Posted Date:June 16, 2016
|Author:||Matt Sessa, Deputy Chief Operating Officer, Federal Student Aid|
Subject: Federal Student Aid Posts Updated Reports to FSA Data Center
Today, Federal Student Aid posted a series of updates to its FSA Data Center, the centralized online source for Federal Student Aid data. In addition to posting updates to the quarterly application, disbursement, and portfolio reports, Federal Student Aid has added two new reports this quarter.
The FAFSA Completion by School District Reports build upon the high school completion reports to include estimates of public school district FAFSA completion rates and provide state-level maps that present this data. Importantly, the district level information only includes applicants reporting public high schools and does not consider private schools that are geographically within a district.
The Guaranty Agency Collections Report provides the cumulative fiscal-year-to-date dollar amount recovered in defaulted student loans by guaranty agency and collection type. This monthly report complements the quarterly private collection agency recoveries report that Federal Student Aid began posting in December 2015.
In addition to these data sets, Federal Student Aid plans to release additional information pertaining to its school oversight responsibilities in the coming weeks. Specifically, Federal Student Aid will release school fine data and historical data about schools that were required to submit a letter of credit (LOC) to continue participation in the Title IV Programs during FY2013 and FY2014.
Key Findings in the Quarterly Reports
Federal Student Aid proactively posts these reports in support of open government initiatives to help ensure consistency, increase transparency, and establish self-service opportunities for interested stakeholders. While not exhaustive, the information below provides a snapshot of key findings in our most recent reporting. Because student loans are highly cyclical in nature, it is important to compare figures year over year whenever possible.
Shifts in the Outstanding Loan Portfolio
The total outstanding portfolio has increased seven percent—more than $80 billion—from approximately $1,174 billion last year to $1,255 billion. The Federal Family Education Loan (FFEL) portfolio has decreased eight percent while the Direct Loan (DL) portfolio has increased 14 percent. Since the implementation of the Health Care and Education Reconciliation Act of 2010, which eliminated new FFEL Program loans after June 30, 2010, the make-up of the outstanding loan portfolio has shifted. Today, the outstanding FFEL portfolio represents less than 28 percent of the outstanding loan portfolio while the DL portfolio has grown to represent 71.5 percent. Perkins Loans comprise less than one percent of the Federal Student Aid portfolio. The federally managed portfolio, which includes Direct Loans and FFEL Program loans owned by the Department, is now more than $997 billion, representing more than 79 percent of the total portfolio.
Increased Enrollment in Income-Driven Repayment Plans
As the Department continues to expand income-driven repayment (IDR) options for borrowers, enrollment in plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) is increasing. As of March 2016, nearly 4.9 million Direct Loan borrowers were enrolled in IDR plans, a 40 percent increase from March 2015 and a 117 percent increase from March 2014. While another one million ED-held FFEL borrowers are enrolled in IBR and Income-Sensitive Repayment (ISR), there is a large overlap of DL and ED-Held FFEL IDR borrowers. Combined, approximately 5.0 million unique borrowers are enrolled in IDR plans. In terms of dollars (outstanding total balance), nearly 41 percent of the Direct Loan repayment plan universe and 40 percent of the ED-serviced repayment plan universe are in an IDR plan.
On December 17, 2015, a new income-driven repayment plan, Revised Pay As You Earn (REPAYE), was made available to borrowers. The REPAYE Plan enables Direct Loan borrowers to cap their monthly student loan payment amount at ten percent of monthly discretionary income, without regard to when the borrower first obtained the loans. As of March 31, 2016, nearly 190,000 borrowers were taking advantage of this new option.
Borrowers enrolled in IBR and PAYE plans are eligible to make reduced payments based on a partial financial hardship (PFH). As of March 2016, 72.0 percent of ED-held FFEL IBR borrowers and 75.9 percent of Direct Loan IBR and PAYE borrowers were making PFH payments. These percentages will likely decrease over time as borrower incomes increase and the proportion of first-time certification borrowers in the IDR portfolio declines. (Note: The ICR, ISR, and REPAYE plans do not offer reduced payments to borrowers based on partial financial hardship.)
