In its quarterly report on student aid programs, the Office of Federal Student Aid (FSA) found that fiscal year (FY) 2019 began with a decrease in the number of FAFSAs submitted and an increase in loan defaults. FSA also provided updates on borrower defense to repayment claims and approved applications for Public Service Loan Forgiveness (PSLF).
FSA’s latest report analyzed data from Jan. 1, 2019 through March 31, 2019. Overall, FSA found that as of the first quarter of FY 2019, the outstanding federal student loan portfolio reached $1.48 trillion—an increase of 4.9% from last year, or about $70 billion. The portfolio was overwhelmingly made up of Direct Loans (81%), followed by Federal Family Education Loans (18%) and Perkins Loans (less than 0.5%).
FSA also reported a decrease in applications for federal financial aid. As of March 31, 2019, 18.2 million FAFSA forms were submitted for the 2018-19 cycle—a 2.3% decrease from the same time period in the previous cycle. During the first quarter of 2019, 10 million applications were submitted, which represented a 4.1% decrease compared with the same quarter the previous 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.
While new student loan defaults have generally been decreasing year-over-year, FSA reported the highest amount of both loan balances in default and number of unique borrowers who entered into default between January and March of 2019 since 2015. During this period, 337,600 borrowers, or 1.2% of those who were in repayment last quarter, entered default with outstanding loan balances totaling $8.10 billion, or 1.8% of all outstanding debt that was in repayment last quarter. This represents about 64,500 more unique borrowers entering into default and a $2 million increase in the outstanding loan balance, when compared to the same time period last year.
At the same time, loan delinquencies generally remained the same. As of March 2019, 83% of non-defaulted Direct Loan recipients were current on their loans, putting the delinquency rate (those borrowers more than 31 days late on their payments) at 16.8%.
The report also noted that more borrowers are continuing to enroll in income-driven repayment (IDR) plans. Between March 2018 and March 2019, the number of borrowers enrolled increased by 7.5%, to 7.5 million borrowers.
Additionally, FSA reported that while it received 22,000 new borrower defense claims in the second quarter of 2019—an increase of 2,000 claims from the first quarter of 2019—the number of approved and denied claims has not changed in this report “as a result of ongoing litigation and the prioritization of the implementation of the 2016 final regulations.”
In total, FSA has received 239,937 claims, 179,377 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 3,541 claims.
FSA also provided new data on the PSLF program, which overall showed that ED rejected 99% of processed applications for the program, with 10,000 claims still pending. As of March 2019, 864 applications had been approved, which resulted in more than $30.7 million in discharges for 518 unique borrowers. The average borrower received a discharge of $59,244.
Publication Date: 8/9/2019