Posted Date:April 6, 2018
| Author: | Federal Student Aid |
Subject: Federal Student Aid Posts New Reports to FSA Data Center
Today, Federal Student Aid released six new reports highlighting the characteristics of Direct Loan (DL) borrowers in a ‘Repayment’ loan status. The new reports were posted to the FSA Data Center, the centralized online source for Federal Student Aid data, along with a series of updates to the quarterly application, disbursement, and portfolio reports to include data through Dec. 31, 2017.
The new reports segment DL borrowers in a ‘Repayment’ loan status by those who are current on their payments and those who are delinquent, and highlight the following attributes of these borrowers: age, debt size, location, repayment plan, school type, and enrollment status.
Key Findings in New Reports
FSA is able to leverage its data warehouse to provide insight into the characteristics of non-defaulted DL recipients with loans in an active repayment status. 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, in bankruptcy, or in disability status are not considered in active repayment.
Characteristics of Current and Delinquent Borrowers in Active Repayment
The youngest borrowers (those 24 and younger) have the highest 31-day -plus delinquency rates at 18.2 percent, followed by borrowers ages 35-49 (17.8 percent). Borrowers 62 and older have the lowest 31-day-plus delinquency rate at 13.7 percent while the delinquency rate for borrowers 25-34 and 50-61 stands at about 15 percent. While the 31-day-plus delinquency rate hovers at approximately 18 percent for borrowers owing less than $20K, the delinquency rate generally decreases as borrowers owe more in federal student loans. For example, the delinquency rate among borrowers owing between $20K and $80K sits at about 15 percent. From there, as debt size increases, the delinquency rate decreases to 6.6 percent for borrowers owing more than $200K in federal student loans.
Twenty-eight percent of Mississippi DL borrowers in repayment are at least 31 days behind on their federal student loans, followed closely by borrowers in Louisiana and South Carolina (both at 26 percent) while borrowers in Puerto Rico and Florida have the lowest 31-day-plus delinquency rates, at six percent and seven percent respectively. South Carolina borrowers have the highest percent of borrowers in late-stage delinquency (more than 180 days delinquent) at 11 percent, followed by Mississippi and Louisiana at 10 percent. Overall, DL borrowers enrolled in an alternative repayment plan have the highest 31-day-plus delinquency rate of all repayment plans at more than 29 percent. This is a result of borrowers transitioning from the income-driven repayment plan, REPAYE, to an alternative repayment plan when they fail to recertify their income, which is a requirement of the REPAYE plan. Borrowers on income-contingent repayment plans and those borrowers with a fixed repayment plan of 10 years or less have the second highest 31-day-plus delinquency rate at about 21 percent. The lowest 31-day-plus delinquency rate is among REPAYE borrowers at four percent.
Seventy-eight percent of federal student loan dollars disbursed from proprietary schools is in current repayment, compared to 88 percent of dollars from public schools and 90 percent of dollars from private nonprofit schools. More than 95 percent of dollars in active repayment disbursed from foreign schools are in a current repayment status. Twenty-five percent of non-completers are more than 30 days delinquent, compared to 14 percent for those borrowers with no reported enrollment status, and 11 percent for those borrowers who have completed school.
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 interested stakeholders. 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.
Application Volume and Aid Disbursements
The 2017-18 Free Application for Federal Student Aid (FAFSA®) form launched on Oct. 1, 2016, three months earlier than in previous cycles, to help students and their families more proactively plan and understand their financial aid options for college. As of Dec. 31, 2017, 17.9 million applications were submitted for the 2017-18 school year. This represents a 1.8-percent increase in applications compared to the previous application cycle through December. However, this number may be a result of families taking advantage of the early FAFSA form and not an indication of an overall increase in FAFSA submissions.
In fact, FAFSA submissions have been declining since the 2011-12 cycle when they reached an all-time high of 21.9 million FAFSA forms. Aid disbursements generally decrease as application volumes decrease. For example, in 2016-17, the number of FAFSA submissions decreased 5.2 percent, while new aid disbursements decreased 2.8 percent compared to the previous year.
