Posted Date: March 17, 2016
Matt Sessa, Deputy Chief Operating Officer, Federal Student Aid
Subject: Federal Student Aid Posts Updated Reports to FSA Data Center
Today, Federal Student Aid posted a series of updates to its FSA Data Center, the centralized online source for Federal Student Aid data. Below is a summary of the updated quarterly reports available on the FSA Data Center. All reports reflect activity through or as of December 31, 2015.
The Federal Student Aid portfolio reports include outstanding balances and recipients by loan program, loan type, loan status, repayment plan, and delinquency status.
The Free Application for Federal Student Aid (FAFSA®) Reports include application submissions by the applicant’s legal state of residence and by the schools listed on the applicant’s form.
The loan and grant volume reports provide award year disbursements and recipients by aid program for schools participating in the Title IV Programs. The summary reports provide award year disbursements by school type and award year borrower and recipient counts.
In addition to the existing reports, we have added four new reports this quarter.
Beginning this quarter, Federal Student Aid is publishing additional information on the ED-held portion of Federal Family Education Loan (FFEL) Program through three reports: the ED-held FFEL Portfolio by Loan Status report, the ED-held FFEL Portfolio by Repayment Plan report, and the ED-Held FFEL Portfolio by Delinquency Status report. Federal Student Aid owns more than $100 billion in Federal Family Education Loans. These loans are made up of loans purchased under the Ensuring Continued Access to Student Loans Act (ECASLA), but also include defaulted loans assigned to the Department from guaranty agencies (GAs), rehabilitated loans, and loans from the Total and Permanent Disability process. As a result, this portfolio is at greater risk of delinquency and default. In fact, the GA-assigned loans are generally in default for several years before coming to the Department.
The New Direct Loan Defaults report details the number of borrowers and the outstanding balance of the loans that have entered default during the quarter. This report will be updated quarterly.
We have also published the annual Campus-Based Programs by School report for the 2014-2015 award year.
Key Findings in the Quarterly Reports
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 customers. While not exhaustive, the information below provides a snapshot of key findings in our most recent reporting. Because student loans are highly cyclical in nature, it is important to compare figures year over year whenever possible.
Shifts in the Outstanding Loan Portfolio
Since the implementation of the Health Care and Education Reconciliation Act of 2010, which eliminated new FFEL Program loans after June 30, 2010, the make-up of the outstanding loan portfolio has shifted. Today, the outstanding FFEL portfolio represents less than 30 percent of the outstanding loan portfolio while the Direct Loan (DL) portfolio has grown to represent 70 percent of the outstanding loan portfolio. Perkins Loans comprise less than 1 percent of the Federal Student Aid portfolio.
The Location of FFEL Program Loans report, which was first introduced last quarter, shows that the ownership of FFEL Program Loans remains unchanged. 61 percent of FFEL Program loans by total dollars are owned by commercial lenders while another 11 percent are with guaranty agencies. The remaining 28 percent of FFEL Program loans by total dollars are ED-owned and serviced by ED’s federal loan servicers, the Total and Permanent Disability loan servicer, or are in collections.
Forbearance and Deferment Usage
Direct Loan forbearances represent 11.3 percent of the DL portfolio, a slight decrease from the same time period last year, while FFEL forbearances have also slightly decreased from last year, now representing 10.3 percent of the FFEL portfolio. Twelve percent of the outstanding ED-Held FFEL portfolio is in forbearance. While forbearance type is not available for the entire FFEL portfolio, Direct Loan forbearance types have remained fairly steady with more than 60 percent of forbearances related to temporary hardships and another 20 percent related to pending administrative actions. For example, a servicer may place a borrower in an administrative forbearance while the servicer waits to receive a borrower’s income verification for an income-driven plan.
Deferments represent 10 percent of outstanding Direct Loan volume and seven percent of outstanding FFEL Program volume; more than eight percent of ED’s portion of the FFEL portfolio is in deferment. The majority of deferments continue to be education-related. Specifically, more than 85 percent of DL volume in deferment and nearly 69 percent of FFEL volume in deferment are in education-related deferments.
