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, 2022.
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. Default collections have also stopped for both FFEL and DL.
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.
Outstanding Loan Portfolio Impact
As of December 31, 2022, approximately 43.8 million unduplicated student loan recipients have about $1.64 trillion in outstanding loans. This represents an increase of $29 billion in the outstanding loan balance since last year, and a slight increase in number of student loan recipients.
Although there have been modest increases in Direct Loan balances, the balances of FFEL loans have been declining more rapidly, in part due to the temporary limited PSLF Waiver which ended on October 31, 2022. The limited PSLF waiver encouraged FFELP borrowers to consolidate into Direct Loan to apply for credits for past public service that ordinarily would not count toward PSLF. As of early February, approximately 453,000 borrowers have been approved for forgiveness under the limited PSLF waiver.
As a result of these shifts, ED now directly manages nearly 93 percent (or $1.5 trillion) of the total federal loan portfolio. The remaining seven percent includes school-held Perkins Loans, lender-held FFELP loans, and the FFELP loans held by guaranty agencies.
Shift in Loan Statuses
As a result of special COVID-19 flexibilities for federal student loans, the number of recipients in repayment status has fallen sharply since March 2020. Almost 27 million Direct Loan (DL) recipients, with approximately $1.1 trillion in outstanding loans, are in forbearance status, and more than 99% of these balances are in the special CARES Act forbearance.
In fact, less than 330,000 DL recipients have opted out of the payment pause and thus were in an active repayment status as of December 31, 2022, compared to 18.1 million recipients in March 2020, shortly after the CARES Act became law. Notably, some borrowers whose accounts remain in a covid forbearance status continue to make voluntary payments, even though they are not required to do so.
Income-Driven Repayment Enrollment
Despite the repayment pause affecting most borrowers, enrollment in income-driven repayment (IDR) plans had slightly increased during the COVID-19 emergency until recently. In September 2022, IDR enrollment among DL recipients decreased for the first time since public reporting began nine years ago. While the decrease was insignificant and is expected to be temporary, the decrease continued this quarter, going from 8.39 million recipients owing $524 billion in December 2021 to 8.32 million borrowers owing $518 billion in December 2022. These decreases are largely driven by the number of borrowers who have entered repayment during the COVID-19 emergency without selecting a repayment plan. These borrowers have immediately been transitioned into forbearance due to the COVID-19 emergency. Specifically, 8.1 million borrowers have at least one loan without a repayment plan compared to 1.2 million in March 2020; and 5.8 million of the 8.1 million borrowers have no reported repayment plan on any of their loans in deferment, forbearance, or repayment. Once repayment begins, a number of these borrowers are likely to enroll in an IDR plan. To a lesser degree, borrowers receiving forgiveness under the limited PSLF waiver may also contribute to the overall decrease since PSLF borrowers tend to be enrolled in IDR plans. In terms of dollars, about 43% of all DL dollars in repayment, deferment or forbearance are enrolled in an IDR plan today, compared to about 47 percent one year ago and 49 percent two years ago.
Impact on Direct Loan Defaults
With almost all non-defaulted federal student loan borrowers now in forbearance, no new DL borrowers entered default since March 2020. In fact, the number of cumulative DL borrowers in default continues to decrease, now 4.7 million borrowers compared to nearly 5.0 million borrowers one year ago. The number of defaulted borrowers in the FFEL Program has also decreased, now less than 3.4 million borrowers compared to more than 3.5 million one year ago. Note that the DL and the FFEL total defaults should not be summed because many borrowers have loans in both programs. Cumulatively, approximately 7.4 million unique recipients have loans in default, compared to more than 7.7 million one year ago.
Appendix: Key Items to Note While Reviewing These Reports
To accurately interpret the data, please note the following item:
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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.
The FSA Data Center was launched in 2009 to increase government transparency by posting information useful to businesses, postsecondary institutions, the media, and individuals.