Posted Date:December 12, 2017
|Author:||Federal Student Aid|
Subject: Federal Student Aid Posts Updated Reports to FSA Data Center
Today, Federal Student Aid released eight new reports highlighting the characteristics of two Federal Student Aid customer segments: Direct Loan borrowers and borrowers enrolled in income-driven repayment plans. Federal Student Aid also published its annual report about complaints, positive feedback, and reports of alleged suspicious activity tracked through resolution via the Federal Student Aid Feedback System, an easy-to-use online portal that allows customers to provide feedback about their experiences applying for, receiving, and repaying federal student aid. 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 Sept. 30, 2017.
Key Findings in New Reports
Direct Loan Borrower Characteristics
Federal Student Aid released four new reports focusing on the following characteristics of Direct Loan borrowers: debt size, location, school type, and age. Direct Loan borrowers account for a large portion (78 percent) of all federal student loan borrowers, and as such, the characteristics of Direct Loan borrowers closely align with those trends for the overall federal student loan borrower population first released last quarter. For example, distribution of borrower debt size among Direct Loan borrowers is similar to the distribution across the entire federal student loan portfolio with 57 percent of borrowers owing less than $20,000 in federal student loans and five percent of borrowers owing more than $100,000. Similarly, DL borrowers follow the same trends as the entire federal student loan borrower population regarding location. Those states with the highest populations, such as California and Texas, have the most outstanding student loan debt while states with smaller populations, such as Wyoming and Alaska, have the least amount of student loan debt; D.C. has the highest average federal student loan balance at nearly $50,000.
When considering the school type that disbursed the loan, 44 percent of outstanding Direct Loan dollars are from public postsecondary institutions compared to 42 percent for the entire federal loan portfolio. Direct Loan borrowers’ loan balances from private not-for-profit schools make up 32 percent, and proprietary schools make up 17 percent compared to overall portfolio percentages of 33 and 18 respectively. In both the Direct Loan and entire federal student loan portfolio, loans from foreign schools make up one percent of total dollars, while the remaining six percent of the dollars 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. Direct Loan borrowers skew slightly younger than the entire federal student borrower population, likely as a result of the influx of new DL borrowers since 2010–11 when loans stopped being made in the Federal Family Education Loan (FFEL) Program. For example, nearly 25 percent of Direct Loan borrowers are 24 years old or younger, compared to about 19 percent of the overall borrower population. Direct Loan borrowers ages 35 and up, account for 38 percent of all DL borrowers compared to 47 percent of all federal student loan borrowers. Similar to the entire portfolio, DL borrowers ages 25–34 make up the largest age segment (37 percent of Direct Loan borrowers and 34 percent of all federal student loan borrowers).
IDR Borrower Characteristics
Approximately 6.8 million federally managed borrowers are enrolled in income-driven repayment plans including Income-Contingent Repayment, Income-Sensitive Repayment, Income-Based Repayment, PAYE, and REPAYE. This figure includes Direct Loan borrowers as well as borrowers with FFEL program loans that are owned by the Department of Education. Using the Enterprise Data Warehouse, Federal Student Aid is able to provide insights into the characteristics of borrowers benefitting from IDR plans and as such, produced four new reports highlighting the age, debt size, school type, and location of these borrowers. Almost half of all IDR borrowers are ages 25 to 34 and more than one-third of IDR borrowers are ages 35 to 49. Collectively, these two age groups make up 82 percent of all IDR borrowers while their loans balances represent 84 percent of all total balances in IDR. About 12 percent of IDR borrowers are older than age 50, and their loan balances make up about 13 percent of total IDR dollars. The remaining six percent of IDR borrowers are ages 24 or younger. These borrowers owe far less than any other IDR age segment, averaging about $23,000 in outstanding loans per borrower compared to an overall IDR average balance of about $55,000.
Not surprisingly, debt size among IDR borrowers is drastically different than the overall federal student loan portfolio. The overall average debt size is about $30,000 compared to $55,000 for IDR borrowers. Just 28 percent of IDR borrowers owe $20,000 or less (compared to 57 percent of all borrowers), and about 15 percent of IDR borrowers owe $100,000 or more in federal student loans (compared to five percent of all borrowers). About 38 percent of IDR dollars are from public schools, 34 percent from private non-profit schools, 17 percent from proprietary schools, and almost two percent from foreign schools. A greater portion of IDR dollars cannot be linked to the school type that made the underlying loan (nearly 10 percent compared to six percent overall). As IDR borrowers are often high-balance borrowers, they are more likely to have several loans and to have consolidated more than once, making it more difficult to tie the underlying loans to a school. Similar to the national trends for the entire portfolio, D.C. borrowers have the highest average IDR balance, but while the average for the entire portfolio was about $50,000 per borrower, IDR borrowers living in D.C. owe, on average, $93,000 in federal student loans. Nearly 23 percent of all borrowers living in D.C. are enrolled in IDR plans, representing more than 42 percent of their outstanding loan balances, which is more than any other location.