Declines in Hardship Deferments, Delinquencies, and New Defaults
Consistent with the trend observed last quarter, hardship deferments, delinquencies, and new defaults have decreased year over year as IDR enrollment has increased. While in-school deferments are on the rise, hardship deferments such as unemployment and economic hardships have continued to decline. As of March 31, 2016, about 350,000 DL recipients were deferring their payments due to unemployment or economic hardship, a 28.6 percent decrease from the prior year. In that same time period, there was a 36.6 percent decrease in the number of FFEL recipients in a deferment status due to unemployment or economic hardship.
Both DL and ED-held FFEL delinquency rates have fallen in the last year. The 31+ DL delinquency rate has experienced year-over-year decreases of 10.6 percent by recipient count and 8.3 percent by total dollar balance. As of March 2016, the active repayment 31+ delinquency rate for DL was 18.5 percent by recipient count and 14.3 percent by total dollar balance compared to 20.7 percent and 15.6 percent one year ago. While the ED-held FFEL portfolio tends to have higher 31+ delinquency rates than DL, with its rates at 18.4 percent by recipient count and 20.0 percent by total dollar balance, it still represents a 10.4 percent year-over-year decrease in the delinquency rate by total dollar balance. When calculating a delinquency rate that includes deferment and forbearance in addition to active repayment, the 31+ delinquency rate for DL decreases to 13.0 percent by recipient count and 9.7 percent by total dollar balance while the ED-held FFEL 31+ delinquency rate decreases to 13.3 percent by recipient count and 13.8 percent by total dollar balance.
For the second consecutive quarter, new defaults have decreased as a percentage of recipients in repayment the previous quarter. Federal Student Aid first released the New Direct Loan Default Report last quarter to provide a more accurate measure of defaults. Because defaulted federal student loans are rarely written off, Federal Student Aid’s open stock of defaults continues to grow even as delinquencies and new defaults have declined. During the most recent quarter (FY2016 Q2), about 276,000 borrowers or 1.8 percent of recipients who were in repayment last quarter entered default. While the raw number of new defaulters increased since last year, the percentage of new defaulters slightly decreased from the same time period last year.
During the quarter ending March 31, 2016, the Department’s private collection agencies recovered more than $2.1 billion in defaulted student loans. Nearly three-fourths of the recoveries were due to rehabilitations; more than 13 percent were due to consolidations; approximately eight percent were due to wage garnishments; and more than four percent were voluntary payments. The Guaranty Agency Collections Report details the cumulative fiscal-year-to-date dollar amount recovered by each guaranty agency. So far in FY2016, guaranty agencies have collected more than $4.9 billion in defaulted student loans while private collection agencies have collected nearly $4.4 billion in the same timeframe. Note that guaranty agency collections include collections on defaulted student loans through the Treasury Offset Program (TOP), but collections reported by private collection agency do not. Private collection agencies are not involved in the TOP process. More than 61 percent of the recoveries by guaranty agencies were due to rehabilitations; nearly 21 percent were due to consolidations; nearly eight percent were due to treasury offsets; seven percent were due to wage garnishments; and nearly four percent were in voluntary payments.
Decreased Application Volume and Aid Disbursements
FAFSA submissions have continued to decline since peaking in the 2011-2012 cycle following the economic turndown. Early indicators for the 2016-2017 FAFSA cycle, which started in January 2016, suggest this trend will continue. In the first quarter, 8.2 million 2016-2017 FAFSAs were submitted, a 5.4 percent decrease from the same time period last year. Similarly, the first 15 months of the 2015-2016 application cycle show a four percent decrease from the same time period last year.
Although complete 2015-2016 disbursement information is not yet available, disbursements have generally decreased consistent with the decline in applications. Specifically, 2014-2015 loan disbursements have decreased 4.8 percent from 2013-2014 while Pell Grant disbursements have decreased 2.7 percent and TEACH Grant disbursements have decreased 2.2 percent. This coincides with a three percent decrease in applications for that time period.
