Today, Federal Student Aid released a series of updates to the quarterly application, disbursement, and portfolio reports on the FSA Data Center to include data through Sept. 30, 2018. 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 $1.44 trillion. The Direct Loan (DL) portfolio now represents 80 percent of the outstanding loan portfolio while the Federal Family Education Loan (FFEL) portfolio represents less than 20 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 $1.24 trillion, representing 86 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 5.3 percent—about $72 billion—with the FFEL portfolio decreasing by 7.8 percent and the DL portfolio increasing by 9.2 percent.
As of Sept. 30, 2018, 16.6 million Free Application for Federal Student Aid (FAFSA®) forms have been submitted for the 2018–19 application year. This represents a 2.3 percent decrease compared to the same time period in the prior application cycle. The prior application cycle, 2017-2018, was the first year of the early FAFSA when the application cycle extended from 18 to 21 months, resulting in the first increase in applications since 2011-2012.
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 Sept. 2018, more than 7.2 million DL borrowers were enrolled in IDR plans, an 11-percent increase from Sept. 2017. 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 7.5 million unique borrowers are enrolled in IDR plans.
New Defaults and Delinquencies
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 slowed. During the most recent quarter (FY2018 Q4), about 247,000 borrowers—or 1.3 percent of recipients who were in repayment last quarter—entered default. The outstanding loan balances of new defaulters totaled approximately $5.8 billion or 0.9 percent of the total outstanding dollars that were in repayment last quarter. This is a decrease compared to both the percentage of recipients and dollars that went into default at the same time one year ago.
Despite the decrease in new defaults, delinquencies have slightly increased from the same time last year. More than 81 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 18.7 percent by recipient count and 14.8 percent by total dollar balance, compared to 18.6 percent by recipient count and 14.5 percent by total dollar balance last year.
The ED-held FFEL portfolio’s 31-day-plus delinquency rate also experienced year-over-year increases in recipients and dollars, now at 19.0 percent by recipient count and 22.0 percent by total dollar balance. When looking at the entire federally managed portfolio (combining Direct Loans and ED-held FFEL), the 31-day-plus delinquency rates are 19.0 percent by recipient count and 15.2 percent by total dollar balance, up from 18.6 percent and 14.9 percent at the same time period last year. While this represents about a two percent increase since last year, delinquency rates have generally been trending downward. Federal Student Aid will continue to closely monitor these trends.
Borrower Defense to Repayment Report
Last quarter, Federal Student Aid published its first 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. Since that initial report, Federal Student Aid has received approximately 35,000 new borrower defense claims.
Almost 48,000 claims have been approved, resulting in nearly $535 million in discharges. The total amount discharged and the number of approved and denied claims included in the Sept. 30, 2018 report has not changed from the June 30, 2018 report as a result of ongoing litigation.
Public Service Loan Forgiveness Report
The Public Service Loan Forgiveness (PSLF) Program, which was established under the College Cost Reduction and Access Act of 2007, permits Direct Loan (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. October 2017 was the first month that borrowers could potentially qualify for loan forgiveness under this program, provided they met all program requirements since the inception of the program.
As of Sept. 30, 2018, approximately 41,000 borrowers had submitted almost 50,000 applications for loan forgiveness under this program. Of the approximately 45,000 applications that have been processed, 72 percent of them have been denied due to not meeting the program requirements (such as having eligible loans, 120 qualifying payments, or qualifying employment). Another 27 percent of PSLF applications were denied 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 Sept. 30, 2018, 423 applications have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $12.3 million in discharges for 206 unique borrowers.
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. Although the NFPs first started receiving new borrowers in January 2015, many of those loans still are in an in-school status.
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 March 2016, the Department has developed a revised methodology that better reflects differences across servicer portfolios while maintaining the established common metrics.
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 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.
Publication Date: 12/20/2018