Your Cohort Default Rate Is Low. Do You Know Why?

The national fiscal year 2023 cohort default rate is 0.4%.

At first glance, that number may look reassuring.

It deserves a closer look.

The Department of Education released the official FY 2023 cohort default rates on September 30, 2026. The national rate increased from 0% for FY 2022 to 0.4% for FY 2023. But Federal Student Aid has specifically cautioned institutions against interpreting the FY 2023 rate as a normal measure of borrower repayment performance.

The reason is straightforward: this cohort moved through an extraordinary repayment environment.

For institutional leaders, the more important question may not be, “What is our cohort default rate?”

Do we understand why our rate is what it is?

What the FY 2023 CDR Actually Measures

A cohort default rate, or CDR, measures the percentage of an institution’s federal student loan borrowers who enter repayment during a federal fiscal year and subsequently default during the applicable three-year measurement period.

For FY 2023, the cohort includes borrowers who entered repayment between October 1, 2022, and September 30, 2023, and who defaulted between October 1, 2022, and September 30, 2025.

That sounds like a normal three-year measurement.

It was not.

The federal student loan payment pause prevented borrowers with Department-held loans from entering default for a significant portion of the period. The subsequent repayment on-ramp also protected borrowers from many consequences of delinquency through September 30, 2024.

Federal Student Aid has therefore cautioned that FY 2023 CDRs should be interpreted carefully because the results may provide an overly favorable picture of borrower repayment outcomes.

A 0.4% national rate is an official federal metric. It is not necessarily an indication that borrower repayment risk has nearly disappeared.

A Low Rate Does Not Necessarily Mean a Low-Risk Portfolio

Before the pandemic-era repayment disruptions, the national FY 2017 cohort default rate was 9.7%.

That was the last cohort before FY 2023 whose three-year measurement period was completely free of COVID-related repayment protections. Beginning with FY 2018, varying portions of each cohort’s measurement period were affected by the payment pause and related protections. FY 2020 through FY 2022 ultimately produced national CDRs of zero because borrowers could not enter default during those measurement periods.

FY 2023 is different because borrowers once again had an opportunity to enter default before the measurement period ended. But that opportunity existed for only part of the normal three-year period. NASFAA also notes that SAVE-related forbearance affected some borrowers during the FY 2023 measurement period.

That is why an institution should be cautious about using its FY 2023 CDR as evidence that borrower counseling, repayment outreach, or default-prevention strategies are necessarily producing excellent results.

They may be. But the CDR alone cannot establish that.

CDR Is Only One View of Borrower Repayment

One of the more important distinctions for institutional leaders is the difference between cohort default rates and current borrower nonpayment or delinquency.

The CDR is a defined federal accountability measure. It looks at a specific cohort of borrowers entering repayment during a particular fiscal year and follows them through a defined default measurement period. It is not the percentage of all of an institution’s borrowers who are currently in default. It also does not identify every borrower experiencing difficulty in repayment.

The Department’s nonpayment data provide a different view. NASFAA explains that these data identify Direct Loan borrowers who entered repayment since January 2020 and whose loans were more than 90 days delinquent when the data were measured. Nonpayment rates are not default rates.

The distinction matters.

An institution could have a very low FY 2023 CDR while still having a meaningful population of former students struggling to make payments.

Both numbers can be accurate because they measure different populations, time periods, and outcomes.

The Operational Question

The return of a non-zero CDR gives institutions an opportunity to revisit something that may have received less attention during several years of zero rates: default prevention.

Federal Student Aid continues to publish default-prevention and management resources, including institutional nonpayment information, the NSLDS Delinquent Borrower Report, training resources, and current Cohort Default Rate guidance.

Institutions should consider whether they can answer several basic operational questions:

• What is our official FY 2023 CDR, and have we reviewed the underlying cohort data for accuracy?
• What do our current nonpayment and delinquency data show?
• Are particular borrower populations showing greater repayment difficulty?
• Are students who withdraw without completing experiencing different outcomes than graduates?
• Who owns default-prevention activity at the institution?
• Are exit counseling and borrower-contact processes functioning as intended?
• Is the institution using available NSLDS delinquency information?
• Are outreach activities documented?
• Does leadership receive borrower repayment information before borrowers actually reach default?
• Is the institution’s default-management strategy current?

These are management and internal-control questions, not merely financial aid processing questions.

The Regulatory Consequences Still Matter for the Cohort Default Rate

The unusually low national FY 2023 rate should not obscure the regulatory significance of CDRs.

