Today, Federal Student Aid (FSA) released two sets of new quarterly portfolio reports on its FSA Data Center website with key data and other information about the American student aid programs from December 31, 2020, and March 31, 2021.
These reports reflect the novel flexibilities applied to borrower accounts as prescribed in the CARES Act and extended by executive actions through September 30, 2021. As a result, payments are paused, collections are stopped, and interest is waived on all Department of Education-held student loans. (This includes Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loan Program loans that are owned by the Department of Education, as well as all Direct Loans (DL).)
FSA has also redesigned the Public Service Loan Forgiveness (PSLF) report to align its reporting structure with the new application process that was recently implemented. This announcement highlights the need for continuing improvements to the PSLF and Temporary Expanded PSLF (TEPSLF) programs, and FSA plans to further refine and expand its PSLF report in the future.
In addition to the quarterly reports, we are releasing servicer performance metrics and allocations that took effect on March 1, 2021, along with monthly reports on borrower defense to repayment through April 30, 2021. FSA posts these reports to its FSA Data Center 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 from these reports. (It should be noted that student loans are highly cyclical in nature, so figures generally should be compared year over year. However, the unprecedented nature of the CARES Act changes may preclude meaningful comparisons for this period.)
Outstanding Loan Portfolio Overview
As of March 31, 2021, the outstanding federal student loan portfolio is $1.59 trillion, representing 42.9 million unduplicated student aid recipients. Direct Loans now represent almost 85% of the portfolio; FFEL loans represent 15%; Federal Perkins Loans are a negligible fraction. The ED-held portfolio is now more than $1.4 trillion, representing 90% of the total. Portfolio growth has slowed since 2010 as new disbursements have declined. Year-over-year, the total federal loan portfolio has increased 3.2% or about $49 billion. The DL portfolio is up 5%; the FFEL portfolio is down 5.4%; Perkins Loans continue to be wound down.
Shift in Loan Statuses
As a result of special pandemic flexibilities for student loans, the number of borrowers in repayment status has fallen sharply. Only about 500,000 Direct Loan borrowers were in repayment status as of March 31, 2021, compared to 18.1 million borrowers a year ago, which was just a few days after the CARES Act was passed. Only one percent of all outstanding Direct Loan dollar balances are currently in repayment status, consisting largely of customers who have opted out of the CARES Act payment pause. More than 23 million Direct Loan borrowers with outstanding loans of about $938 billion are now in forbearance status, and more than 99% of these balances are in the special CARES Act forbearance.
ED-Held Delinquencies and Direct Loan Defaults
With almost all federal student loan borrowers now in forbearance, no new DL borrowers entered default during this time period. The more detailed Direct Loan delinquency demographic reports have been suspended until at least December 31, 2021, the first quarter for which borrowers could potentially be delinquent.
Income-Driven Repayment Enrollment
Despite the repayment pause for most borrowers, enrollment in income-driven repayment (IDR) plans has continued to grow during the pandemic. As of March 2021, 8.3 million DL borrowers were enrolled in IDR plans, up 3% from March 2020. Adding ED-held FFEL borrowers, 8.6 million unique borrowers are enrolled in IDR plans. That is 30% of all ED-serviced borrowers or, in dollar terms, 48% of ED-serviced balances.
Free Application for Federal Student Aid (FAFSA) Volume and Aid Disbursements
FSA has now posted reports on FAFSA application and disbursement data for the full 2019–20 award year. The number of forms submitted fell by 2.4% compared to the prior year, while loan and grant disbursements fell by about 1%. Applications have been declining since award year 2011–12, except for a modest increase in award year 2017–18 when the application cycle was extended from 18 to 21 months. FSA also has posted partial data about applications and disbursements for the latest years. Applications for the 2020–21 award year are down 1.3% from the prior year, and disbursements for loans and grants are down 7%. The decline is more pronounced at public postsecondary institutions and for undergraduate students. Applications for the 2021–22 award year so far are up 2% from this time last year.
Borrower Defense to Repayment
The law allows DL borrowers to seek cancellation of their loans if their school misled them or engaged in illegal misconduct. In March 2021, the Department of Education announced adoption of a streamlined approach to grant full relief, rather than partial relief, for approved borrower defense claims. The March report shows the early impact of that announcement, with an additional 3,000 borrowers approved for full relief while the April report adds another 30,000 approved applications.
