In its quarterly report on federal aid applications, loan disbursements, delinquencies, and other measures of student aid programs, Federal Student Aid (FSA) also for the first time provided a summary of borrowers deemed eligible to receive automatic closed school discharges for their federal student loans.
The new data summarizes the number of borrowers eligible for an automatic discharge as a result of their school closing between Nov. 1, 2013 and Dec. 31, 2019. In total, FSA found approximately 31,400 borrowers with loans totaling $347.1 million eligible for the automatic discharge. In total, about 30,000 of those borrowers have received discharges.
The report — which includes data from Oct. 1, 2019 to Dec. 31, 2019 — gives an overview of the outstanding federal student loan portfolio, which stands at $1.51 trillion, as well as new delinquency and default rates for federal student loans. Overall, the growth of both the loan portfolio and FAFSA application volume has decreased generally since 2010 and 2011, as new disbursements and the number of college goers have declined.
Meanwhile, the report found, new student loan default and delinquency rates are also generally trending downward. While the percentage of new defaulters ticked up slightly from this time last year — up to 1.6% of borrowers in repayment the previous quarter, compared with 1.5% — the overall new default rate is still lower than in previous years. By comparison, the rate of new defaults in the first quarter of fiscal year 2015, the first year FSA reported defaults in this way, was 2.5%. The new default rate reached a low of 1.3% in the fourth quarter of fiscal year 2018.
The delinquency rate — or the percentage of non-defaulted Direct Loan recipients who are 31 or more days late on their payments — continued in a downward trend. Overall, the percentage of borrowers 31 days or more delinquent was 15.6% last quarter, representing an 8.6% decrease from this time last year.
FSA also continued to receive applications for borrower defense to repayment claims, receiving roughly 12,000 new applications last quarter that brought the total application count to just under 300,000. Of those applications, nearly 49,000 have been approved, 32% of which received partial discharges. Another 217,000 applications are pending, while more than 8,000 have been closed with no need for adjudication, per FSA. To date, nearly $535 million in loans have been discharged.
Both the Public Service Loan Forgiveness (PSLF) and Temporary Expanded PSLF (TEPSLF) programs continue to see high rejection rates, most often due to missing or incomplete information on the application, or borrowers not meeting the program requirements. As of the end of December, roughly 127,000 borrowers had submitted more than 161,000 PSLF applications, up from 110,000 borrowers and 136,000 borrowers the previous quarter. Of those applications, 151,000 have been processed, with 76% deemed ineligible due to not meeting the program requirements, and another 22% deemed ineligible due to missing or incomplete information. To date, fewer than 2,300 PSLF applications have been approved, resulting in a total of $99.2 million in loan forgiveness for 1,565 borrowers — a roughly 1.4% approval rate.
With regard to TEPSLF, nearly 1,300 borrowers have been approved for a total of approximately $54.8 million in loan discharges. Overall, roughly 24,000 borrowers have been deemed ineligible for TEPSLF — one-third for not being in repayment for 10 years, one-fifth for not meeting the payment requirements during the last 12 month, and one-tenth for not having eligible loans.
Publication Date: 2/21/2020