Posted Date: November 19, 2015
Matthew Sessa, Deputy Chief Operating Officer
Subject: Federal Student Aid Posts Updated Reports to FSA Data Center
Today, Federal Student Aid posted a series of updates to its FSA Data Center, the centralized online source for Federal Student Aid data. Below is a summary of the updated quarterly reports available on the FSA Data Center. All reports reflect activity through or as of September 30, 2015.
The Federal Student Aid portfolio reports include outstanding balances and recipients by loan program, loan type, loan status, repayment plan, and delinquency status.
The Free Application for Federal Student Aid (FAFSA®) Reports include application submissions by the applicant’s legal state of residence and by the schools listed on the applicant’s form.
The loan and grant volume reports provide award year disbursements and recipients by aid program for schools participating in the Title IV Programs. The summary reports, first introduced in August 2015, provide award year disbursements by school type and award year borrower and recipient counts.
In addition to the existing quarterly reports, we have added three new reports this quarter.
The Location of Federal Family Education Loan (FFEL) Program Loans report provides additional insight into the dwindling FFEL Program portfolio by detailing the ownership of the existing FFEL Program loans.
The FAFSA Year-End Reports provide summary statistics about applicants who completed the FAFSA by application cycle. Data elements include gender, age, grade, degree, parent education level, Pell eligibility, dependency status, type of FAFSA filed, Internal Revenue Service (IRS) Data Retrieval Tool usage, and FAFSA filing time. Going forward, this report will be completed within six months following the end of an application cycle.
American Customer Satisfaction Index (ACSI) Scores report, which will be updated annually, demonstrates customer satisfaction among our applicants, in-school students, and borrowers.
Finally, we have centralized the servicer quarterly performance metrics, which were previously posted through electronic announcements on the Information for Financial Aid Professionals (IFAP) Web site. Federal Student Aid compiles quarterly customer satisfaction survey scores and default prevention statistics for the members of the federal loan servicer team every six months to determine each servicer’s allocation of loan volume. Allocations, which are also posted to the FSA Data Center, are determined twice per year as described in each servicer’s contract.
Key Findings in the Quarterly Reports
Federal Student Aid proactively posts these reports in support of open government initiatives to help ensure consistency, increase transparency, and establish self-service opportunities for customers. While not exhaustive, the information below provides a snapshot of key findings in our most recent reporting. Because student loans are highly cyclical in nature, it is important to compare figures year over year whenever possible.
Shifts in the Outstanding Loan Portfolio
Since the implementation of the Health Care and Education Reconciliation Act of 2010, which eliminated new FFEL Program loans after June 30, 2010, the make-up of the outstanding loan portfolio has shifted. Today, the outstanding FFEL portfolio represents only 30 percent of the outstanding loan portfolio while the Direct Loan (DL) portfolio has grown to represent more than 69 percent of the outstanding loan portfolio. Perkins Loans make up the remaining 0.7 percent of the Federal Student Aid portfolio.
With the leveling-off and gradual decline in loan originations, the portfolio has matured, with a decreasing percentage in the interim loan statuses of in-school and in grace. The proportion of Direct Loan portfolio balances in these statuses has declined from 32.9 percent (September 2013) to 28.0 percent (September 2014), and to 23.6 percent (September 2015). In the FFEL portfolio, where no loans have originated in more than five years, the percentage has gone from 4.0 percent to 2.0 percent to 1.1 percent.
Information from our new report, Location of FFEL Program Loans, shows that the majority (61 percent) of FFEL Program loans by total dollars are still with commercially-held lenders while another 11 percent are with guaranty agencies. The remaining 28 percent of FFEL Program loans by total dollars are ED-owned and serviced by ED’s federal loan servicers, the Total and Permanent Disability loan servicer, or are in collections.
Increased Enrollment in Income-Driven Repayment Plans
Enrollment in income-driven repayment (IDR) options such as Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment continues to increase. As of September 2015, more than 4.2 million Direct Loan borrowers were enrolled in IDR plans, a 50 percent increase from September 2014 and a 147 percent increase from September 2013.
Federal Student Aid continues to provide information about borrowers enrolled in PAYE and IBR plans who make reduced payments based on a partial financial hardship. As of September 2015, 81.1 percent of Direct Loan IBR and PAYE borrowers were making PFH payments. (Note: The ICR plan does not offer reduced payments to borrowers based on a partial financial hardship.)
