Is Your Institution Prepared? Navigating the Department of Education’s Latest Guidance on Default Management Plans
On February 18, 2026, the Department of Education’s Federal Student Aid (FSA) office released a crucial update that every higher education leader needs to read. The announcement revealed that over 1,800 institutions currently have student loan nonpayment rates at or exceeding 25%. With pandemic-era flexibilities fading, the message is clear: relying on artificially low Cohort Default Rates (CDRs) is no longer a viable strategy. The time to update, maintain, and aggressively execute your Default Management and Prevention Plan is now.
Are you prepared to protect your students’ financial futures and your institution's Title IV eligibility?
The Shift from CDRs to Nonpayment Rates
While official CDRs are the standard metric for federal aid eligibility, FSA has made it clear that nonpayment rates are currently a much more reliable indicator of repayment success. Institutions with high nonpayment rates are at serious risk of eventually crossing the dangerous 30% CDR threshold. Once a school hits that mark, they are legally required to submit a default prevention plan, and they face the very real threat of losing access to all federal student assistance.
What is Expected of Institutions?
To mitigate these risks, the Department is urging schools to take proactive steps, including:
Developing Robust Plans: Establishing a default prevention task force, identifying factors causing high delinquency, and setting measurable objectives to improve repayment.
Targeted Outreach: Utilizing the National Student Loan Data System (NSLDS) Delinquent Borrower Report to identify at-risk students and deploy targeted communication.
Leveraging New Policies: Incorporating the reforms of the One Big Beautiful Bill Act (OBBBA), including guiding students toward the new Repayment Assistance Plan (RAP) launching in Summer 2026 and educating them on expanded loan rehabilitation opportunities.
Enhancing Resources: Building comprehensive borrower portals and integrating financial literacy into the student experience from day one.
Don't Wait for a High CDR Notification
Proactive default management is essential for student success and institutional survival. Partnering with JHSG ensures that you are ahead of the curve, fully compliant, and actively supporting your borrowers.
