Today, Federal Student Aid released a series of quarterly updates to its portfolio reports on its FSA Data Center to include data as of September 30, 2020. These reports reflect changes made to borrower accounts because of the administration’s executive actions and provisions included as part of the CARES Act, which was signed on March 27, 2020.
As a result of the executive action and the CARES Act, payments were suspended, collections were stopped, and interest was waived on all ED-held student loans [Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loan Program loans owned by the Department of Education and all Direct Loans (DL)]. While the CARES Act provisions were set to expire on September 30, 2020, the President directed the Secretary on August 8, 2020, to continue to suspend loan payments, stop collections, and waive interest on ED-held student loans until December 31, 2020.
Federal Student Aid proactively posts reports to the FSA Data Center website in support of open government initiatives to help ensure consistency, increase transparency, and establish self-service opportunities for stakeholders.
Key Findings in 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. As a result, figures generally should be compared year over year whenever possible. However, due to the unprecedented nature of changes resulting from the CARES Act, cyclical comparisons may not provide meaningful comparisons for this period.
Outstanding Loan Portfolio Overview
As of September 30, 2020, the outstanding federal student loan portfolio is $1.56 trillion, representing 42.9 million unduplicated aid recipients. The DL portfolio now represents 84 percent of the outstanding loan portfolio while the FFEL portfolio represents less than 16 percent, and Federal Perkins Loan Program loans comprise less than one-half percent.
The ED-held portfolio is now $1.4 trillion, representing more than 89.5 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 approximately 3.7 percent—about $56 billion—with the FFEL portfolio decreasing by six percent while the DL portfolio increased by more than two percent. Perkins Loan balances declined approximately 15 percent, consistent with the ongoing wind-down of the program.
Shift in Loan Statuses
As a result of student loan flexibilities introduced at the end of March, approximately 400,000 Direct Loan recipients’ loans were in a repayment status as of September 30, 2020, compared to 18.5 million recipients one year ago. The outstanding balance of recipients in repayment represents one percent of all outstanding Direct Loan dollar balances. These are largely customers who have opted out of the CARES Act payment suspension. Alternatively, as student aid recipients exit grace periods or education-related deferments, they may briefly enter repayment before being transitioned to the CARES Act mandatory administrative forbearance.
More than 22 million Direct Loan borrowers with outstanding loans totaling approximately $887 billion are now in a forbearance status. More than 99 percent of the total balances in forbearance are in a mandatory administrative forbearance (the forbearance type used for the special CARES Act forbearance), which increased from $1.7 billion last September to more than $882 billion this September. When including ED-held FFEL, $922 billion is in mandatory administrative forbearance. As of September 30, 2020, almost 68 percent of all outstanding Direct Loan total dollar balances are in forbearance, compared to about 10 percent one year ago. When including ED-serviced FFEL, the total ED-serviced forbearance portfolio increased, year-over-year, from $130 billion to $927 billion.
Prior to March, about 90 percent of DL deferments were education-related deferments. With the CARES Act implementation, loans in unemployment deferment and economic hardship deferment were moved into the special CARES Act forbearance (using the mandatory administrative forbearance type). As a result, nearly 100 percent of DL deferments are now education related.
ED-Held Delinquencies and Direct Loan Defaults
As a result of the CARES Act, most federal student loan borrowers have been placed in a mandatory administrative forbearance, including those borrowers who were previously delinquent. Since ED-Held borrower delinquencies were cured, no DL borrowers entered default during this quarter. While the Direct Loan Portfolio by Delinquency and New Direct Loan Defaults reports were updated to reflect this, the more detailed Direct Loan delinquency demographic reports have been temporarily suspended until March 31, 2021, the first quarter for which borrowers could potentially be delinquent.
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 slightly increased, despite the temporary suspension of repayment for most borrowers. As of September 2020, 8.2 million DL borrowers were enrolled in IDR plans, a six-percent increase from September 2019. 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, more than 8.5 million unique borrowers are enrolled in IDR plans, representing 31 percent of all ED-serviced borrowers in a repayment, deferment, or forbearance status. In terms of dollars, about 50 percent of ED-serviced balances in a repayment, deferment, or forbearance status are enrolled in an IDR plan.
Application, Disbursement, and Monthly Public Service Loan Forgiveness and Borrower Defense to Repayment Reports
Last month, Federal Student Aid posted quarterly updates to its application and disbursement reports as well as monthly Borrower Defense to Repayment and Public Service Loan Forgiveness reports with data through September 30, 2020.
Free Application for Federal Student Aid (FAFSA) Volume and Aid Disbursements
Last month, FSA published its quarterly application and disbursement reports with data through September 30, 2020. During the first year of the 2020-2021 application cycle, approximately 15.8 million applications were submitted, a 1.8 percent increase from the same time period in the prior application year. Early indications from the first quarter of award year 2020-2021, which began July 1, 2020, show disbursements trending down compared to previous award years, particularly for aid associated with undergraduate students. FSA will continue to monitor this trend as the award year progresses.
Disbursements for award year 2019-2020 are still not mature enough to report final trends, but current indicators suggest a decrease similar to the approximate 2.5-percent decrease in FAFSA applications over the same time period. Disbursements have generally trended downward since award year 2010-2011.
Borrower Defense to Repayment
Last month, Federal Student Aid also released the September monthly borrower defense data report. As of September 2020, almost 334,000 borrower defense to repayment applications have been submitted. Of those applications, 39 percent are pending decision, including approximately 80,000 applications that are awaiting adjudication and approximately 50,000 applications that are pending notification. More than 61,000 applications were deemed eligible for borrower defense to repayment, 131,000 applications were deemed ineligible, and the remaining 11,000 applications were closed.
Public Service Loan Forgiveness (PSLF)
As of September 30, 2020, more than 179,000 borrowers had submitted more than 229,000 applications for public service loan forgiveness. Of the more than 210,000 applications that were processed, more than 5,000 have been approved by the PSLF loan servicer as meeting all program requirements, resulting in more than $260 million in discharges for nearly 3,500 unique borrowers.
Of those applications that were ineligible, 56 percent were ineligible due to not having 120 qualifying payments, 25 percent were ineligible due to missing or incomplete information on the form, 14 percent were ineligible due to having ineligible loans, and the remaining five percent were ineligible due to not meeting other program requirements such as qualifying employment.
Under the Temporary Expanded PSLF program, almost 2,200 borrowers’ requests were deemed eligible for loan forgiveness, resulting in more than $87 million in discharges for more than 2,000 unique borrowers.
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. The NFPs first started receiving new borrowers in January 2015.
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.
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.
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.