March 8, 2011

ED Clarifies Default Definition

According to a recent notice posted by ED, there is a difference between the definition of ‘default’ as it applies to student eligibility versus the date used to calculate cohort default rates. A borrower who is 270 days or more past due on a Federal Family Education Loan (FFEL) or Direct Loan is not eligible for additional Title IV aid unless s/he has made satisfactory repayment arrangements. However, for cohort rate calculation purposes, a FFEL loan held by a FFEL lender is included as a default when the default claim is paid by the lender. FFEL and Direct Loans held by ED are included in the calculation as a default when they’re 360 days past due.