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 March 31, 2022. This quarter marks two years since the novel flexibilities applied to borrower accounts, as prescribed in the CARES Act and extended by executive actions, took effect.
The key findings described in this report will focus primarily on the impact of the CARES Act during this time when the Department of Education (ED) paused payments and waived interest on all ED-held student loans, including all loans in the William D. Ford Federal Direct Loan (Direct Loan) Program as well as Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loan Program loans that are owned by ED. ED also stopped default collections.
FSA posts reports to its Data Center in support of open government initiatives to help ensure consistency, increase transparency, and establish self-service opportunities for stakeholders.
Spotlight: *Two Years into the Payment Pause*
Outstanding Loan Portfolio Impact
As of March 31, 2022, 43 million unduplicated student loan recipients have about $1.62 trillion in outstanding loans. This represents an increase of $80 billion in the outstanding loan balance and about 400,000 student loan recipients since March 2020, when the portfolio was $1.54 trillion for 42.6 million unduplicated student loan recipients.
Portfolio growth has continued to slow since 2010, as new disbursements have steadily declined. During the COVID-19 emergency, decreased disbursements coupled with a 0% interest rate slowed the growth even more. An uptick in loan forgiveness, such as PSLF, and loan discharges, such as TPD and ACSD, has had a smaller, but significant impact. Over the past two years, the total federal loan portfolio has increased, but only by about 5%.
In March 2020, Direct Loans represented about 83% of the outstanding loan portfolio; today, it is up to 86%. At the same time, the FFEL Program has shrunk from more than 16% to less than 14% of the portfolio.
The decline in the FFEL portfolio is not unexpected. Since no new FFEL Program loans have been made since 2010, the portfolio has been shrinking. Moreover, because many CARES Act benefits, including suspended payments and 0% interest, were available only to ED-held borrowers, some commercial FFEL borrowers chose to consolidate their existing loans into Direct Loans. The advent of the PSLF Limited Waiver in October 2021 also resulted in some FFEL borrowers consolidating into the Direct Loan Program. In fact, through April 2022, approximately 168,000 FFEL borrowers have consolidated their loans into Direct Loans since ED announced the PSLF Limited Waiver.
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 over the last two years. Nearly 25 million Direct Loan (DL) recipients, with $1 trillion in outstanding loans, are in forbearance status, and over 99% of these balances are in the special CARES Act forbearance. By comparison, in March 2020, just 3.8 million DL recipients were in forbearance.
In fact, only about 400,000 DL recipients have opted out of the payment pause and thus were in an active repayment status as of March 31, 2022, compared to 18.1 million recipients in March 2020, shortly after the CARES Act became law. Notably, for those borrowers in forbearance, some may choose to make voluntary payments, even though they are not required to do so. For example, approximately 9.1 million borrowers have made at least one payment between April 2020 and March 2022. This includes about 1.9 million borrowers who have entirely paid off their accounts.
Income-Driven Repayment Enrollment
Despite the repayment pause affecting most borrowers, enrollment in income-driven repayment (IDR) plans has slightly increased during the COVID-19 emergency. As of March 2022, almost 8.4 million DL recipients were enrolled in IDR plans, up about 4% from March 2020. Incorporating ED-held FFEL recipients, 8.7 million unique recipients are enrolled in IDR plans as of March 2022, compared to 8.4 million unique recipients 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 during the past two years. In fact, the number of cumulative DL borrowers in default has decreased by about 900,000 borrowers since March 2020 to 4.9 million borrowers. The number of defaulted borrowers in the FFEL Program also decreased from about 3.7 million borrowers in March 2020 to 3.4 million in March 2022. Note that the DL total and the FFEL total should not be summed because many borrowers have loans in both programs. The combined total is approximately 7.5 million, down from 8.6 million in March 2020.
Other Key Findings—Updates to Financial Responsibility Composite Scores
The Higher Education Act requires nonprofit and for-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 updated the 2019–20 Financial Responsibility Composite Scores report to add more than 500 composite scores to the composite scores previously disclosed for nonprofit and for-profit institutions with fiscal years ending between July 1, 2019, and June 30, 2020.
In the updated 2019–20 Financial Responsibility Composite Scores report
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nearly 2,600 schools (92%) had a score greater than or equal to 1.5 (and thus are considered financially responsible);
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73 schools had a score less than 1.5, but greater than or equal to 1.0 (and thus are considered financially responsible but require additional oversight); and
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152 schools had a score less than 1.0 (and thus are considered not financially responsible).
For more information about the Financial Responsibility Composite Scores report, see the “Spotlight” section of FSA’s March 30, 2022 Electronic Announcement and the FSA Data Center.
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 continue to update the report periodically to disclose more scores as they are available.
Appendix: Key Items to Note While Reviewing These Reports
To accurately interpret the data, please note the following items:
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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.
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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 beginning in 2011. 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 beginning in 2011. The NFPs first started receiving new borrowers in January 2015.
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The Consolidated Appropriations Act of 2016 required ED 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, ED 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. ED 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 FSA Data Center was launched in 2009 to increase government transparency by posting information useful to businesses, postsecondary institutions, the media, and individuals.