The Department of Education’s (ED) Renewal Cohort Default Rate (DRN) is a new metric that measures the percentage of first-time borrowers who default on their federal student loans within three years of entering repayment. The DRN is used to identify institutions with high default rates and to determine their eligibility for federal student aid.
Why is the DRN important?
The DRN is important because it helps ED to identify institutions that are not serving their students well. Institutions with high default rates may have problems with their academic programs, financial aid counseling, or student support services. The DRN can also help ED to target its resources to institutions that need the most help.
How is the DRN calculated?
The DRN is calculated by dividing the number of first-time borrowers who default on their federal student loans within three years of entering repayment by the total number of first-time borrowers who entered repayment during that same period. The DRN is expressed as a percentage.
For example, if 100 first-time borrowers enter repayment and 20 of them default within three years, the DRN would be 20%.
What is a high DRN?
ED considers an institution to have a high DRN if it is in the top 15% of all institutions for its sector and cohort. For example, in 2020, institutions with DRNs of 10% or higher were considered to have high DRNs.
What are the consequences of having a high DRN?
Institutions with high DRNs may be subject to a number of consequences, including:
- Loss of eligibility for federal student aid: Institutions with high DRNs may lose their eligibility to participate in the federal student aid program. This means that they would not be able to offer federal student loans or grants to their students.
- Increased monitoring: Institutions with high DRNs may be placed on heightened cash monitoring by ED. This means that they will be required to submit more frequent financial reports to ED and may be subject to additional audits.
- Corrective action: Institutions with high DRNs may be required to take corrective action to address the problems that are contributing to their high default rates. This could include changes to their academic programs, financial aid counseling, or student support services.
How can institutions avoid having a high DRN?
Institutions can avoid having a high DRN by taking the following steps:
- Provide high-quality academic programs: Institutions should offer academic programs that are rigorous and relevant to the needs of the workforce. Students who are successful in their academic programs are less likely to default on their student loans.
- Provide effective financial aid counseling: Institutions should provide financial aid counseling to students to help them understand their loan options and make informed decisions about how to finance their education. Students who understand their loan obligations are less likely to default.
- Provide robust student support services: Institutions should provide student support services to help students succeed in their academic programs and manage their finances. Students who receive support from their institution are less likely to default on their student loans.
Conclusion
The DRN is a new metric that ED is using to identify institutions with high default rates. Institutions with high DRNs may be subject to a number of consequences, including loss of eligibility for federal student aid, increased monitoring, and corrective action. Institutions can avoid having a high DRN by providing high-quality academic programs, effective financial aid counseling, and robust student support services.
Additional Resources
- ED’s DRN webpage
- National Center for Education Statistics’ DRN webpage
- Institute for College Access & Success’ DRN webpage