Posted Date:September 21, 2017
|Author:||Matt Sessa, Deputy Chief Operating Officer, Federal Student Aid|
Subject: Federal Student Aid Posts New Reports to FSA Data Center
Today, Federal Student Aid released seven new reports to highlight the characteristics of Federal Student Aid customers. The new reports were posted to the FSA Data Center, the centralized online source for Federal Student Aid data, along with a series of updates to the quarterly application, disbursement, and portfolio reports to include data through June 30, 2017. Updates were also made to the report that provides self-reported information from Title IV schools about their cash management contracts.
The seven new reports include:
- Federal Student Loan Portfolio by School Type
- Federal Student Loan Portfolio by Borrower Age
- Federal Student Loan Portfolio by Borrower Debt Size
- Federal Student Loan Portfolio by Borrower Location
- Grant and Loan Disbursements by Age of Federal Student Aid Recipient
- Grant and Loan Disbursements by Location of Federal Student Aid Recipient
- Direct Loan Disbursements by Program of Study
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.
Outstanding Loan Portfolio Overview
Since the implementation of the Health Care and Education Reconciliation Act of 2010, which eliminated new Federal Family Education Loan (FFEL) Program loans after June 30, 2010, the make-up of the outstanding loan portfolio has dramatically shifted. Today, the outstanding federal student loan portfolio is $1.34 trillion. The Direct Loan portfolio now represents more than three-fourths of the outstanding loan portfolio while the FFEL portfolio represents 23 percent and Perkins Loans comprise less than one percent. The federally managed portfolio, which includes Direct Loans and FFEL Program loans owned by the Department, is now more than $1.1 trillion, representing more than 83 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 6.0 percent – about $75 billion – with the FFEL portfolio decreasing by 8.8 percent and the DL portfolio increasing by 11.6 percent.
Outstanding Loan Portfolio Borrower Characteristics
With this quarter’s release, Federal Student Aid is able to provide a breakdown of the portfolio based on the school type of the loan. This analysis includes linking the underlying loans of a consolidation loan to the school that originally made the loan. By total dollar balance, 42 percent of the outstanding dollars are from public postsecondary institutions; 32 percent from private; 17 percent from proprietary; and one percent from foreign schools. Eight percent of the dollars within the portfolio are in the “Other” category. "Other" includes consolidation loans made prior to 2004 that cannot currently be linked to a specific school in the Enterprise Data Warehouse.
In addition to school type, the new reports highlight the age, federal student loan debt size, and location of borrowers in the outstanding federal student loan portfolio. Borrowers ages 25-34 account for more than a third of borrowers in the portfolio followed closely by those borrowers aged 35-49. Collectively, these borrowers’ outstanding loans represent 72 percent of outstanding dollars. Although younger borrowers (24 and under) account for 18.6 percent of all borrowers, their loan balances are just 9.4 percent of total outstanding dollars. Borrowers ages 51 and up, account for about 16.5 percent of all borrowers and 18.5 percent of total dollars in the portfolio.
For borrowers with less than 40K of student loan debt, borrowers’ federal student loan debt size is relatively evenly distributed across the following segments:
Application Volume and Aid Disbursements
The 2017-2018 Free Application for Federal Student Aid (FAFSA®) launched on October 1, 2016, three months earlier than in previous cycles, to help students and their families more proactively plan and understand their financial aid options for college. As of June 30, 2017, more than 14 million applications were submitted for the 2017-2018 school year. This represents a 6.3 percent increase in applications submitted in the previous cycle through June 30. However, this number may be a result of families taking advantage of early FAFSA and not an indication of a projected overall increase in FAFSA submissions.
In fact, FAFSA submissions have been declining since the 2011-2012 cycle when they reached an all-time high of 21.9 million FAFSAs. More than 18.7 million FAFSAs were submitted in the 2016-2017 cycle, a 5.2 percent decrease from the same time period last year. Although the 2016-2017 award year ended June 30th, late disbursements and adjustments often occur after the end of an award year, and as such, it is premature to report on aid disbursement trends at this point. However, aid disbursements generally decrease consistent with the decline in applications; for example, in 2015-2016, aid disbursements decreased by 3.2 percent to $123.1 billion (excludes disbursements made in the Campus-Based Programs) while applications decreased 3.9 percent.
The new reports provide additional information about the age and location of federal student aid recipients. Approximately half of all aid recipients in AY2015-2016 were ages 19-24 while almost one fourth of aid recipients were ages 25-34. There were similar numbers of recipients ages 18 or less (13%) and ages 35-49 (12%) and less than three percent of recipients were ages 51-61. New disbursements by location trended similarly to the location trends identified at the portfolio level, with the largest number of recipients at highly populated states such as California and Texas, and the lowest number of recipients at less populated states such as Wyoming and Alaska.
As a result of reporting changes that occurred in late 2014, Federal Student Aid is now able to report loan disbursements by program, utilizing the Classification of Instructional Programs (CIP) code. Please note that this information is not available historically and is not reported for the federal student grants. The programs of study that received the most disbursements in loan dollars in award year 2015-2016 include: Business Administration and Management, General; Registered Nursing/Registered Nurse; Law; Medicine; and General Studies. Due to privacy concerns, this information is available at the aggregate level only, and not the institution level.
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) has continued to increase. As of June 2017, nearly 6.3 million Direct Loan borrowers were enrolled in IDR plans, a 19 percent increase from June 2016. Although more than 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, more than 6.5 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 June 2017, nearly 1.6 million borrowers with outstanding loan balances of nearly $83 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 is 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. As of June 30, approximately 669K borrowers have at least one approved Employment Certification Form (ECF). The overall ECF approval rate has been holding steady at about 66 percent.
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.
New Direct Loan Defaults and Delinquency Rates
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.
During the most recent quarter (FY2017 Q3), approximately 265.5K borrowers, or 1.6 percent of recipients who were in repayment last quarter, entered default, compared with 1.7 percent one year ago. The outstanding loan balances of new defaulters totaled approximately $5.7 billion or 1.1 percent of the total outstanding dollars that were in repayment last quarter. This is consistent with the percentage of dollars that went into default one year ago.
Although delinquency rates have been declining since Federal Student Aid began reporting on this metric in 2014, the delinquency rates appear to be leveling off in the most recent report. This quarter, the active repayment 31+ delinquency rate for DL was 18.8 percent by recipient count and 14.7 percent by total dollar balance compared to 18.6 percent and 14.4 percent one year ago. The ED-held FFEL portfolio’s 31+ delinquency rate also experienced similar fluctuations, now at 19.6 percent by recipient count and 22.3 percent by total dollar balance. Federal Student Aid is closely monitoring the changes in delinquency rates.
When calculating a delinquency rate that includes deferment and forbearance in addition to active repayment, the 31+ day delinquency rate for DL decreases to 14.0 percent by recipient count and 10.6 percent by total dollar balance while the ED-held FFEL 31+ day delinquency rate decreases to 15.1 percent by recipient count and 16.5 percent by total dollar balance.
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 required 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.
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 worksheet 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 worksheet 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.