Key Items to Note While Reviewing These Reports
To accurately interpret the data, please note the following items:
In the portfolio reports, recipient counts are based at the loan level. For that reason, recipients may be counted multiple times across varying loan statuses. For example, a recipient with one loan in deferment and one loan in forbearance would be counted once in each category. A recipient with two loans in the same status would only be counted once in that category.
In the portfolio reports by servicer, please note the differences in portfolio composition between the Title IV Additional Servicers (TIVAS) and the Not-For-Profit Servicers (NFPs). The NFP portfolio is overwhelmingly made up of accounts received from the Direct Loan Servicing Center in 2011-2012. These loans were already in repayment and current at the time they were transferred. As a result, the loans are more much stable and mature than the TIVAS portfolios. The TIVAS have high volumes of new borrowers who are much more likely to go in and out of delinquency. The TIVAS also service FFEL Program loans purchased through ECASLA and loans of all statuses received from the Direct Loan Servicing Center. Although the NFPs started receiving new borrowers in January 2015, many of those loans are still in an in-school status.
Active repayment includes all current and delinquent borrowers whose accounts are currently serviced by federal servicers. Borrowers with loans in grace, in school, in deferment, in forbearance, or in bankruptcy or disability status are not expected to make payments and are not included in this calculation.
The Direct Loan Portfolio by Delinquency Status, ED-Held FFEL Portfolio by Delinquency Status, and Servicer Portfolio by Delinquency Status reports should not be directly compared with the quarterly performance metrics for federal student loan servicers. These reports define current repayment as less than 31 days delinquent while the most recent contracts with the servicers define current repayment as five days or less delinquent.
In the loan and grant reports, the first tab of the workbook shows the number of recipients and disbursements for the specified quarter while the second tab shows the cumulative, award-year-to-date activity. The second tab of an award year’s fourth quarter report will show data for the full award year. Since the information is reported by specific loan type or grant program, a total unique grant or loan recipient count is not available by school.
Please note that since loan and grant reports are generally run shortly after the quarter’s end, initial runs often under-report activity as a result of reporting delays and activity that occurs for the award year after the run date (for example, summer disbursements).
The Consolidated Appropriations Act of 2016 requires the Department to allocate new student loan borrower accounts to eligible student loan servicers on the basis of their performance compared to all loan servicers utilizing established common metrics, and on the basis of the capacity of each servicer to process new and existing accounts no later than March 1, 2016. Prior to the passage of the Consolidated Appropriation Act, the Department established common performance metrics across all servicing contracts but maintained separate allocation pools to reflect differences in portfolio composition.
Given this new requirement, beginning on March 1, 2016, new allocation percentages were based on performance under the established common metrics compared across all loan servicers. Since that time the Department has developed a revised methodology that will better reflect differences across servicer portfolios while maintaining the established common metrics. This methodology will be applied for the period from January 1, 2016, through May 31, 2016, and revised allocations will be put in place on July 1, 2016.
As part of Federal Student Aid’s assessment of how best to implement the provision included in the appropriations act, the organization has requested, received, and conducted an initial review of capacity plans from all of our servicers to assess the reasonability and risk of each servicer’s staffing, training, system, and other resource planning. We have experience working with each of our servicers and are already familiar with their systems and capabilities. Based on our experience and our initial assessment of the capacity plans, we are confident that all of our servicers can manage and process projected borrower account allocations for the next few months, while the volume of new accounts is relatively low. While we continue the process of completing and documenting our capacity assessment, we will monitor each servicer’s performance closely and can modify or discontinue allocations on short notice if any issues arise.
The FSA Data Center was launched in 2009 in an effort to increase government transparency by proactively posting information useful to businesses, institutions, the media, and individuals. In addition to the reports listed above, Federal Student Aid regularly posts strategic plans, copies of executed contracts, and school compliance reports, such as Clery Act reports and financial composite scores, on the FSA Data Center. Federal Student Aid is committed to continuing to expand the data sets available on the FSA Data Center in alignment with customer needs.