A CDR of 30% or more for a fiscal year requires the institution to establish a default prevention task force and develop and submit a default prevention plan. If the rate is 30% or more for a second consecutive year, the institution must submit a revised plan and may be placed on provisional certification. Three consecutive years at 30% or more can result in loss of eligibility to participate in the Federal Pell Grant and Direct Loan programs.

A CDR greater than 40% in a single year results in loss of Direct Loan eligibility.

Conversely, institutions with CDRs of less than 15% for each of the three most recent fiscal years for which data are available may qualify for exceptions to the 30-day delayed disbursement requirement for first-year, first-time Direct Loan borrowers and to certain multiple-disbursement requirements.

Those thresholds are important. But an institution does not need to approach a regulatory threshold before borrower repayment outcomes deserve attention.

The Repayment Environment Is Changing Again

There is another reason institutions should avoid treating FY 2023 as a new baseline.

The repayment environment is changing.

Public Law 119-21, which the Department now refers to as the Working Families Tax Cuts Act and previously referred to as the One Big Beautiful Bill Act (OBBBA), made significant changes to federal student loan repayment, including establishment of the Repayment Assistance Plan and changes to the repayment options available to borrowers. Those changes did not cause the FY 2023 cohort default rate; the timing does not support that conclusion.

They will, however, help shape the repayment environment experienced by future borrowers.

That means today’s CDR reflects one repayment environment while future borrower outcomes will develop under another.

For institutions, the practical implication is not to predict exactly where future default rates will land. There are too many variables to support that conclusion responsibly.

The practical implication is to be prepared.

What Comes Next

NASFAA notes that the pattern of a lower-than-typical CDR will likely continue for the FY 2024 cohort, although borrowers will have had a longer opportunity to enter default than the FY 2023 cohort.

FY 2025 is more significant. NASFAA notes that the FY 2025 CDR, expected to be released in 2028, will be the first since FY 2017 whose full three-year default measurement period does not include the pandemic payment pause or repayment on-ramp protections.

That does not tell us what the FY 2025 rate will be.

It tells us that future CDRs will increasingly reflect borrower behavior under a more typical default measurement window, even as the underlying federal repayment framework continues changing.

Waiting until those rates are published to evaluate borrower repayment risk would be a poor control strategy.

Strong Institutional Practice

A stronger approach is to treat the official CDR as one indicator within a broader borrower-outcomes framework.

That means reviewing CDR data, nonpayment and delinquency information, withdrawal and completion patterns, borrower outreach, exit counseling, repayment-plan information, and default-prevention processes together.

It also means distinguishing between three questions:

What does the federal accountability metric say?

What are our borrowers experiencing now?

What are we doing about it?

A low rate may be good news.

But leadership should know whether that result reflects effective institutional practice, an unusual federal repayment environment, or some combination of both.

The Executive Question

The FY 2023 national cohort default rate is 0.4%.

The number is real.

The question is whether the institution understands what it actually means.

Can your institution explain its borrower repayment risk using more than its official cohort default rate?

Source Note

Federal Student Aid, LOANS-26-08, “FY 2023 Official National Student Loan Cohort Default Rate Briefing,” September 30, 2026. https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2026-09-30/fy-2023-official-national-student-loan-cohort-default-rate-briefing

Federal Student Aid, 2026–27 Federal Student Aid Handbook, Volume 2, Chapter 4, “Audits, Standards, Limitations, & Cohort Default Rates,” including CDR calculation, default-prevention requirements, sanctions, and administrative capability. https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2026-2027/vol2/ch4-audits-standards-limitations-cohort-default-rates

Federal Student Aid, “Default Prevention and Management” resources, including current CDR and default-prevention guidance. https://fsapartners.ed.gov/knowledge-center/library/functional-area/Default%20Prevention%20and%20Management

U.S. Department of Education, “Reimagining and Improving Student Education—Federal Student Loan Program Final Regulations,” May 1, 2026, implementing Public Law 119-21 repayment changes. https://fsapartners.ed.gov/knowledge-center/library/federal-registers/2026-05-04/reimagining-and-improving-student-education-federal-student-loan-program-final-regulations

NASFAA, “Understanding Cohort Default Rates” and Cohort Default Rate Web Center, including FY 2023 context, future-cohort discussion, and institutional implications. https://www.nasfaa.org/understanding_cdr | https://www.nasfaa.org/cdr

To discuss borrower repayment risk, default prevention, or institutional readiness, contact Keith or Herb Riley at focusEDU.