The U.S. Department of Education announced last week that the annual cohort default rate for federal student loans had declined from the previous year’s rate by 1 percentage point to 13.7 percent.

That rates dropped for the first time in years is good news and a testament to the increased availability of manageable repayment options — but the numbers behind this figure are still worrisome. Here’s a look at what the data really means for borrowers.

Check out the numbers: A cohort default rate is the percentage of a school’s borrowers who enter repayment on Stafford loans and Graduate PLUS loans in a given federal fiscal year and then default within three years. The latest rate means that out of all of the federal Stafford and Graduate PLUS loan borrowers who entered repayment during the 2011 fiscal year, 13.7 percent defaulted before Sept. 30, 2013.

First, consider what it takes to default on a federal student loan. While technically the loan is in default once it reaches 270 days — or nine months — past due, it’s generally not until it is around 330 days past due that it transfers over to collections and experiences the real consequences of default.

Meanwhile, in addition to the various lower payment and deferment options available, most loan holders offer up to 36 months of forbearance that will postpone a borrower’s payments with a simple phone call. The forbearance option alone should result in almost no defaults within that cohort default period.

To be clear, forbearance is not a great option for borrowers as interest still accrues on the loan, generally increasing the balance, but it’s still better than default.

[Understand four income-driven student loan repayment plans.]

As the cohort default rate is used as an indicator of a school’s success and is part of the federal loan program eligibility criteria, policy makers have struggled to find the appropriate balance between school accountability for loan defaults versus other factors such as the economy, job market and the borrowers themselves.

Understand what a high default rate means for students: While schools with exceptionally low cohort default rates are exempt from certain rules that affect the disbursement of new loans, schools with high rates face sanctions and a possible loss of eligibility for federal aid programs, which for many schools would result in closure.

This year, 21 schools are at risk for loss of eligibility due to their 2011 rate. This is the highest number in decades, although it’s less than originally projected thanks to a controversial last-minute reprieve offered by the Department of Education.

[Learn how to avoid student loan company scams.]

Students attending those schools will lose access to federal loan and grant funds no later than mid-October, unless the school appeals their default rate. Schools that lose access to federal funds because of a high cohort default rate do so for three fiscal years.

Students attending those schools will still be required to repay loans they’ve borrowed to attend that school, but they may have to resort to payment plans or private loans or attempt to transfer institutions in order to complete their credential.

If the school closes due to its loss of eligibility, and students were enrolled within 120 days of that closure, they may be eligible for a discharge of their federal loans. If the school you are attending hasn’t lost eligibility but has a rate higher than the national average, it could be an indicator of lower job placement or income than anticipated, so it might be smart to reduce your loan borrowing as much as possible.

Remember, too, that Parent PLUS loans are not considered at all within a cohort default rate, which could be a perverse incentive for some schools to encourage Parent PLUS borrowing over Stafford borrowing, despite the lower interest rate available for Stafford loans.

[Learn what parents should consider before borrowing a PLUS loan.]

While Parent PLUS loans are useful tools for bridging the tuition gap, families should ensure they’ve recieved the maximum allowed in federal Stafford loans before acception other loan types such as private and Parent PLUS.

Also, remember that the cohort default rate only looks at that first three years and therefore doesn’t reflect the actual amount of borrowers who default on their student loans. Although with a bit less fanfare, the Department of Education is now required to publish “lifetime” default rates annually.

This number is calculated based on dollars and loans in default rather than borrowers — so it’s not really an apples-to-apples comparison with the cohort default rate — but the numbers are still troublesome.

According to the report published in June, 18.4 percent of the loan dollars for that same fiscal year 2011 cohort are projected to default within 20 years, averaged over all school types.

The numbers get more alarming when you dig into the different sectors of schools, as over a third of federal loan dollars are projected to default for students who attended two-year non-profit institutions and almost half defaulting for those who attended two-year for-profit schools. These numbers should be considered when choosing a college as they can be indicative of low graduation and job placement rates.

More from U.S. News

4 Warning Signs You’re Headed for Student Loan Default

Make a College Cost Plan to Limit Student Loans

Parents: Think Hard Before Borrowing for, With Your Student

Student Loan Default Rates Fall, but Borrowers Should Still Worry originally appeared on usnews.com