FSA Feedback System Annual Report
The feedback system annual report, released this quarter, provides insight into the more than 17,000 cases submitted by customers between July 1, 2016, and June 30, 2017. Approximately 83 percent of the cases received were identified by customers as complaints, while 13 percent were allegations of suspicious activity, and three percent were positive feedback cases. Between July 1, 2016, and June 30, 2017, almost 15,000 cases were closed. Complaints are initially categorized into general categories and then further refined into specific subcategories. The most frequently submitted complaint subcategories were related to student eligibility; loan accuracy; and loan discharge, cancellation, or forgiveness.
There were 665 cases submitted as positive feedback. Of those cases, 95 percent were, in fact, positive feedback. The remaining five percent were process improvement suggestions, policy suggestions, or technology suggestions. More than 600 of the submissions were about customer service delivered by one of the FSA contact centers. Four percent were submitted by members of the military, veterans or their dependents.
To support its fiduciary responsibility to U.S. taxpayers, the feedback system solicits reports about practices or activities customers suspect or perceive to be fraud, waste, or abuse. The feedback system received 2,310 reports of alleged suspicious activity. The allegations of suspicious activity categories include school fraud (including distance education), third-party debt relief fraud, student fraud, identity theft, and other. After analysis of the data, it was determined that there were 1,510 allegations of fraud with the most allegations being about third-party debt relief (33 percent), followed by student fraud (27 percent), and identity theft (23 percent). The FSA Feedback System already has helped ED and FSA improve customer service and communications, expand our ability to analyze data and make operational improvements, and strengthen consumer protections. For example, FSA formed an enterprise-wide workgroup focused exclusively on mitigating negative customer impacts related to third-party debt relief companies, including launching a new web page, StudentAid.gov/loanscams.
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
The 2017-2018 Free Application for Federal Student Aid (FAFSA®) form 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 Sept. 30, 2017, 17 million applications were submitted for the 2017-2018 school year. This represents a 2.5 percent increase in applications submitted in the previous cycle through September. However, this number may be a result of families taking advantage of early FAFSA and not an indication of an 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 while applications decreased 3.9 percent.
Outstanding Loan Portfolio Overview
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 dramatically shifted. Today, the outstanding federal student loan portfolio is $1.37 trillion. The Direct Loan portfolio now represents more than 77 percent of the outstanding loan portfolio while the FFEL portfolio represents 22 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 84 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 5.8 percent – about $75 billion – with the FFEL portfolio decreasing by 8.8 percent and the DL portfolio increasing by 11 percent.
The percent of DL and FFEL recipients in forbearance has increased to about eight percent, up from about seven percent last year. Although forbearance type is not reported in the commercial FFEL portfolio, the increase in DL forbearances is largely a result of borrowers being placed into mandatory forbearance in the aftermath of the recent hurricanes. Although the percent of Direct Loan recipients in deferment have remained steady at about 10 percent, the vast majority (93 percent) of recipients are in education-related deferments, not deferments related to economic hardships or unemployment. The same is true of the FFEL portfolio. While the percent of FFEL recipients in deferment has decreased as the portfolio ages, 82 percent of FFEL Program deferments are education-related deferments.
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 September 2017, nearly 6.5 million Direct Loan borrowers were enrolled in IDR plans, a 16 percent increase from September 2016. Although almost 1.3 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, 6.8 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 September 2017, nearly 1.8 million borrowers with outstanding loan balances of $95 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. The Department introduced a voluntary Employment Certification Form in January 2012 to help borrowers track their progress toward meeting PSLF requirements. As of September 30, 2017, approximately 740,000 borrowers have submitted 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 the 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. October 2017 is the first month that borrowers could qualify for forgiveness under this program.
New Direct Loan Defaults and Delinquency Rates
In an effort to more accurately measure the flow of defaults, Federal Student Aid began publishing data about new Direct Loan defaults in March 2016. 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 Q4), 298,000 borrowers, or 1.7 percent of recipients who were in repayment last quarter, entered default, compared to 1.8 percent one year ago. The outstanding loan balances of new defaulters totaled approximately $6.3 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 Federal Student Aid experienced a small increase in delinquency rates last quarter, it seems to be an anomaly as the delinquency rates have resumed trending downward. More than 81 percent of non-defaulted DL recipients with loans in active repayment are current on their loans (i.e. on time or less than 31 days delinquent), putting the 31-day plus delinquency rate at 18.6 percent by recipient count and 14.5 percent by total dollar balance. This represents a four-percent decrease in the delinquency rate by recipient count from last year and a 14.3-percent decrease from two years ago. The ED-held FFEL portfolio’s 31-day plus delinquency rate also experienced year-over-year decreases, now at 17.5 percent by recipient count and 19.7 percent by total dollar balance. When considering the entire federally managed portfolio (combining Direct Loans and ED-held FFEL), the 31-day plus delinquency rates were 18.6 percent by recipient count and 14.9 percent by total dollar balance, down from 19.5 percent and 15.4 percent at the same time period last year.
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 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.