New Student Loan Report Reveals Promising Repayment Trends

Archived Information

New Student Loan Report Reveals Promising Repayment Trends

Department Makes New Data Available on Defaults, Bank-Based Federal Loans
March 17, 2016

The U.S. Department of Education today released its Quarterly Student Aid Report, a collection of key performance data on the federal student loan portfolio, revealing continued increases in income-driven repayment enrollment with notable decreases in defaults and delinquencies.

Within the report, the Department's office of Federal Student Aid unveiled new, expanded data on the $357 billion Federal Family Education Loan (FFEL) program, which typically consists of federal student loans originated by banks.

The quarterly update includes three new reports to shed light on the FFEL portfolio owned by the Department—showing loan status, repayment plan and delinquency level.

"Today's analysis suggests that the Administration's efforts to help struggling borrowers are having a positive impact," said U.S. Secretary of Education John B. King Jr. "We will continue to make more data available to shed light on student debt in America. As President Obama has said, 'Government should be transparent. Transparency promotes accountability and provides information for citizens about what their government is doing.'"

The Department of Education (ED) owns more than $100 billion in FFEL loans. ED also has oversight responsibilities of the entire $357 billion FFEL portfolio. The ED-held portfolio includes FFEL loans purchased under the Ensuring Continued Access to Student Loans Act (ECASLA) along with defaulted loans assigned to the Department from guaranty agencies, rehabilitated loans, and loans in the Total and Permanent Disability discharge process.

The Quarterly Student Aid report is part of the FSA Data Center which was launched in 2009 to increase government transparency by proactively making available information that is useful to the public.

In addition to new information about the ED-held FFEL loans, today's release includes data on first-time defaults and re-defaults by quarter. The percentage of borrowers who defaulted in the first quarter of fiscal year 2016 ticked down slightly to 2.3 percent from 2.5 percent in the first quarter of fiscal year 2015.

"Over the past seven years, we have taken unprecedented steps to make college more affordable and to help borrowers manage their student loan debt," King said. "While we see promising signs of progress, we know we have work to do to ensure that every borrower in distress has a clear path to avoid default. And I will continue to fight to ensure that students have access to an affordable education that helps them get ahead, rather than drowning in debt."

Among other report highlights:

  • Income-Driven Repayment Plan enrollments continue to rise. Enrollment in income-driven repayment (IDR) options such as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), 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 FFEL borrowers are signed up in the Income-Sensitive Repayment (ISR) and IBR plans, there is a large overlap of Direct Loan and ED-held FFEL IDR borrowers. Combined, approximately 4.8 million unique borrowers are enrolled in IDR plans. On Dec. 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 amounts at 10 percent of monthly discretionary income, without regard to when the borrower first obtained the loans.

  • Hardship deferments decline. While in-school deferments have decreased slightly, hardship deferments such as for unemployment or economic hardship have declined drastically as enrollment in income-driven repayment plans has increased. As of Dec. 31, 2015, about 370,000 Direct Loan recipients were deferring their payments due to unemployment or economic hardship, a 31.5 percent decrease from the previous year. 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.

  • Forbearances shrinking. Direct Loan forbearances represent 11.3 percent of the Direct Loan portfolio, a slight decrease from the same time period last year, while FFEL forbearances have also declined slightly from last year—now representing 10.3 percent of the FFEL portfolio. Borrowers typically request forbearance when they want a temporary suspension of their payments. But with new IDR plans described above, borrowers have better options to manage their debt in tough times.

  • Delinquencies fall. The proportion of Direct Loan borrowers who are more than 31 days late in their repayments dropped to 19.7 percent on Dec. 31, 2015, compared to 22.2 percent a year earlier. Likewise, the total dollar balance of Direct Loans delinquent for more than 31 days fell to 14.9 percent from 16.6 percent during the same period. While the ED-held FFEL portfolio tends to have higher 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.

  • $2.2 billion in defaults recovered—mostly through "rehabilitations." In December 2015, FSA posted its first quarterly default recoveries report to the FSA Data Center in response to the President's directive in the Student Aid Bill of Rights. The Default Recoveries by Private Collection Agency report details the dollar amount recovered by each private collection agency. During the quarter ending Dec. 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, which is a protection not available in the private market. Under rehabilitation, borrowers who have defaulted can regain eligibility for new federal student aid, eliminate the loan default, and restore eligibility for benefits such as income-driven repayment and deferments by "rehabilitating" a defaulted loan. To qualify, borrowers must make nine on-time monthly payments during a period of 10 consecutive months. Because borrowers must make nine payments over 10 months, borrowers are allowed to miss one payment, but still rehabilitate if they make the rest of their payments.

To access the full set of data released today, visit the FSA Data Center at www.FSADataCenter.ed.gov.