Today, Federal Student Aid released a series of updates to the quarterly application, disbursement, and portfolio reports on its FSA Data Center to include data through December 31, 2019. As part of this release, Federal Student Aid also published its first report regarding Automatic Closed School Discharge. 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 stakeholders.
Key Findings in the Quarterly Reports
While not exhaustive, the information below provides a snapshot of key findings in our most recent reporting. Student loans are highly cyclical in nature so figures should be compared year over year whenever possible.
Outstanding Loan Portfolio Overview
Today, the outstanding federal student loan portfolio is $1.51 trillion. The Direct Loan (DL) portfolio now represents almost 83 percent of the outstanding loan portfolio while the Federal Family Education Loan (FFEL) portfolio represents 17 percent, and Federal Perkins Loan Program loans comprise less than one-half percent. The federally managed portfolio, which includes DL and FFEL Program loans owned by the Department, is now $1.34 trillion, representing almost 89 percent of the total portfolio. The growth of the portfolio has slowed since 2010 as new disbursements have declined. Year-over-year, the total federal loan portfolio has increased 4.7 percent—about $68 billion—with the FFEL portfolio decreasing by seven percent and the DL portfolio increasing by almost eight percent.
Application Volume and New Aid
In the first quarter of application cycle 2020-2021, more than 5.5 million applications were submitted, representing a slight increase compared to the same time period last year. Application volume has generally declined since 2011-2012, except for the 2017-2018, when the application cycle first extended from 18 to 21 months. Through December 31, 2019, approximately 17 million applications were submitted for the 2019-2020 application cycle, a 2.9 percent decrease from the same time period in the prior year. Trends in application volume typically closely align to disbursement trends. For example, in the most recently completed award year, 2018-2019, application volume and dollars disbursed both decreased by 2.3 percent compared to the prior year.
Income-Driven Repayment Enrollment
Enrollment in income-driven repayment (IDR) plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) has continued to increase. As of December 2019, 7.9 million DL borrowers were enrolled in IDR plans, a seven-percent increase from December 2018. Although 1.3 million ED-held FFEL borrowers are enrolled in IBR and Income-Sensitive Repayment (ISR), there is a large overlap of DL and ED-held FFEL IDR borrowers. Combined, more than 8.2 million unique borrowers are enrolled in IDR plans.
New Defaults and Delinquencies
To more accurately measure the flow of defaults, Federal Student Aid began publishing data about new DL defaults in March 2016. Because there are currently no provisions to write off defaulted federal student loans, historically, the cumulative defaulted loan portfolio continues to grow even as delinquencies and new defaults have slowed. During FY2020 Q1, the percentage of new defaulters slightly increased compared to the same time last year while the percentage of dollars entering default remained on par with last year. Approximately 300,000 DL borrowers—or 1.6 percent of recipients who were in repayment last quarter—with outstanding balances totaling $7.6 billion—or 1.1 percent of the total outstanding dollars that were in repayment last quarter
— entered default.
Last quarter, DL delinquency rates resumed their downward trend, and that trend has continued this quarter. In fact, more than 84 percent of non-defaulted DL recipients with loans in active repayment are current on their loans (i.e. on time or less than 31 days delinquent), putting the 31-day plus delinquency rate at 15.6 percent by recipient count and 12.4 percent by total dollar balance, representing year-over-over decreases of 8.6 and 8.3 percent, respectively.
Like DL, the ED-held FFEL portfolio’s 31+ delinquency rates also experienced year-over-year decreases in recipients and dollars, now at 16.5 percent by recipient count and 19.0 percent by total dollar balance. These decreases contributed to a similar reduction in delinquency rates across the entire federally managed portfolio (combining Direct Loans and ED-held FFEL), which are now at 15.7 percent by recipient count and 12.7 percent by total dollar balance.
Borrower Defense to Repayment Report
Provisions in the Higher Education Act referred to as borrower defense to repayment (borrower defense) allow borrowers to seek loan forgiveness if a college or university misled them or engaged in other misconduct in violation of certain state laws. During the last quarter, Federal Student Aid received approximately 12,000 new borrower defense applications, bringing the total application count to approximately 300,000.
Of those 300K applications, almost 49K applications have been approved, 25K applications have been deemed ineligible, and more than 8K applications have been closed with no need for adjudication. Cases are closed at a borrower’s request or when the borrower qualifies for other benefits, including automatic closed school discharge. The remaining 217K applications are pending.
