Quarterly FSA Data Gives Update on FAFSA Applications, Loan Default and Forgiveness, and Borrower Defense

By Allie Bidwell, NASFAA Senior Reporter

In its quarterly report on student aid programs, the Office of Federal Student Aid (FSA) presented data showing, among other things, that in the fourth quarter of 2018, FAFSA applications declined, enrollment in income-driven repayment plans continued to increase, approved Public Service Loan Forgiveness (PSLF) applications ticked up, and decisions on borrower defense to repayment claims stalled. The report also analyzed some data from the first quarter of 2019, showing new federal student loan defaults decreased while delinquencies remained unchanged.

The report analyzes data from the fourth quarter of 2018, through Dec. 31, 2018, and select data from Jan. 1, 2019 to March 31, 2019. Overall, the total outstanding federal student loan portfolio inched up from $1.44 trillion in the third quarter of 2018 to $1.45 trillion as of December. Direct Loans represent more than 80% of total outstanding student loan debt, and Federal Family Education Loans (FFEL) make up 19%. Federal Perkins Loans represent less than 0.5% of total outstanding debt. Since the same time the previous year, total outstanding debt increased by 5.2%, or about $72 billion.

As of December, 17.5 million FAFSA applications were submitted for the 2018-19 year, a 2.4% decrease compared to the same time in the previous application cycle. The report also found that in the first quarter of the 2019-20 application cycle, there was a 3.4% dip in applications compared with the same time period the prior year. The report noted that FAFSA applications have generally declined since 2011-12, with the exception of the 2017-18 cycle with the move to the use of prior-prior year income data and the Early FAFSA.

Similar to previous data reports, enrollment in income-driven repayment (IDR) plans continued to increase. Among Direct Loan borrowers, nearly 7.4 million were enrolled in IDR plans as of December, an increase of 10% from December 2017. In total, there are nearly 7.7 million unique borrowers enrolled in IDR plans.

Likewise, new student loan defaults continued to decrease. In the first quarter of 2019, FSA found that about 279,000 borrowers, or 1.5% of those who were in repayment last quarter, entered default with outstanding loan balances totaling $6.7 billion, or 1.1% of all outstanding debt that was in repayment last quarter. Meanwhile, loan delinquencies were unchanged, with nearly 83% of non-defaulted Direct Loan recipients current on their loan payments. The delinquency rate (those borrowers more than 30 days late on their payments) is 17.1%.

In the report, FSA said that while it received about 20,000 new borrower defense claims in the first quarter of 2019, the number of approved and denied claims has not changed “as a result of ongoing litigation.” In total, FSA has received 218,366 claims, 158,110 of which are pending. FSA has approved 47,942 claims resulting in about $535 million in discharged loans. About one-third of the approved claims resulted in partial forgiveness, while 69% resulted in full forgiveness. It has also denied 9,077 claims and closed 3,237 claims. The report also breaks down claims by state.

FSA also provided an update on PSLF applications, showing that as of December, 610 applications had been approved, up from 423 at the end of September 2018, resulting in $21.1 million in discharges for 338 unique borrowers. In total, 65,500 applications have been submitted and 58,293 have been processed. Of the processed claims, 42,560 (73%) were denied for not meeting program requirements, and 15,123 (26%) were denied for missing information.

 

Publication Date: 4/23/2019


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