Press Release Zero CDRs Won’t Last – Act Now Before It’s Too Late:Managing Student Loan Delinquency Many schools may feel a false sense of security seeing their Cohort Default Rate (CDR) sitting at zero. However, now is not the time to sit back and relax. According to recent survey data, over 30% of borrowers are not making payments and have no plans to do so. This paints a stark reality: while a low CDR may look like a sign of financial health, it doesn’t tell the full story. Missed payments are already piling up, and unless schools take immediate action, those delinquencies will turn into defaults, directly impacting future CDRs – and the institution's financial and operational health. The Danger of a Zero CDR Right now, every school is benefiting from a zero CDR due to the COVID-19 repayment pause. But this is temporary. Beneath the surface, countless borrowers are struggling financially, and the return to repayment will bring a surge in delinquencies and defaults. The zero CDR you see today is no guarantee of future stability. Schools that fail to act now are setting themselves up for a sudden, potentially catastrophic rise in defaults. The Consequences of Rising CDRs When your CDR rises, the consequences can be severe. If your institution hits a 15% CDR, the Department of Education requires that you move from single to multiple disbursements for federal financial aid. This seemingly small change can cause significant disruptions for students, leading to delayed access to funds. Can you imagine how frustrated your students will be when their disbursements are delayed and split into multiple payments? This will inevitably result in a flood of customer service issues, putting enormous strain on your financial aid department and tarnishing the institution’s reputation. Even more alarming, schools with a 30% or higher CDR for three consecutive years risk losing eligibility for federal student aid programs, including Pell Grants and Direct Loans. A single year with a CDR above 40% can lead to immediate sanctions. These penalties can devastate your institution’s ability to support students and maintain enrollment levels, with long-term financial repercussions. Delinquency Rate: Your Window into Future CDR To stay ahead, it’s imperative to check your delinquency rate in late December or early January, as this can provide a critical glimpse into what your 2023 CDR might look like. If your delinquency rate is high at that time, there’s a strong chance your future CDR will reflect this unless immediate action is taken. There’s only one year left to make a difference and lower that CDR before it solidifies. Schools that act now can still bring down those rates, but ignoring rising delinquencies will lead to inevitable spikes in defaults. Why Delinquency Management Is Critical If you’re only watching your CDR without addressing rising delinquencies, you’re missing the real issue. Delinquencies build silently before defaults, and ignoring them will lead directly to dangerous CDR spikes. By taking action now to manage delinquencies, you can protect both your students and your institution from these dire consequences. The Time to Act Is NOW Even if your CDR is zero today, the return to repayment means you cannot afford to wait. Schools need to take swift action to monitor delinquencies and support borrowers before defaults rise. The alternative is dealing with the costly impact of CDR increases and the operational headaches that come with it. Addressing delinquencies today can save your institution from losing federal aid eligibility and prevent chaos in your financial aid office. How Inceptia Can Help You Stay Ahead Inceptia offers comprehensive solutions to help schools proactively promote positive borrowing and manage delinquencies before they turn into defaults. From student loan repayment wellness programs to real-time data insights, Inceptia equips you to stay ahead of the curve – protecting students from future loan defaults and safeguarding your institution’s financial health. Visit our Repayment Counseling Outreach page to learn more and connect with us with your questions.