Spotlight: *Public Service Loan Forgiveness*
We are putting special focus here on Public Service Loan Forgiveness (PSLF), which has recently undergone substantial changes to the application process. Over the years, PSLF has spawned much confusion and frustration. Millions of people are employed in public service, including teachers, firefighters, law enforcement, and some nonprofit workers, yet only about 5,500 borrowers have received PSLF discharges thus far, totaling $453 million. Congress has sought to simplify and streamline this relief for borrowers, which was first authorized by law more than a decade ago. One legislative measure has augmented PSLF with specific changes to qualify more borrowers, known as Temporary Expanded PSLF (TEPSLF). As a result, about 3,000 borrowers have received TEPSLF discharges totaling $130 million. FSA is currently scrutinizing PSLF to see how the promise of the original law can be better fulfilled.
Today, FSA is introducing a new PSLF report that closely examines borrowers’ progress toward loan forgiveness. The new report shows some encouraging signs, as almost all borrowers with a complete, processed application are receiving some credit toward ultimate forgiveness. We are exploring what additional data can be provided about processing times, reasons that forms are incomplete, and borrower resubmissions to further improve these reports.
In November 2020, FSA released a new combined Certification and Application form that covers both PSLF and TEPSLF. Borrowers previously had to submit separate forms to certify their employment or to apply for forgiveness. Since the new form was implemented (through April 2021), FSA has received more than 391,000 applications from approximately 322,000 borrowers. Of these, more than 168,000 have been completed and processed, 146,000 remain in processing, and 76,600 were missing necessary information. Almost all (99.7%) of the 168,000 completed and processed applications came from borrowers whose loans and employment meet the legal requirements to receive credit toward PSLF, though the vast majority’s loans have not been in repayment long enough to meet the required ten years (120 months) of qualifying employment or qualifying payments.
Cumulatively, almost 1.3 million borrowers have had their employment eligibility certified and have received a qualifying payment count so they can keep track of where they stand on attaining PSLF. The qualifying payment counts for these borrowers are pegged as of their last employment certification or combined form submission. Since borrowers do not formally enroll or un-enroll in PSLF or TEPSLF, FSA does not know how many of them still plan to pursue forgiveness on this basis, but those that do plan to do so, will continue to make steady progress during the payment pause as these months count toward PSLF or TEPSLF, if the borrower’s employment continues to qualify. FSA will include information about these borrowers’ further progress toward forgiveness in its future data reports.
The new PSLF report provides greater insight into why many borrowers are not meeting the forgiveness requirements. For most borrowers, it is simply a matter of timing. Over 82% of borrowers who do not yet qualify for forgiveness have eligible loans that have been in repayment less than 120 months, meaning they could not yet have accumulated the required 120 months of qualifying employment or qualifying payments. One notable problem here relates to borrowers who consolidated older federal student loans into new Direct Loans and then were made to start over on a brand-new clock; they did not get credit for employment or payment activity on their prior loans. This issue merits further consideration and potential revision as a matter of equity. In the meantime, however, close to half the borrowers who do not yet qualify for PSLF on this basis are held back by this treatment of their consolidated loans. The remaining 18% of borrowers who do not yet qualify for forgiveness divide as follows: 14% do not have 120 months of qualifying employment so far; the remaining 4% have met all requirements except having 120 qualifying payments.
Appendix: 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, using 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 passage of the Act, the Department established common performance metrics across all servicing contracts but maintained separate allocation pools to reflect differences in portfolio composition. As a result, beginning on March 1, 2016, new allocation percentages were based on performance under the established common metrics compared across all loan servicers. The Department has since developed a revised methodology, which it continues to implement, 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 servicer contracts define current repayment as less than 5 days delinquent. The servicer contract performance metrics are at the borrower level while the FSA Data Center reports are based at the loan level. There may be duplication across the FSA Data Center reports when borrowers have loans in varying delinquency statuses.
The FSA Data Center was launched in 2009 to increase government transparency by posting information useful to businesses, institutions, the media, and individuals. In addition to the reports listed above, FSA 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. FSA is committed to continuing to expand the data sets available on the FSA Data Center to foster greater understanding of these issues.