(GENERAL-22-21) Federal Student Aid Posts Quarterly Portfolio Reports to FSA Data Center

Today, Federal Student Aid (FSA) released 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, 2021.

These reports reflect the novel flexibilities applied to borrower accounts as prescribed in the CARES Act and extended by executive actions. As a result, payments are paused, and interest is waived on all U.S. Department of Education (ED)-held student loans. This includes Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loan Program loans that are owned by ED, as well as all Direct Loans (DL). Default collections have also stopped for both FFEL and DL.

While the Public Service Loan Forgiveness Reports have typically been tied to quarterly releases, the extensive program activity since changes were announced in October, combined with high levels of interest from the public, have led FSA to begin publishing these reports monthly and outside of the typical refresh schedule. As such, PSLF data is now posted through February 2022 with an update scheduled for next month.

Additionally, this release includes updates to school oversight reports that can help consumers understand the financial health of for-profit and non-profit institutions participating in the Title IV programs as they make decisions about their education.

FSA posts 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.

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.

As of December 31, 2021, the outstanding federal student loan portfolio is $1.61 trillion, representing 43.4 million unduplicated student loan recipients. Direct Loans now represent nearly 86% of the portfolio; FFEL loans represent 14%; Federal Perkins Loans are a negligible fraction. The ED-held portfolio is now more than $1.46 trillion, representing nearly 91% of the total. Portfolio growth has slowed since 2010, as new disbursements have declined. Year-over-year, the total federal loan portfolio has increased almost 3% or about $41 billion. The DL portfolio is up about 4% while the FFEL portfolio is down about 7%; Perkins Loans continue to be phased out.

As a result of special pandemic flexibilities for student loans, the number of recipients in repayment status has fallen sharply over the last 21 months. Fewer than 500,000 Direct Loan recipients were in an active repayment status as of December 31, 2021, compared to 18.1 million recipients in March 2020, just a few days after the CARES Act was passed. These borrowers consist largely of customers who have opted out of the CARES Act payment pause. Nearly 25 million Direct Loan recipients with $1 trillion in outstanding loans are in forbearance status, and more than 99% of these balances are in the special CARES Act forbearance. While in forbearance, some borrowers may choose to make voluntary payments even though they are not required to do so.

With almost all federal student loan borrowers now in forbearance, no new DL borrowers entered default during this period. As a result, the more detailed Direct Loan delinquency demographic reports have been suspended.

Despite the repayment pause for most borrowers, enrollment in income-driven repayment (IDR) plans has slightly increased during the pandemic. As of December 2021, almost 8.4 million DL recipients were enrolled in IDR plans, up about 2% from December 2020. Incorporating ED-held FFEL recipients, 8.7 million unique recipients are enrolled in IDR plans. That is 29% of all ED-serviced borrowers or, in dollar terms, 47% of ED-serviced balances.

FSA has posted its second update of the loan and grant disbursement data for the full 2020–21 award year as of December 31, 2021, which shows nearly $110 billion in grant and loan disbursements. While small adjustments to the data may continue to occur, the data has stabilized enough to make meaningful comparisons. Applications for 2020–21 decreased 1%, whereas the disbursements for loans and grants were down about 7% compared to the 2019–20 award year.

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. Applications for the 2021–22 award year so far are down about 2% from this time last year. The application cycle for the 2022–23 award year also launched in October 2021 with more than 4.4 million applications submitted through December 31, 2021.

In October 2021, ED announced a new limited PSLF waiver that helps borrowers employed in public service make greater progress toward PSLF. The implementation of the waiver has had a significant effect on the number of borrowers receiving forgiveness as well as the number of PSLF applications being submitted. Due to these changes, it is necessary to adapt the PSLF reporting to accurately reflect how borrowers are being affected by the waiver.

The first change will be in the frequency of reporting. FSA will begin publishing monthly PSLF data outside of our typical quarterly refresh schedule to help make this data more readily available to stakeholders. For example, FSA recently published a report indicating that more than 100,000 borrowers with $6.2 billion in loans have been identified for discharge under the PSLF waiver through early March 2022. This report will be updated monthly going forward.

FSA will also publish the application data monthly. However, the application report, particularly as it relates to forgiveness approvals and denials, may be more difficult to interpret and compare to prior periods due to the wide-scale eligibility changes made under the waiver. For example, borrowers who are denied for not having made 120 qualifying payments may now qualify for forgiveness under the waiver’s expanded eligibility criteria, without ever submitting a new approved application. To provide a complete picture of PSLF discharges, those processed under the waiver are now included in the ‘Portfolio’ tab of the report in addition to those discharges processed under PSLF or TEPSLF (Temporary Expanded Public Service Loan Forgiveness).

