Quarterly FSA Data Reveals Record Student Loan Debt, Decrease in FAFSAs, Continued Rejections for PSLF
By Joelle Fredman, NASFAA Staff Reporter
In its quarterly report on student aid programs, the Office of Federal Student Aid (FSA) presented data showing outstanding student loan debt has now exceeded $1.5 trillion, FAFSA submissions continue to decline, and an overwhelming majority of applications for Public Service Loan Forgiveness (PSLF) and its temporary program are still being rejected.
FSA’s latest report analyzed data from July 1, 2019 through Sept. 30, 2019, as well as information on defaults from the final quarter of fiscal year (FY) 2019. Overall, FSA found that as of the third quarter of FY 2019, the outstanding student loan portfolio grew by $30 billion — from $1.48 trillion to $1.51 trillion — since the previous quarter. The portfolio was overwhelmingly made up of Direct Loans (82%), followed by Federal Family Education Loans (17%) and Perkins Loans (less than 0.5%) — nearly the same makeup as the first two quarters of FY 2019.
FSA also reported a continued decrease in the number of submitted FAFSA applications, which it noted has been a trend since the 2011-12 application cycle (with the exception of 2017-18). As of the end of the third quarter of 2019, FSA received 16.1 million applications for the 2019-20 application cycle, a decrease of 3.1% when compared to the same time last year.
During the final quarter of 2019, FSA reported that while the percentage of borrowers in default increased compared to last year, the percentage of dollars in default remained the same. Specifically, FSA found 260,000 Direct Loan borrowers — 1.4% of those who entered into repayment in the most recent quarter — defaulted on their loans with a balance totalling $6.3 billion, 0.9% of the dollars in repayment in the last quarter.
FSA also found that the delinquency rate for Direct Loan borrowers has started decreasing after an uptick over the last few quarters, due to borrowers impacted by natural disasters exiting forbearance. Specifically, FSA reported that the 31-day plus delinquency rate decreased by 10.9% when compared to the same time last year, meaning that more than 83% of non-defaulted Direct Loan borrowers in active repayment were current on their loans.
The report also noted that more borrowers are continuing to enroll in income-driven repayment (IDR) plans. Between September 2018 and September 2019, the number of borrowers enrolled increased by 8%, to 7.8 million.
FSA also reported on its progress in reviewing applications for PSLF as of September 2019, revealing that a total of 136,00 were submitted by 110,000 borrowers. FSA’s data showed that just 1.2% (1,561) of the 125,000 applications processed were approved, resulting in $71.9 million in discharges. A majority of applications (74%) were rejected because they did not meet PSLF requirements, such as making all 120 qualifying payments or working a qualifying job, and another 24% were ineligible due to incomplete forms, according to the data.
FSA added that about 20,000 applications have also been rejected for Temporary Expanded PSLF (TEPSLF), with just about 5% of applications (1,000) having been approved, totalling $43.7 million in discharges. Applications were rejected because borrowers either haven’t been in a repayment plan for 10 years, did not meet repayment requirements, or did not have eligible loans, FSA wrote.
With regard to borrower defense, FSA reported that the total number of applications for relief has reached 288,000 — with 15,000 coming in during the last quarter. Of those applications, 48,000 have been approved, totalling $535 million in debt relief. FSA wrote that while the number of borrowers approved and monetary amount of relief has been unchanged due to ongoing litigation, it has made progress in closing applications “in which the borrowers qualified for other benefits, including automatic closed school discharge.”
Publication Date: 1/7/2020
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