Nearly All Borrowers Utilizing CARES Act Payment Suspension, Quarterly FSA Data Report Shows

By Owen Daugherty, NASFAA Staff Reporter

A vast majority of borrowers who have federal Direct Loans (DL) are taking advantage of the payment suspension enacted under the Coronavirus Aid, Relief and Economic Security (CARES) Act, according to a quarterly report released this week by Federal Student Aid (FSA) outlining federal aid applications, loan disbursements, delinquencies, and other measures of student aid programs.

Roughly 300,000 DL borrowers had loans in a repayment status as of June 30, 2020, compared with the nearly 19 million borrowers who were in a repayment status just one year ago.

The most recent quarterly report is the first snapshot of how borrowers utilized the pause in payments, as the previous report collected data through March 31 — after President Trump’s executive order pausing student loan payments and interest accrual but before enough time had passed to accurately reflect the impact of the COVID-19 pandemic on borrowers.

The approximately 300,000 borrowers still making payments are mainly those who have opted out of the CARES Act payment suspension, FSA noted.

“Alternatively, as borrowers exit grace periods or education-related deferments, they may briefly enter repayment before being transitioned to the CARES Act mandatory administrative forbearance,” the report stated.

As of the end of June, more than 22 million DL borrowers with outstanding loans totaling approximately $888 billion were in forbearance. More than 99.5% of the total balances in forbearance are in a mandatory administrative forbearance, totaling more than $884 billion — a massive increase from the $1.9 billion last June.

Nearly 70% of all outstanding DL total balances are in forbearance, compared to about 10% a year ago.

Due to the nature of the CARES Act and the provisions related to federal loan borrowers, most federal student loan borrowers have been placed in a mandatory administrative forbearance, including those borrowers who were previously delinquent. As such, no DL borrowers entered delinquency or default during this quarter.

The Department of Education’s (ED) outstanding federal student loan portfolio now totals $1.54 trillion — unchanged from the previous quarterly report — representing 42.3 million individual aid recipients.

The FSA report also included updated details on borrowers defense claims and the Public Service Loan Forgiveness (PSLF) program, with both programs seeing high rates of rejection.

As of August, more than 330,000 borrower defense to repayment applications have been submitted and of those, 39% are pending decisions, including roughly 85,000 applications that are awaiting adjudication and approximately 45,000 applications that are pending notification.

Additionally, more than 61,000 applications were deemed eligible for borrower defense to repayment, 129,000 applications were deemed ineligible, and the remaining 10,000 applications were closed.

The borrower defense program has faced several issues since Education Secretary Betsy DeVos first announced plans in 2017 to halt the implementation of Obama-era regulations and rewrite them. Tens of thousands of borrower defense applications sat idle for years as DeVos’ proposed changes faced political and legal battles.

ED recently agreed to process within 18 months nearly 170,000 applications that student loan borrowers have submitted as part of a class action settlement.

As of the end of August, about 171,000 borrowers had submitted more than 220,000 PSLF applications, with roughly 203,000 applications being processed. Of those, only about 4,400 — or about 2.2% — have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $236.2 million in discharges for more than 3,200 borrowers.

Of those who were ineligible, 56% were due to not having 120 qualifying payments, a quarter were due to missing or incomplete information on the form, 14% were due to having ineligible loans, and the remaining 5% were due to not meeting other program requirements, such as qualifying employment.

In total under the Temporary Expanded PSLF program, more than 2,100 borrowers’ requests were deemed eligible for loan forgiveness, for a total of more than $87 million in discharges.


Publication Date: 9/24/2020

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