In total, almost 101,000 borrowers have received PSLF, TEPSLF, or limited PSLF waiver discharges through February 2022, totaling more than $7.1 billion. An additional 1.25 million borrowers have had some employment certified for PSLF but have not yet received forgiveness under PSLF.

Many of these borrowers are expected to receive an increase in their qualifying payment counts under the waiver criteria without taking any further action. These updates are currently being processed by the PSLF servicer. Simultaneously, many PSLF borrowers are submitting additional periods of eligible employment, which may also add to their qualifying payment count.

FSA will continue to improve future PSLF reports to better integrate changes resulting from the waiver.

FSA may place institutions on a Heightened Cash Monitoring (HCM) payment method to provide additional oversight for financial or federal compliance issues, some of which may be serious and others less troublesome.

There are two levels of Heightened Cash Monitoring:

Schools may be placed on HCM1 or HCM2 as a result of compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school's administrative capabilities, concern around a school's financial responsibility, and possibly severe findings uncovered during a program review.

FSA may also place a school on the “Reimbursement” payment method if it determines that the school needs the highest level of monitoring. This payment method is similar to HCM2, except FSA reviews the documentation for all students and parents included in the payment request, not just a sample. Some schools are on this list due to preliminary findings made during a program review that is still open. Those findings could change when the program review is completed.

FSA’s recent report identifies 388 schools receiving Title IV funds under HCM. More than half of the schools (205) are for-profit institutions, while more than a third are nonprofits, and the remaining 11% are public.

Of the 388 schools on the December report, 335 are on HCM1, 52 are on HCM2, and one is on the reimbursement payment method. Nearly 95% of schools that were placed on HCM1 are due to Financial Responsibility, or to Late or Missing Compliance Audits or Financial Statements submissions. Schools may also be cited for a past performance violation due to a late audit submission. Almost 87% schools that were placed on HCM2 (46 total) are due to Accreditation Problems, Administrative Capability Concerns, or Title IV Compliance Concerns identified in Audits, or Program Reviews.

As part of FSA’s responsibility to conduct oversight of the schools that participate in the Title IV programs, FSA reviews and issues decisions on requests from proprietary (i.e., for-profit) schools to convert to a nonprofit or public status.

To its list of decisions about proprietary institution conversion requests since Fiscal Year 2017, FSA added Seattle Institute of East Asian Medicine, Northcentral University, and Southside College of Health Sciences. These schools were approved in 2021.

The Higher Education Act requires for-profit and non-profit institutions to submit annual audited financial statements to FSA to demonstrate they are maintaining the standards of financial responsibility necessary to participate in the Title IV programs. One of many standards is a composite score derived from an institution’s audited financial statements to measure the institution’s overall relative financial health. FSA uses the composite score to gauge the financial responsibility of an institution.

As part of this release, FSA published the 2019–20 Financial Responsibility Composite Scores for 2,314 for-profit and non-profit institutions with fiscal years ending between July 1, 2019, and June 30, 2020. FSA also updated the 2018–19 Financial Responsibility Composite Scores report with 137 institutions whose scores were not finalized at the time the 2018–19 data set initially was released.

Composite scores range from positive 3.0 to negative 1.0. To be considered financially responsible without additional oversight, an institution must have a composite score greater than or equal to 1.5.

Schools with a score less than 1.5 are subject to additional oversight measures to continue their participation in the Title IV programs. Under ED’s Title IV Financial Responsibility regulations, a participating institution with a score below 1.5 but greater than or equal to 1.0 may be considered financially responsible, but the score results in FSA providing additional oversight, such as subjecting the school to cash monitoring and other participation requirements.

A participating school with a score less than 1.0 is considered not financially responsible, but—under ED’s Title IV Financial Responsibility regulations—the school may continue to participate in the Title IV programs under a provisional certification alternative. The institution would also be subject to cash monitoring and other participation requirements and must post a letter of credit (LOC); the LOC would be equal to a minimum of 10% of the Title IV aid the school received in its most recent fiscal year. A school may instead choose to post a larger LOC that is equal to a minimum of 50% of the Title IV aid the school received in its most-recent fiscal year and to participate under a financial protection alternative that does not require provisional certification, cash monitoring, or other participation requirements.

In the 2019–20 Financial Responsibility Composite Scores report:

To provide schools with greater flexibilities during the COVID-19 emergency, ED extended the deadlines for schools to submit annual audited financial statements. As a result of the flexibilities, some schools are not included in the 2019–20 Financial Responsibility Composite Scores report. FSA will periodically update the report to disclose more scores as they are available.

In the 2018–19 report:

To accurately interpret the data, please note the following items:

The FSA Data Center was launched in 2009 to increase government transparency by posting information useful to businesses, institutions, the media, and individuals.