Cohort Default Rate: Definition and What It Is
The cohort default rate (CDR) is the percentage of a school's federal student loan borrowers who enter repayment in a given federal fiscal year and default before the end of the following two fiscal years. The Department of Education calculates and publishes CDRs annually for every institution that participates in federal aid programs.
Schools with CDRs above defined thresholds over multiple consecutive years face consequences, including the potential loss of eligibility to participate in federal financial aid programs. A school's CDR is public record and available through the Department of Education's database.
Why it Matters
CDR gives prospective students and policymakers a signal about if a school's graduates are managing their loan repayment. A persistently high CDR suggests that graduates are not earning enough to repay, that borrowers were not well-informed about their obligations, and/or that the program did not deliver the financial value implied by its cost.
For individual borrowers, CDR is less directly actionable but useful for evaluating schools before enrolling. A school with a high default rate is worth scrutinizing, particularly if the program's credentials have uncertain employment outcomes. Yrefy's article on debt and financial freedom includes data on how borrowers experience the relationship between educational investment and financial outcomes.
Example
A for-profit vocational school has a CDR of 24% over three consecutive years. The Department of Education issues a warning. If the rate stays above the threshold in the following year, the school risks losing access to federal loan and Pell Grant funds.
