufficient empirical research about why borrowers default and how to best help them, a number of recent studies and reports help break down the factors that make default a continuing problem.81 Borrowers in default often did not complete

Student Loan Law: Missouri

Missouri Department of Higher Education

205 Jefferson Street

P.O. Box 1469

Jefferson City, MO 65102

Phone: (573) 751-2361

Toll-Free: (800) 473-6757

Fax: (573) 751-6635

TTY: (800) 735-2966

Email: info@dhewd.mo.gov

Website: www.dhewd.mo.gov

Student Loan Law: Nebraska

Nebraska National Student Loan Program

1300 O Street

P.O. Box 82507

Lincoln, NE 68501-2507

Phone: (402) 475-8686

Toll-Free: (800) 735-8778, ext. 6300

Website: www.nslp.org