Today, Federal Student Aid released a series of updates to the quarterly application, disbursement, and portfolio reports on its FSA Data Center to include data through June 30, 2019. Earlier this month, Federal Student Aid also published its Public Service Loan Forgiveness (PSLF) report that details activity related to the PSLF and Temporary Expanded PSLF programs. 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.
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 $1.48 trillion. The Direct Loan (DL) portfolio now represents nearly 82 percent of the outstanding loan portfolio while the Federal Family Education Loan (FFEL) portfolio represents 18 percent, and Federal Perkins Loan Program loans comprise less than one-half percent. The federally managed portfolio, which includes DL and FFEL Program loans owned by the Department, is now $1.3 trillion, representing almost 88 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 4.9 percent—about $69 billion—with the FFEL portfolio decreasing by almost eight percent and the DL portfolio increasing by more than eight percent.
As of June 30, 2019, 18.5 million Free Application for Federal Student Aid (FAFSA®) forms were submitted for the 2018–19 application year. This represents a 2.3 percent decrease compared to the same time period in the prior application cycle. Through June 30, 2019, approximately 13.2 million applications were submitted for the 2019-2020 application cycle, a 4.3 percent decrease from the same time period in the prior year. Application volume has generally declined since 2011-2012, except for the 2017-2018 application cycle, which was when the application cycle extended from 18 to 21 months.
Income-Driven Repayment Enrollment
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 2019, approximately 7.7 million DL borrowers were enrolled in IDR plans, an eight-percent increase from June 2018. Although 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, about eight million unique borrowers are enrolled in IDR plans.
New Defaults and Delinquencies
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, historically, the cumulative defaulted loan portfolio continues to grow even as delinquencies and new defaults have slowed. During FY2019 Q3, new defaults increased compared to the same time last year. Like last quarter, borrowers exiting mandatory administrative forbearances following the 2017 natural disasters have contributed to this increase with approximately 352,000 DL borrowers—or 1.9 percent of recipients who were in repayment last quarter—entering default. The outstanding loan balances of new defaulters totaled approximately $8.5 billion or 1.3 percent of the total outstanding dollars that were in repayment last quarter.
During the last two quarters, DL delinquencies were also impacted by borrowers who exited mandatory administrative forbearance following the 2017 natural disasters. However, as a portion of these borrowers have now entered default, the DL delinquency rates have resumed their downward trend. In fact, more than 84 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 15.8 percent by recipient count and 12.6 percent by total dollar balance, representing year-over-over decreases of 12.2 and 11.4 percent, respectively.
Like DL, the ED-held FFEL portfolio’s 31+ delinquency rates also experienced year-over-year decreases in recipients and dollars, now at 16.7 percent by recipient count and 19.7 percent by total dollar balance. These overall rates in delinquency across the entire federally managed portfolio (combining Direct Loans and ED-held FFEL) experienced similar decreases, now at 16.1 percent by recipient count and 12.9 percent by total dollar balance.
Borrower Defense to Repayment Report
Last year, Federal Student Aid first published the 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. Since March 31, 2019, Federal Student Aid has received approximately 33,000 new borrower defense applications.
Almost 48,000 applications have been approved, resulting in nearly $535 million in discharges. The total amount discharged and the number of approved and denied applications included in the June 30, 2019, report has not changed as a result of ongoing litigation and the prioritization of the implementation of the 2016 final regulations.
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.
The Consolidated Appropriations Act of 2016 required the Department to allocate new student loan borrower accounts to eligible student loan servicers based on their performance compared to all loan servicers utilizing established common metrics, and based on 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 it continues to implement today, that better reflects 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 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 FSA Data Center was launched in 2009 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.