Between September 30, 2014 and September 30, 2015, outstanding balances of DL recipients enrolled in IDR plans went from comprising 28 percent of DL balances in Repayment, Deferment, and Forbearance to nearly 36 percent.
Deferment and Forbearance Usage
Deferments continue to represent less than 12 percent of outstanding Direct Loan volume and less than eight percent of outstanding FFEL Program volume. The majority of deferments continue to be education-related deferments. Specifically, more than 86 percent of DL volume in deferment and 68 percent of FFEL volume in deferment are in education-related deferments. While in-school deferments are on the rise, hardship deferments such as unemployment and economic hardships have declined throughout the fiscal year. Year over year comparisons are not currently available but we will continue to monitor these trends going forward.
Less than 10.7 percent of DL volume is in forbearance, which represents a slight decrease from the same time period last year. However, discretionary forbearances related to temporary hardships, such as financial difficulties, change in employment, or medical circumstances, still represent the majority of Direct Loan dollars in forbearance (62 percent). Another 21 percent are in administrative forbearance, a status that servicers often use while borrower actions are pending.
Delinquency and Default in the DL Portfolio
Almost four out of five non-defaulted DL borrowers in active repayment are current (on time or less than 31 days delinquent) on their federal student loan payments. Thus, the active repayment 31+ delinquency rate for DL is 21.7 percent by recipient count and 16.4 percent by total dollar balance. While compared with the September 30, 2014 corresponding rates of 24.0 percent and 18.1 percent, this represents year-over-year decreases of 9.6 percent and 9.4 percent in the delinquency rates. In contrast, the ED-held FFEL portfolio (primarily loans purchased through the Ensuring Continued Access to Student Loans Act [ECASLA]) has a 31+ delinquency rate of 21.0 percent by recipient count and 22.3 percent by total dollar balance. When compared with the September 30, 2014 corresponding rates of 24.0 percent and 24.5 percent, this represents year-over-year decreases of 12.6 percent and 8.8 percent in the delinquency rates.
Please note that active repayment includes all current and delinquent borrowers whose accounts are currently serviced by federal servicers. Borrowers with loans in grace, in-school, in deferment, in forbearance, or in bankruptcy or disability status are not expected to make payments and are not included in this calculation. When calculating a delinquency rate that includes deferment and forbearance in addition to active repayment, the 31+ delinquency rate for DL decreases to 15.5 percent by recipient count and 11.1 percent by total dollar balance while the ED-held FFEL 31+ delinquency rate decreases to 14.9 percent by recipient count and 15.1 percent by total dollar balance.
Due to the growing interest in the defaulted portfolio, Federal Student Aid is looking into how we can produce additional data sets to better meet the changing needs of the community. While the Portfolio by Loan Status report provides information on the number of recipients and total dollars of loans in default, this report shows only the entire open stock of defaulted loans at a specific point in time. In the coming year, Federal Student Aid plans to release data sets about new defaults. This open stock increases over time and includes recent defaults as well as defaulted loans from previous quarters, years, and decades that are still open. This report will provide information about loans entering default for the first time as well as re-defaults. In the future, we hope to further expand the default section of our site to include information on collections, rehabilitated loans, and aging of the portfolio.
The FAFSA Year-End reports suggest that more applicants are filing earlier than ever before. In fact, 43 percent of 2014-2015 applicants filed in the first quarter of the application cycle compared to 37 percent in 2006-2007. Almost half of renewal applicants apply in the first quarter compared to just over a third of those filing an original application. With the changes to the application cycle announced in September 2015, applicants will be able to access the 2017-2018 application even earlier, beginning on October 1, 2016.
While usage of the IRS Data Retrieval Tool (DRT) is at an all-time high among FAFSA applicants, the increase in early applications hindered widespread use of the tool. For example, 34 percent of parents of dependent students had not yet filed their taxes by the time they filed their 2014-2015 FAFSA. Among 2014-2015 independent applicants that had filed their taxes, 58 percent had used the DRT; among parents of dependent students, 46 percent had used the DRT. However, allowing applicants to use tax information from two-years prior when completing the FAFSA should contribute to an increase in use of this tool and the accuracy of information reported on the FAFSA while decreasing the burden on schools to verify students’ tax information.
More freshman applicants are reporting multiple schools on their FAFSA and those reporting multiple schools are more likely to apply early. While in 2008-2009, 80 percent of freshmen filing an original application listed just one school; the figure dropped to 68 percent by 2014-2015. Among freshmen that reported at least two schools on their 2014-2015 FAFSA, 63 percent applied in the first quarter of the application cycle; among those that report at least four schools, the number increases to 75 percent; and among those who report the maximum number of schools allowable (10), 84 percent file within the first quarter.
