Over 1,000 Colleges Could Lose Access to Federal Student Aid
Preston Cooper
July 23, 2025
Students are not the only ones who enjoyed a reprieve during the nearly five-year pause on federal student loan payments. Colleges also got a break from a rule that bars them from the federal student aid system if their former students’ loan default rates are too high. Now that student loan payments have resumed, however, too many borrowers aren’t paying their loans. If this nonpayment translates to higher loan defaults, over 1,000 colleges are at risk of losing federal funding.
The Cohort Default Rate (CDR) measures the percentage of borrowers who take out loans to attend a given institution and default on those debts within approximately three years of entering repayment. (Default means going 360 days without making a payment.) If a college’s CDR exceeds 30 percent for three consecutive years, or 40 percent for one year, it could lose access to federal student aid including Pell Grants and student loans.
During the pandemic-era payment pause, the official CDR was zero—students can’t default if they don’t owe payments. Even before the pause, only a handful of schools failed the CDR every year, making the rule somewhat of an afterthought. But now, loan payments are due again, and nonpayment rates have skyrocketed thanks to the Biden administration’s mismanagement of the transition back into repayment.