Outstanding Loan Portfolio Overview
Since the implementation of the Health Care and Education Reconciliation Act of 2010, which eliminated new Federal Family Education Loan (FFEL) Program loans after June 30, 2010, the make-up of the outstanding loan portfolio has dramatically shifted. Today, the outstanding federal student loan portfolio is $1.38 trillion. The DL portfolio now represents almost 78 percent of the outstanding loan portfolio while the FFEL portfolio represents less than 22 percent and Federal Perkins Loan Program loans comprise less than one percent. The federally managed portfolio, which includes Direct Loans and FFEL Program loans owned by the U.S. Department of Education, is now $1.16 trillion, representing 84 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 just 5.8 percent—about $76 billion—with the FFEL portfolio decreasing by 8.3 percent and the DL portfolio increasing by 10.7 percent.
Enrollment in Income-Driven Repayment Plans
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 2017, more than 6.7 million DL borrowers were enrolled in IDR plans, a 13 percent increase from December 2016. Although almost 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, seven million unique borrowers are enrolled in IDR plans.
The REPAYE plan, which was first made available to borrowers in December 2015, enables DL borrowers to cap their monthly student loan payment amount at 10 percent of monthly discretionary income, without regard to when the borrower first obtained the loans. As of December 2017, two million borrowers with outstanding loan balances of almost $109 billion were enrolled in REPAYE.
Tracking Toward 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. The Department introduced a voluntary Employment Certification Form (ECF) in January 2012 to help borrowers track their progress toward meeting PSLF requirements. As of Dec. 31, 2017, approximately 800,000 borrowers have submitted at least one approved ECF. The overall ECF approval rate has been holding steady at about 66 percent.
ECFs are denied when a borrower’s loans are ineligible for PSLF, the form is incomplete, or the employer does not meet the PSLF requirements. An ECF will not be denied due to an ineligible repayment plan; instead, the borrower will be counseled to switch to a PSLF-eligible repayment plan if he or she is otherwise eligible for PSLF (i.e. eligible loans and qualifying employment). Borrowers are encouraged, but not required, to submit an ECF annually or whenever they change jobs to help track their progress toward meeting the PSLF eligibility requirements. October 2017 was the first month that borrowers could qualify for forgiveness under this program.
New Direct Loan Defaults and Delinquency Rates
In an effort 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, the cumulative defaulted loan portfolio continues to grow even as delinquencies and new defaults have declined. During the most recent quarter (FY2018 Q1), about 312,000 borrowers, or 1.8 percent of recipients who were in repayment last quarter, entered default. The outstanding loan balances of new defaulters totaled approximately $6.8 billion or 1.2 percent of the total outstanding dollars that were in repayment last quarter. This is consistent with the percentage of recipients and dollars that went into default one year ago.
The new DL default report typically identifies loans that have defaulted for the first time versus those that have defaulted for at least the second time. Due to a reporting issue, this breakdown is temporarily unavailable. Federal Student Aid will update the report accordingly once this information becomes available.
Approximately 83 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 17.1 percent by recipient count and 13.5 percent by total dollar balance, as reported in the Direct Loan by Delinquency Status report. This represents a seven-percent decrease in the delinquency rate by recipient count and a five-percent decrease by total dollar balance from last year. The ED-held FFEL portfolio’s 31-day-plus delinquency rate experienced year-over-year decreases, now at 17.0 percent by recipient count and 19.6 percent by total dollar balance. When considering the entire federally managed portfolio (combining Direct Loans and ED-held FFEL), the 31-day-plus delinquency rates were 17.0 percent by recipient count and 13.6 percent by total dollar balance, down from 18.6 percent and 14.7 percent at the same time period last year.
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 only 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 is overwhelmingly 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 are more much stable and mature than the TIVAS portfolios. The TIVAS have high volumes of new borrowers who are much more likely to move 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 receiving new borrowers in January 2015, many of those loans still are in an in-school status.
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.
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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 days or less 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. 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 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 Consolidated Appropriations Act of 2016 required the Department to allocate new student loan borrower accounts to eligible student loan servicers on the basis of their performance compared to all loan servicers utilizing established common metrics, and on the basis of 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 that time the Department has developed a revised methodology that will better reflect differences across servicer portfolios while maintaining the established common metrics.
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.