Deferral of Accountability Metrics: Unintended Consequences of the Student Loan Payment Pause
Hugh T. Ferguson
April 11, 2022
The continued extension of the federal payment pause on student loans and interest accrual has been a relief to borrowers, but amid this freeze a simple accountability metric on institutions of higher education may be less useful in the coming years, allowing programs that leave students worse off financially to continue to access federal aid.
Because no federal student loan borrower is required to be making payments, there are no defaults. As a result, the annual cohort default rate (CDR) metric will less accurately reflect the financial well-being of borrowers for the next several years. The cohort default rate measures the percentage of a school’s student loan borrowers who enter repayment and subsequently default within a three-year window that begins after they left school.
The Department of Education (ED) releases the official rate once per year and uses the metric to determine the school’s eligibility to continue to participate fully in theTitle IV aid programs. If an institution exceeds a default rate of 40% in a single year or a 30% CDR threshold for three consecutive years the school could then lose eligibility.