To date, nearly $535 million in discharges have been processed for approved borrowers. Servicers continue to process the discharges associated with borrowers whose applications were approved in December.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) Program, which was established under the College Cost Reduction and Access Act of 2007, permits DL borrowers who make 120 qualifying monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer, to have the remainder of their balance forgiven.
As of December 31, 2019, approximately 127,000 borrowers had submitted more than 161,000 applications for loan forgiveness under this program. Of the approximately 151,000 applications that have been processed, 76 percent of them were ineligible due to not meeting the program requirements (such as making 120 qualifying payments or having eligible loans or qualifying employment). Another 22 percent of PSLF applications were ineligible due to missing or incomplete information on the form. These borrowers have been advised to submit a complete application so a determination of their eligibility can be made. As of December 31, 2019, 2,246 applications have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $99.2 million in discharges for 1,565 unique borrowers.
Almost 1,300 borrowers have received approximately $54.8 million in discharges under the Temporary Expanded PSLF (TEPSLF) opportunity. Of the approximately 24,000 borrowers who have been deemed ineligible for TEPSLF, one-third have not been in repayment for 10 years; one-fifth do not meet the TEPSLF payment requirements for payments during the last 12 months; and one-tenth have no loans eligible to receive TEPSLF.
Automatic Closed School Discharge (ACSD)
The 2016 borrower defense regulations provide for an automatic discharge of some or all of the Direct Loan, FFEL, or Perkins Loan program loans an eligible borrower (or, if applicable, the dependent child on whose behalf a parent took out a PLUS loan) obtained to attend a school that closed on or after November 1, 2013. A borrower is eligible for an automatic closed school discharge if the borrower was enrolled when the school closed; or withdrew not more than 120 days before the school closed; or if approved by the U.S. Department of Education (the Department), withdrew more than 120 days before the school closed; and did not enroll at another Title IV-eligible school within three years of the date the borrower’s prior school closed.
The first ACSD report summarizes the number of borrowers and the associated loan balances that were determined eligible for ACSD as a result of the borrower’s school closing between November 1, 2013 and December 31, 2019. It also includes the status of those discharges. Through December 31, 2019, approximately 31,400 borrowers with loans totaling $347.1 million were eligible for an automatic discharge, and approximately 30,000 borrowers had received those discharges.
The report also provides school-level detail associated with these discharges. Going forward, this report will be refreshed quarterly.
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 be counted once in that category.
In the portfolio reports by servicer, please note the differences in portfolio composition between the Title IV Additional Servicers (TIVAS) and the Not-For-Profit Servicers (NFPs). The NFP portfolio was originally made up of accounts received from the Direct Loan Servicing Center in 2011–12. These loans already were in repayment and current at the time they were transferred. As a result, the loans were more stable and mature than the TIVAS portfolios. In addition to new accounts, the TIVAS service FFEL Program loans purchased through the Ensuring Continued Access to Student Loans Act and loans of all statuses received from the Direct Loan Servicing Center in 2011–12. The NFPs first started receiving new borrowers in January 2015.
The Consolidated Appropriations Act of 2016 required the Department to allocate new student loan borrower accounts to eligible student loan servicers based on their performance compared to all loan servicers utilizing established common metrics, and based on the capacity of each servicer to process new and existing accounts no later than March 1, 2016. Prior to the passage of the Consolidated Appropriation Act, the Department established common performance metrics across all servicing contracts but maintained separate allocation pools to reflect differences in portfolio composition.
Given this requirement, beginning on March 1, 2016, new allocation percentages were based on performance under the established common metrics compared across all loan servicers. Since March 2016, the Department has developed a revised methodology, that it continues to implement today, that better reflects differences across servicer portfolios while maintaining the established common metrics.
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.
The Portfolio by Delinquency Status reports should not be directly compared with the quarterly performance metrics for federal student loan servicers. These reports define current repayment as less than 31 days delinquent while the most recent contracts with the servicers define current repayment as five or less days delinquent. The servicer contract performance metrics are at the borrower level while the FSA Data Center reports are based at the loan level. As a result, there may be duplication across the FSA Data Center reports in the event a borrower has loans in varying delinquency statuses.
In the loan and grant reports, the first worksheet 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 worksheet of an award year’s fourth quarter report will show data for the full award year. As 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 because loan and grant reports generally are run shortly after the quarter’s end, initial runs often under-report activity as a result of reporting delays and activity that occurs for the award year after the run date (for example, summer disbursements).
The FSA Data Center was launched in 2009 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.