Today, Federal Student Aid released a series of quarterly updates to its portfolio reports on its FSA Data Center to include data as of March 31, 2020. These reports provide a snapshot of the federal student loan portfolio as it existed in FSA systems on March 31, 2020, just four days after the passage of the CARES Act on March 27, 2020. Changes to borrower accounts as a result of the administration’s executive action in late March, and provisions in the CARES ACT are underrepresented in these reports due to the timing of this snapshot.
Federal Student Aid previously posted updates to its application and disbursement reports, along with its Borrower Defense to Repayment and Public Service Loan Forgiveness reports, on April 30, 2020. Federal Student Aid proactively posts reports to the FSA Data Center website 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. As a result, figures generally should be compared year over year whenever possible. However, due to the unprecedented nature of changes resulting from COVID-19, even cyclical comparisons may not provide meaningful comparisons for this time period.
Outstanding Loan Portfolio Overview
Today, the outstanding federal student loan portfolio is $1.54 trillion. The Direct Loan (DL) portfolio now represents more than 83 percent of the outstanding loan portfolio while the Federal Family Education Loan (FFEL) portfolio represents more than 16 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 $1.37 trillion, representing 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 approximately 4.5 percent—about $66 billion—with the FFEL portfolio decreasing by seven percent while the DL portfolio increased by more than seven percent. Perkins Loan balances declined 15 percent, consistent with the ongoing wind-down of the program.
Increased Use of Forbearance
As of March 31, 2020, servicers had begun to implement the pandemic forbearance, resulting in a 37 percent increase in Direct Loan total balances in forbearance over the previous year. As a percentage of the DL portfolio, the March forbearance portfolio represents 13.7 percent of the total DL portfolio, an increase from 9.9 percent last year. Forbearance use will continue to increase in future reports as the pandemic forbearance is fully implemented.
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 March 2020, eight million DL borrowers were enrolled in IDR plans, a seven-percent increase from March 2019. 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, about 8.4 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 Q2, the percentage of new defaulters and the percentage of dollars entering default decreased compared to the same time last year. Approximately 238,000 DL borrowers—or 1.3 percent of recipients who were in repayment last quarter—with outstanding balances totaling $6.9 billion—or 0.9 percent of the total outstanding dollars that were in repayment last quarter— entered default.
March is typically a low point for delinquency rates. In addition to that seasonality, servicers began placing delinquent accounts into forbearance either per ED’s executive actions or per the enactment of the CARES Act in late March, and as a result, the delinquency rates have declined significantly since last year. In fact, more than 88 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 11.5 percent by recipient count and 10.1 percent by total dollar balance, representing year-over-over decreases of more than 25 percent, respectively.
The ED-held FFEL portfolio’s 31+ delinquency rates also experienced significant year-over-year decreases in recipients and dollars, now at ten percent by recipient count and 12.2 percent by total dollar balance. The decline in the federally managed portfolio is more pronounced in these reports than expected as a result of timing. Due to the large volume of servicers uploading pandemic delinquency cures while the reports were running, the federally managed portfolio’s 31+ delinquency rates were eight percent by recipient count and 7.1 percent by total dollar balance, representing year-over-year decreases of approximately 50 percent.
Key Items to Note While Reviewing These Reports
To accurately interpret the data, please note the following items:
The reports within this release provide snapshots of the federal student loan portfolio as of March 31, 2020, just four days after the passage of the CARES Act on March 27, 2020. Federal Student Aid, in collaboration with its vendors, have been diligently working to implement all provisions of the CARES Act that impact Federal Student Aid borrowers. Much of that work will not be reflected in these reports as a result of the timing. Generally, servicers report borrower data to Federal Student Aid on a weekly basis.
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.
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.