Posted Date:March 9, 2017
|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. This update refreshes more than 30 quarterly application, disbursement, and portfolio reports to include data through December 31, 2016.
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.
Application Volume and Aid Disbursements
Federal Student Aid released the 2017-2018 Free Application for Federal Student Aid (FAFSA®) on October 1, 2016, three months earlier than in previous cycles, to help students and their families more proactively plan for and understand their financial aid options for college. Along with this timing change, applicants are now required to provide their income information from an earlier tax year, which in many cases, eliminates the need for families to return to the FAFSA to update their information after filing their taxes.
In the first quarter of the 2017-2018 application cycle, more than 5.4 million FAFSAs were submitted. As a result of the recent changes, it is difficult to compare this figure to previous application volumes at this time. Historically, FAFSA peak occurs in late February/early March, coinciding with many state and institution deadlines. Federal Student Aid will continue to monitor 2017-2018 application submission trends and provide a more in-depth trend analysis in the next quarterly release.
Since the 2011-2012 application cycle, FAFSA submissions have been declining. In the first year of the 2016-2017 application cycle, more than 17.5 million FAFSAs were submitted, a 5.2 percent decrease from the same time period last year. Aid disbursements generally experience fluctuations consistent with the flow in applications; for example, the 2015-2016 application cycle, which ended June 30, 2016, decreased by 3.9 percent compared to the 2014-2015 cycle while overall 2015-2016 aid disbursements declined 3.5 percent compared to the prior year. Loan disbursements were down just 2.4 percent while Pell Grant disbursements decreased by 6.8 percent.
Shifts in the Outstanding Loan Portfolio
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 student loan portfolio stands at $1.3 trillion. The FFEL portfolio represents 25 percent of the outstanding loan portfolio while the DL portfolio has grown to represent more than 74 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 $1 trillion, representing 82 percent of the total portfolio. The growth of the portfolio has slowed since 2010 as new disbursements have declined. Year-over-year, the total federal loan portfolio has increased just 6.5 percent – less than $80 billion. The FFEL portfolio has decreased more than eight percent and the DL portfolio has increased nearly 13 percent.
Increased Enrollment in Income-Driven Repayment Plans
Enrollment in income-driven repayment (IDR) repayment plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) continue to increase. As of Dec.2016, more than 5.9 million Direct Loan borrowers were enrolled in IDR plans, a 30 percent increase from Dec. 2015. Although almost 1.2 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 6.2 million unique borrowers are enrolled in IDR plans.
The REPAYE Plan, which was first made available to borrowers in December 2015, 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 Dec. 2016, more than 1.2 million borrowers with outstanding loan balances of nearly $61.8 billion were enrolled in REPAYE.
Tracking Toward Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) Program, which was established under the College Cost Reduction and Access Act of 2007, permits Direct Loan borrowers who make 120 qualifying monthly payments under a qualifying repayment plan, while working full-time for a qualifying employer, to have the remainder of their balance forgiven. Although no borrower will be eligible for forgiveness under this program until October 2017, the Department introduced a voluntary Employment Certification Form in January 2012 to help borrowers track their progress toward meeting PSLF requirements. The PSLF Employment Certification Forms Report shows that through Dec. 2016, about 1.3 million ECFs have been submitted and of those, about two-thirds have been approved.
ECFs are denied when a borrower’s loans are ineligible for PSLF, the form is incomplete, or a borrower’s employer does not meet the PSLF requirements. An ECF will not be denied due to an ineligible repayment plan; instead, the borrower will be counseled to switch to a PSLF-eligible repayment plan if he or she is otherwise eligible for PSLF (i.e. eligible loans and qualifying employment). Borrowers are encouraged, but not required, to submit an ECF annually or whenever they change jobs to help track their progress toward meeting the PSLF eligibility requirements. Some borrowers may choose to wait until they are eligible for forgiveness before submitting documentation about their employment so this report may underrepresent the potential numbers of borrowers who may ultimately qualify for forgiveness under this program. As of December, approximately 553,000 borrowers have submitted at least one approved ECF.
New Defaults and Delinquency Rates Fall
In an effort to more accurately measure the flow of defaults, Federal Student Aid began publishing information about new Direct Loan defaults last year. 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. For the fourth consecutive quarter, new Direct Loan defaults have decreased as a percentage of recipients in repayment the previous quarter. During the most recent quarter (FY2017 Q1), 286,500 borrowers, or 1.8 percent of recipients who were in repayment last quarter, entered default, compared with 2.3 percent one year ago.
In addition to the decrease in new defaults, both DL and ED-held FFEL delinquency rates are down compared with the same time period last year. As of December 2016, the active repayment 31+ day delinquency rate for DL was 18.4 percent by recipient count and 14.2 percent by total dollar balance compared to 19.7 percent and 14.9 percent one year ago. While the ED-held FFEL portfolio tends to have slightly higher 31+ day delinquency rates than DL, with rates at 19.0 percent by recipient count and 21.0 percent by total dollar balance, it still represents year-over-year decreases of 7.3 percent and 5.4 percent. The federally managed portfolio, which combines Direct Loans and ED-held FFEL, has an active repayment 31+ day delinquency rate for DL of 18.6 percent by recipient count and 14.7 percent by total dollar balance. When calculating a delinquency rate that includes deferment and forbearance in addition to active repayment, the 31+ day delinquency rate for DL decreases to 13.6 percent by recipient count and 10.3 percent by total dollar balance while the ED-held FFEL 31+ day delinquency rate decreases to 14.4 percent by recipient count and 15.4 percent by total dollar balance and the federally managed rate drops to 13.8 percent and 10.7 percent, respectively.
In the first quarter of FY2017, the Department collected more than $4.4 billion in defaulted student loans through guaranty agencies and private collection agencies. Guaranty agencies collected nearly $2.4 billion in defaulted student loans while private collection agencies collected more than $2 billion. Note that the guaranty agency numbers include collections on defaulted student loans through the Treasury Offset Program (TOP), while the PCA numbers do not as PCAs are not involved in the TOP process.
The majority of collections were a result of rehabilitations, which made up 69 percent of all guaranty agency and PCA collections. 19 percent of collections were due to consolidations; seven percent were due to wage garnishments; four percent were due to voluntary payments; and about one percent due to TOP.
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 move 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.
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 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 was applied for the period from January 1, 2016, through May 31, 2016, and revised allocations were put in place on July 1, 2016.
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 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. The servicer contract performance metrics are at the borrower level while the FSA Data Center reports are based at the loan level. As a result, there may be duplication across the FSA Data Center reports in the event a borrower has loans in varying delinquency statuses.
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 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.