WEST ORANGE, N.J., Dec. 9 /PRNewswire-FirstCall/ -- Lincoln Educational Services Corporation (Nasdaq: LINC) ("Lincoln") today reported that it has obtained from the Department of Education (DOE) its unofficial trial three-year cohort default rates (CDRs) for the fiscal years ending September 30, 2005, 2006 and 2007. The three-year CDRs will replace the current two-year CDRs for purposes of determining a school's eligibility to participate in Title IV programs beginning with the 2009, 2010, and 2011 three-year CDRs.
The unofficial three-year CDRs are for informational purposes only and are intended to provide schools with an indication of the three-year CDR calculation that the DOE will first use for 2009 CDRs released in 2012. Under the three-year 2009 CDR calculation, the student loan default rate measurement period will increase from two years to three years for students who entered repayment on their federal student loans between October 1, 2008 and September 30, 2009. The DOE will not impose sanctions based on the new three-year CDRs until 2014, when default rates for three consecutive fiscal years will have been calculated under the new methodology. Until that time, the DOE will continue to calculate and publish two-year CDRs and to base sanctions on those two-year CDRs.
A school may lose its eligibility to receive federal financial aid under certain Title IV programs if its CDRs exceed specified percentages. Currently, a school's two-year CDRs are calculated annually based on the number of current and former students who are scheduled to begin repaying their federal student loans in one fiscal year and who default in that fiscal year or in the next fiscal year. A school loses eligibility to participate in certain Title IV programs if its two-year CDRs are 25% or above for each of the three most recent fiscal years or greater than 40% in a single fiscal year.
Under the new regulations, three-year CDRs will be calculated based on the number of current and former students who are scheduled to begin repaying their federal student loans in one fiscal year and who default in that fiscal year or in either of the next two fiscal years, effectively extending the measurement period from two fiscal years to three fiscal years. In addition, the current 25% threshold for losing certain Title IV eligibility based on three consecutive fiscal year CDRs will increase to 30% for three-year CDRs for fiscal year 2009 or later. However, sanctions will not be imposed based on three-year CDRs under the 30% threshold until the DOE has issued three-year CDRs for the 2009, 2010, and 2011 fiscal years. A school with a single three-year CDR for fiscal year 2011 or later that exceeds the 40% threshold in any single fiscal year is subject to loss of its eligibility to participate in certain Title IV programs.