While in-school deferments have decreased slightly since the same time period last year, hardship deferments such as unemployment and economic hardships have declined drastically as enrollment in income-driven repayment plans has increased. As of December 31, 2015, about 370,000 DL recipients were deferring their payments due to unemployment or economic hardship, a 31.5 percent decrease from the year prior. In that same time period for the FFEL Program, there was a 35 percent decrease in the number of recipients in a deferment status due to unemployment or economic hardship.
Increased Enrollment in Income-Driven Repayment Plans
Enrollment in income-driven repayment (IDR) options such as Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment continues to increase. As of December 2015, nearly 4.6 million Direct Loan borrowers were enrolled in IDR plans, a 48 percent increase from December 2014 and a 140 percent increase from December 2013. While another one million ED-held Federal Family Education Loan (FFEL) borrowers are enrolled in the Income-Sensitive Repayment (ISR) and IBR plans, there is a large overlap of DL and FFEL IDR borrowers. Combined, approximately 4.8 million unique borrowers are enrolled in IDR plans.
On December 17, 2015, a new income-driven repayment plan called Revised Pay As You Earn (REPAYE) was made available to borrowers. The REPAYE Plan enables Direct Loan borrowers to cap their monthly student loan payment amount at 10 percent of monthly discretionary income, without regard to when the borrower first obtained the loans. This new repayment plan is now included on the relevant reports.
Federal Student Aid continues to provide information about borrowers enrolled in PAYE and IBR plans who make reduced payments based on a partial financial hardship. As of December 2015, 74.2 percent of ED-held FFEL IBR borrowers and 79.1 percent of Direct Loan IBR and PAYE borrowers were making PFH payments. (Note: The ISR, ICR, and REPAYE plans do not offer reduced payments to borrowers based on partial financial hardship.)
Delinquency in the DL and ED-Held FFEL Portfolio
With the increased availability and usage of flexible repayment options such as income-driven plans among other factors, Federal Student Aid’s active repayment 31+ DL delinquency rate has experienced year-over-year decreases of 11.3 percent by recipient count and 11.4 percent by total dollar balance. As of December 31, 2015, the active repayment 31+ delinquency rate for DL was 19.7 percent by recipient count and 14.9 percent by total dollar balance compared to 22.2 percent and 16.6 percent one year ago. While the ED-held FFEL portfolio tends to have higher 31+ delinquency rates at 20.4 percent by recipient count and 22.2 percent by total dollar balance, this still represents a 6.3 percent year-over-year decrease in the delinquency rate by total dollar balance.
Please note that 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. When calculating a delinquency rate that includes deferment and forbearance in addition to active repayment, the 31+ delinquency rate for DL decreases to 14.3 percent by recipient count and 10.5 percent by total dollar balance while the ED-held FFEL 31+ delinquency rate decreases to 14.8 percent by recipient count and 15.3 percent by total dollar balance.
Default in the DL Portfolio
In an effort to provide greater insight into our defaulted portfolio, Federal Student Aid is releasing its first default report that looks at the number of borrowers and the outstanding balance of the loans entering default during the quarter. The New Direct Loan Defaults report also provides a breakdown of those loans defaulting for the first time versus re-defaults.
At this time, we are only able to provide this information beginning with FY2015, and as a result, there is just one year-over-year comparison available. However, this comparison shows a slight year-over-year decrease in the percentage of borrowers who are entering default. During the most recent quarter (FY2016 Q1), about 336,200 borrowers or 2.3 percent of recipients who were in Repayment last quarter entered default. While 301,200 borrowers entered default during the first quarter of FY2015, that figure represented 2.5 percent of recipients who were in Repayment during the previous quarter.