Decreased Application Volume and Aid Disbursements
In the first three quarters of the 2015-2016 application cycle, more than 17.1 million FAFSAs were submitted, a 3.9 percent decrease from the same time period last year. 2014-2015 FAFSA submissions were also down three percent from 2013-2014. The 2014-2015 grant and loan volume, as of September 30, 2015, suggests there will be similar declines in disbursements; however, at this time, the data is not mature enough to make those comparisons. Disbursements are likely to continue to increase as a result of typical year-end adjustments and summer disbursements made for the 2014-2015 award year. Federal Student Aid expects to report on this decrease in more detail in its next quarterly release.
Customer Satisfaction Results
Federal Student Aid uses the American Customer Satisfaction Index (ACSI) to measure customer satisfaction among applicants, in-school students, and borrowers. The ACSI survey provides a national, cross-industry, cross-sector economic indicator, using widely accepted methodologies to obtain standardized customer satisfaction information. Survey scores are indexed on a 100-point scale. Applicant surveys are conducted continuously on FAFSA.gov and the annual score is an average of the quarterly scores reported throughout the fiscal year. The in-school student survey is conducted annually among aid recipients, and the borrower survey is conducted quarterly. The borrower annual score is calculated based on surveys conducted between July 1 and June 30 of the following year.
Although Federal Student Aid consistently outscores the federal government satisfaction score reported by ACSI, the implementation of FSA ID, which changed how applicants verify their identity with Federal Student Aid, did result in a decrease in customer satisfaction among applicants in FY2015. In future reports, customer satisfaction scores among borrowers may decrease due to two recent survey changes. Specifically, delinquent borrowers were added to the survey in October 2014 and the survey format was changed from phone-based to online in July 2015. FSA will continue to monitor these impacts going forward.
Key Items to Note While Reviewing These Reports
To accurately interpret the data, please note the following items:
In the portfolio reports, recipient counts are based at the loan level. For that reason, recipients may be counted multiple times across varying loan statuses. For example, a recipient with one loan in deferment and one loan in forbearance would be counted once in each category. A recipient with two loans in the same status would only be counted once in that category.
In the portfolio reports by servicer, the not-for-profit servicers (NFPs) should not be directly compared to the Title IV Additional Servicers (TIVAS) due to differences in their portfolio composition. The NFP portfolio is overwhelmingly made up of accounts received from the Direct Loan Servicing Center in 2011-2012. These loans were already in repayment and current at the time they were transferred. As a result, the loans are more much stable and mature than the TIVAS portfolios. The TIVAS have high volumes of new borrowers who are much more likely to go in and out of delinquency. The TIVAS also service FFEL Program loans purchased through ECASLA and loans of all statuses received from the Direct Loan Servicing Center. Although the NFPs started getting new borrowers in January 2015, most of those loans are still in an in-school status.
The Direct Loan Portfolio by Delinquency Report should not be directly compared with the quarterly performance metrics for federal student loan servicers. The Direct Loan Portfolio by Delinquency Report is based on the Direct Loan portfolio only while the servicer metrics include all ED-held loans the servicer is responsible for, including ED-held FFEL Program loans. It should also be noted that the report on the FSA Data Center defines current repayment as less than 31 days delinquent while the most recent contracts with the servicers define current repayment as five days or less delinquent.
In the loan and grant reports, the first tab of the spreadsheet shows the number of recipients and disbursements for the specified quarter while the second tab shows the cumulative, award year-to-date activity. The second tab of an award year’s fourth quarter report will show data for the full award year. Since the information is reported by specific loan type or grant program, a total unique grant or loan recipient count is not available by school.
Please note that since loan and grant reports are run a few days after the quarter’s end, initial runs often underreport activity as a result of reporting delays and activity that occurs for the award year after the date (for example, summer disbursements).
The FSA Data Center was launched in 2009 in an effort to increase government transparency by proactively posting information useful to businesses, institutions, the media, and individuals. In addition to the reports listed above, Federal Student Aid regularly posts strategic plans, copies of executed contracts, and school compliance reports, such as Clery Act reports and financial composite scores, on the FSA Data Center. Federal Student Aid is committed to continuing to expand the data sets available on the FSA Data Center in alignment with customer needs.