Posted Date:September 19, 2018
|Author:||Federal Student Aid|
Subject: Federal Student Aid Posts New Reports to FSA Data Center
Today, Federal Student Aid released two new reports that provide snapshots of the number of applications and resulting loan discharges processed as a result of borrower defense to repayment and the Public Service Loan Forgiveness Program, as of June 30, 2018. The new reports were posted to the FSA Data Center along with a series of updates to the quarterly application, disbursement, and portfolio reports that include data through June 30, 2018. 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 stakeholders.
Borrower Defense to Repayment Report
Provisions in the Higher Education Act referred to as borrower defense to repayment (borrower defense) allow borrowers to seek loan forgiveness if a college or university misled them, or engaged in other misconduct in violation of certain state laws. Specifically, a borrower may assert borrower defense by demonstrating that their college or university, through an act or omission, violated state law directly related to their federal student loan or to the educational services for which the loan was provided.
As of June 30, 2018, FSA received approximately 166,000 borrower defense claims. About 64 percent of those claims were still pending processing. However, of the nearly 60,000 processed claims, 80 percent had been approved, resulting in $534.8 million in loan discharges.
About 15 percent of processed claims were denied and the remaining five percent were closed as a result of the borrower’s request that the U.S. Department of Education (Department) stop processing the claim or because the claim was identified as a duplicate. Borrowers whose claims were denied will receive a credit for interest that accrued beyond one year after the borrower defense claim was filed. All interest will be forgiven during the processing period on any approved claims.
Public Service Loan Forgiveness Report
The Public Service Loan Forgiveness (PSLF) Program, which was established under the College Cost Reduction and Access Act of 2007, permits Direct Loan (DL) 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. October 2017 was the first month that borrowers could potentially qualify for loan forgiveness under this program, provided they met all program requirements since the inception of the program.
As of June 30, 2018, approximately 28,000 borrowers had submitted almost 33,000 applications for loan forgiveness under this program. Of the approximately 29,000 applications that have been processed, more than 70 percent of them have been denied due to not meeting the program requirements (such as having eligible loans, 120 qualifying payments, or qualifying employment). In late May 2018, FSA initiated outreach efforts to those borrowers who may potentially qualify for the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity, which provides limited, additional conditions under which borrowers may be eligible for loan forgiveness if some or all of the Direct Loan payments were made under a non-qualifying repayment plan for PSLF.
Another 28 percent of PSLF applications were denied due to missing or incomplete information on the form. These borrowers have been advised to submit a complete application so a determination of their eligibility can be made. Almost 300 applications have been approved by the PSLF loan servicer as meeting all program requirements, resulting in $5.52 million in processed discharges for 96 unique borrowers.
Key Findings in the Quarterly Reports
While not exhaustive, the information below provides a snapshot of key findings in our most recent reporting. Student loans are highly cyclical in nature so figures should be compared year over year whenever possible.
Outstanding Loan Portfolio Overview
Today, the outstanding federal student loan portfolio is $1.41 trillion. The DL portfolio now represents 79 percent of the outstanding loan portfolio while the Federal Family Education Loan (FFEL) portfolio represents more than 20 percent, and Federal Perkins Loan Program loans comprise less than one percent. The federally managed portfolio, which includes DL and FFEL Program loans owned by the Department, is now $1.2 trillion, representing more than 85 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 5.6 percent—about $75 billion—with the FFEL portfolio decreasing by 7.7 percent and the DL portfolio increasing by 9.7 percent.
Delinquency Rates Decrease
More than four in five borrowers (82 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 18.0 percent by recipient count and 14.2 percent by total dollar balance, as reported in the Direct Loan by Delinquency Status report. These rates have declined since June 2017 when the delinquency rates were 18.8 by recipient count and 14.7 by total dollar balance. This represents a four-percent decrease by recipient count and a three-percent decrease by total dollar balance.
The ED-held FFEL portfolio’s 31-day-plus delinquency rate experienced a slight year-over-year decrease in recipients and slight year-over-year increase in dollars, now at 19.3 percent by recipient count and 22.6 percent by total dollar balance. When looking at the entire federally managed portfolio (combining Direct Loans and ED-held FFEL), the 31-day-plus delinquency rates are 14.7 percent by recipient count and 18.1 percent by total dollar balance, down from 15.3 percent and 18.9 percent at the same time period last year.
New Direct Loan Defaults Decrease
In an effort to more accurately measure the flow of defaults, Federal Student Aid began publishing data about new DL defaults in March 2016. Because there are currently no provisions to write off defaulted federal student loans, the cumulative defaulted loan portfolio continues to grow even as delinquencies and new defaults have slowed. During the most recent quarter (FY2018 Q3), about 248,000 borrowers—or 1.4 percent of recipients who were in repayment last quarter—entered default. The outstanding loan balances of new defaulters totaled approximately $5.7 billion or 0.9 percent of the total outstanding dollars that were in repayment last quarter. This is a decrease compared to both the percentage of recipients and dollars that went into default at the same time one year ago.
Increased Enrollment in Income-Driven Repayment Plans
Enrollment in income-driven repayment (IDR) 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 2018, 7.1 million DL borrowers were enrolled in IDR plans, a 20-percent increase from June 2017. 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, almost 7.4 million unique borrowers are enrolled in IDR plans.
Application Volume Increases
The 2017–18 Free Application for Federal Student Aid (FAFSA®) form launched on Oct. 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. Approximately 19 million applications were submitted for the 2017–18 application year, which ended June 30, 2018. This represents a 1.2-percent increase in applications compared to the previous cycle and is the first increase in applications since 2011–12. Through June 30, 2018, 13.8 million applications have been submitted for the 2018–19 FAFSA cycle, a 1.7-percent decrease compared to the same time period in the prior 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 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 was originally made up of accounts received from the Direct Loan Servicing Center in 2011–12. These loans already were in repayment and current at the time they were transferred. As a result, the loans were more stable and mature than the TIVAS portfolios. In addition to new accounts, the TIVAS service FFEL Program loans purchased through the Ensuring Continued Access to Student Loans Act and loans of all statuses received from the Direct Loan Servicing Center in 2011–12. Although the NFPs first started receiving new borrowers in January 2015, many of those loans still are 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 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 or less days 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. As 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 because loan and grant reports generally are 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 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 March 2016, the Department has developed a revised methodology that better reflects differences across servicer portfolios while maintaining the established common metrics.
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.