Federal Student Aid released FY2023 official student-loan cohort default rates September 30 but warned that pandemic payment protections make the figures unusually favorable and potentially misleading.
Editorial Note
The official FY2023 cohort default rates released September 30 should be interpreted carefully.
Federal Student Aid explicitly warns that the pandemic-era federal student-loan payment pause prevented borrowers with Department-held loans from entering default during much of the measurement period. As a result, FY2023 cohort default rates may make borrower repayment outcomes look substantially better than underlying conditions actually were.
This article provides general educational and financial-aid information. It does not provide financial, legal, debt-management, or repayment advice.
Federal Student Aid released official FY2023 cohort default rates on September 30 and immediately delivered an unusual warning: the numbers may look good for the wrong reason.
The Department of Education says the data was significantly affected by the federal student-loan payment pause that began in March 2020.
During that pause, borrowers with Department-held loans were not required to make payments and did not enter default.
Bottom Line
A low cohort default rate normally appears positive.
It can suggest that graduates and former students are successfully managing loan repayment.
The FY2023 numbers are different.
Because pandemic-era protections prevented large numbers of borrowers from entering default, the official rates provide an incomplete picture of repayment risk.
Federal Student Aid is therefore encouraging colleges to pay attention to a different measure: the nonrepayment rate.
That data shows a much more concerning picture.
FSA says approximately 1,800 institutions have nonrepayment rates of at least 25 percent.
What Happened
Federal Student Aid posted the official FY2023 National Student Loan Cohort Default Rate briefing on September 30.
The rate covers borrowers who entered repayment on Direct Loans or Federal Family Education Loans between October 1, 2022, and September 30, 2023.
The default window then runs through September 30, 2025.
Under ordinary conditions, that structure gives policymakers and institutions a way to see how many borrowers default within a defined period after entering repayment.
But these borrowers entered the measurement period during extraordinary federal repayment policies.
That makes historical comparison difficult.
What Is a Cohort Default Rate?
A cohort default rate, commonly called a CDR, measures the percentage of certain federal student-loan borrowers from an institution who enter repayment during a particular fiscal year and then default within the applicable measurement period.
The metric matters because federal law connects extremely high institutional default rates with accountability consequences.
Colleges therefore have a strong incentive to monitor whether former students are successfully repaying their loans.
The CDR is not the percentage of all graduates who default.
It applies to a defined borrower cohort and specific federal loans.
That distinction matters when interpreting institutional statistics.
Why FY2023 Is Unusual
The pandemic repayment pause dramatically altered normal borrower behavior.
Beginning in March 2020, required payments on Department-held federal student loans were suspended.
Interest treatment and default rules were also affected by federal pandemic policies.
A borrower generally cannot become newly delinquent for failing to make a payment that the federal government is not requiring.
That means the FY2023 CDR calculation includes a period when normal default mechanisms were effectively interrupted.
Federal Student Aid therefore says the resulting rates may provide an overly favorable picture of borrower repayment outcomes.
Why a Low Default Rate Can Mislead
Imagine an institution where many former students would normally struggle with payments.
If federal policy temporarily prevents those borrowers from entering default, the institution's official default rate can remain low even though borrowers may still be financially vulnerable.
That is the central analytical problem.
The CDR records a specific legal outcome: default.
It does not directly measure whether borrowers are comfortable financially, making consistent progress on repayment, or likely to struggle once normal collection processes resume.
That is why policymakers increasingly need additional measures.
The Nonrepayment Rate Tells a Different Story
Federal Student Aid is asking institutions to examine their nonrepayment rate.
This metric looks at Direct Loan borrowers who entered repayment between January 2020 and May 2025 and whose loans were more than 90 days delinquent.
The Department updated that data through August 2026.
FSA says approximately 1,800 institutions have nonrepayment rates of 25 percent or higher.
That means at least one quarter of the relevant borrowers at those institutions are experiencing serious repayment difficulty under the measure.
The contrast with artificially low official default rates is important.
Borrowers can be struggling even when they have not yet crossed the legal threshold into default.
Who This Affects
Students and former students are the most important group.
Repayment difficulties can affect household budgets, credit, financial stress, and long-term decisions involving housing, transportation, career mobility, and family finances.
Colleges are also affected.
Institutions participating in federal student aid have responsibilities related to entrance and exit counseling, financial-aid administration, borrower communication, and default prevention.
Financial-aid offices may need to monitor graduates more carefully as federal repayment enforcement normalizes.
Institutional leaders also have reputational and regulatory reasons to understand borrower outcomes.
Colleges Cannot Treat This as Only a Borrower Problem
Students are legally responsible for repaying their loans.
That does not mean colleges have no role in repayment outcomes.
Institutions influence how much students borrow, whether they complete a credential, the labor-market value of programs, whether students understand repayment obligations, and how effectively financial-aid offices communicate.
A borrower who leaves school without completing a credential can face particular risk.
They may carry debt without receiving the wage benefits associated with graduation.
That is one reason default-prevention policy intersects with retention, completion, academic advising, and program quality.
The Role of Program Value
Repayment outcomes do not depend only on student behavior.
A program that produces strong earnings can make debt easier to manage.
A program with high costs, weak completion, or limited employment opportunities can leave graduates in a more difficult position.
That does not mean every low-paying field is educationally unimportant.
Public-service professions and other socially valuable careers may pay less than some private-sector jobs.
The point is that students need realistic information about the relationship among tuition, borrowing, completion, expected earnings, and repayment obligations.
Financial aid should support educational opportunity without hiding long-term cost.