The first five quarters of this data suggest that seasonality impacts this rate, particularly for first-time defaulters. Traditionally, a large number of borrowers enter repayment during the first quarter of the fiscal year and a certain percentage of those borrowers will never make a payment, going into default one year later. The sheer volume of borrowers compared with the active repayment portfolio at the time will likely result in the first quarter of the fiscal year having higher rates. We will continue to monitor and report on this metric in the future, and we are committed to identifying additional data sets related to our defaulted portfolio to publish in the coming year.
In December 2015, Federal Student Aid posted its first quarterly default recoveries report to the FSA Data Center. The Default Recoveries by Private Collection Agency report details the dollar amount recovered by each private collection agency.
During the quarter ending December 31, 2015, the Department recovered more than $2.2 billion in defaulted student loans through its private collection agencies. More than three-fourths of the recoveries were due to rehabilitations; nearly 10 percent due to consolidations; 8 percent due to wage garnishments; and almost 4 percent voluntary payments. Please note that this report does not include collections on defaulted student loans through the Treasury Offset Program (TOP) as private collection agencies are not involved in the TOP process.
Decreased Application Volume and Aid Disbursements
In the first year of the 2015-2016 application cycle, nearly 18.5 million FAFSAs were submitted, a 3.9 percent decrease from the same time period last year. 2014-2015 FAFSA submissions were also down three percent from 2013-2014. In alignment with the decline in applications, disbursements decreased; 2014-2015 loan disbursements have decreased 4.8 percent from 2013-2014 while Pell Grant disbursements have decreased 2.7 percent and TEACH Grant disbursements have decreased 2.2 percent.
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 only 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 is overwhelmingly made up of accounts received from the Direct Loan Servicing Center in 2011-2012.
These loans were already in repayment and current at the time they were transferred. As a result, the loans are more much stable and mature than the TIVAS portfolios. The TIVAS have high volumes of new borrowers who are much more likely to go in and out of delinquency. The TIVAS also service FFEL Program loans purchased through ECASLA and loans of all statuses received from the Direct Loan Servicing Center. Although the NFPs started getting new borrowers in January 2015, many of those loans are still in an in-school status.
However, a provision of The Consolidated Appropriations Act of 2016 requires the Department to allocate new student loan borrower accounts to eligible student loan servicers on the basis of their performance compared to all loan servicers utilizing established common metrics, and on the basis of 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 new requirement, beginning on March 1, 2016, new allocation percentages will be based on performance under the established common metrics compared across all loan servicers. As part of our assessment of how best to implement this new provision, we have requested, received, and conducted an initial review of capacity plans from all of our servicers to assess the reasonability and risk of each servicer’s staffing, training, system, and other resource planning. We have experience working with each of our servicers and are already familiar with their systems and capabilities. Based on our experience and our initial assessment of the capacity plans, we are confident that all of our servicers can manage and process projected borrower account allocations for the next few months, while the volume of new accounts is relatively low. While we continue the process of completing and documenting our capacity assessment, we will monitor each servicer’s performance closely and can modify or discontinue allocations on short notice if any issues arise.
The Direct Loan Portfolio by Delinquency Status and ED-Held FFEL Portfolio by Delinquency Status reports should not be directly compared with the quarterly performance metrics for federal student loan servicers. These reports defines current repayment as less than 31 days delinquent while the most recent contracts with the servicers define current repayment as five days or less delinquent.
The default recoveries report includes only those loans currently placed with private collection agencies. It does not include the entire defaulted portfolio owned by the Department. Most of the remaining defaulted loans are handled in-house by Federal Student Aid. This report also excludes collections as a result of the Treasury Offset Program since private collection agencies are not involved in that process.
In the loan and grant reports, the first tab of the spreadsheet 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 tab of an award year’s fourth quarter report will show data for the full award year.
Since 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 since loan and grant reports are run a few days after the quarter’s end, initial runs often underreport activity as a result of reporting delays and activity that occurs for the award year after the date (for example, summer disbursements).
The FSA Data Center was launched in 2009 in an effort 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.