What Federal Student Aid Is Asking Colleges to Do
FSA is encouraging institutions with high nonrepayment rates to strengthen default-management and prevention plans.
The Department specifically points institutions toward targeted outreach for delinquent borrowers.
It also announced an October 13 webinar titled Default Prevention: Institutional Strategies for Success.
The webinar will address default management, institutional consequences, borrower communication, and available resources.
Federal Student Aid has also created a self-paced learning track on cohort default rates and default prevention.
That signals that the Department expects institutions to prepare before the next CDR cycle becomes more representative of normal repayment conditions.
Why FY2024 Could Matter More
Federal Student Aid says the upcoming draft FY2024 cohort default rates will be the first such release after the full expiration of pandemic-era repayment flexibilities.
That means FY2024 may provide a clearer view of borrower stress.
It could also produce substantially different institutional results.
Colleges that appear safe under FY2023 data should therefore be cautious about assuming those numbers represent a stable long-term trend.
The repayment environment changed dramatically after the pandemic pause ended.
Default statistics may eventually catch up with that reality.
What This Does Not Mean
The September 30 briefing does not mean 25 percent of all student-loan borrowers nationwide are in default.
The figure concerning 1,800 institutions refers to institutional nonrepayment rates of at least 25 percent under a specific federal measure.
Nonrepayment and default are also not the same thing.
A borrower can be seriously delinquent without yet meeting the legal definition of default.
The FY2023 CDR should therefore not be described either as proof that the student-loan system is healthy or as evidence that all borrowers are failing.
The correct interpretation is narrower: the official default-rate measure is distorted by extraordinary pandemic policies.
What Students Should Understand
Borrowers should not assume that a college's low official default rate guarantees that graduates rarely struggle with repayment.
Institutional outcomes should be examined alongside graduation rates, program cost, borrowing levels, earnings data, employment outcomes, and available support.
Students should also understand their own loan terms before leaving school.
Repayment plans, servicers, interest, deferment, forbearance, delinquency, default, and federal repayment programs can be complicated.
Confusion becomes more costly after payments are already missed.
Financial literacy is most useful before repayment problems develop.
The Bigger Picture
Federal student-aid accountability is moving into a post-pandemic reality.
For several years, emergency policy protected borrowers from many ordinary repayment consequences.
That made sense during extraordinary economic conditions.
It also disrupted the data normally used to judge repayment performance.
Policymakers now have to distinguish between true improvement and temporary statistical effects.
That will take time.
The September 30 briefing is important because Federal Student Aid is acknowledging the limitation directly rather than presenting the official default rates without context.
What Happens Next
Federal Student Aid plans to release draft FY2024 cohort default rates early next year.
Those numbers will receive close attention because they will reflect borrower behavior after the full expiration of pandemic-era flexibilities more clearly than FY2023.
Institutions with high nonrepayment rates are being encouraged to act now.
That means borrower outreach, repayment education, default-management planning, and analysis of which groups of students are struggling.
The most useful institutions will not wait until a regulatory penalty appears.
They will treat borrower distress as an early-warning indicator.
Why This Matters
Student debt policy is often discussed at the national level in trillions of dollars.
Borrowers experience it one payment at a time.
A statistical measure can look healthy while many individuals remain financially stressed.
Federal Student Aid's September 30 warning is therefore important.
It reminds colleges, policymakers, and families that official metrics must be interpreted in context.
A low default rate is useful only when it reflects genuine repayment success.
When federal policy temporarily prevented default, a low rate tells us much less.
Key Takeaways
- Federal Student Aid released official FY2023 cohort default rates on September 30.
- The rates cover borrowers entering repayment between October 1, 2022, and September 30, 2023.
- Pandemic-era payment protections significantly distorted the results.
- FSA warns that FY2023 CDRs may present an overly favorable picture of repayment outcomes.
- Approximately 1,800 institutions have nonrepayment rates of at least 25 percent.
- Nonrepayment and default are different measures.
- FSA is encouraging colleges to strengthen borrower outreach and default-prevention plans.
- Draft FY2024 CDRs are expected early next year and should better reflect post-pandemic repayment conditions.
Frequently Asked Questions
What is a cohort default rate?
It is an institutional measure showing the percentage of certain federal student-loan borrowers who enter repayment during a defined fiscal year and default within the applicable monitoring period.
Why are FY2023 default rates unusual?
Pandemic-era federal policies suspended required payments and prevented borrowers with Department-held loans from entering default during much of the relevant period.
What is a nonrepayment rate?
Federal Student Aid uses the measure to identify borrowers who are significantly delinquent even when they have not yet entered default.
Are 1,800 colleges in default?
No.
FSA says approximately 1,800 institutions have nonrepayment rates of 25 percent or more.
That is not the same as saying the institutions themselves are in default.
Why will FY2024 data matter?
Federal Student Aid says the FY2024 CDR cycle will be the first after the full expiration of pandemic-era repayment flexibilities, making it potentially more representative of normal borrower repayment behavior.
Final Thoughts
Student-loan statistics need context.
The FY2023 cohort default rate may look reassuring at first glance.
Federal Student Aid itself says readers should be cautious.
The payment pause made it much harder for borrowers to enter default, so the official rate does not capture the full amount of repayment stress building underneath.
The more useful question is not whether today's default number is low.
It is whether borrowers are successfully repaying, completing valuable programs, and receiving enough support to prevent delinquency from becoming default.
September 30’s federal briefing suggests that many institutions still have substantial work to do.
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Sources
Federal Student Aid — FY2023 Official National Student Loan Cohort Default Rate Briefing
