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Trends In Federal Student Loan Repayment

Trends In Federal Student Loan Repayment. Colleen Slattery MOHELA. Agenda. Brief recap of the evolution of repayment plans Trends in Student Loan Repayment including: Repayment Data CFPB Federal Loan Complaints Loan Discharge and Forgiveness What’s Pending. Repayment Plan Evolution.

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Trends In Federal Student Loan Repayment

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  1. Trends In Federal Student Loan Repayment Colleen Slattery MOHELA

  2. Agenda • Brief recap of the evolution of repayment plans • Trends in Student Loan Repayment including: • Repayment Data • CFPB Federal Loan Complaints • Loan Discharge and Forgiveness • What’s Pending

  3. Repayment Plan Evolution

  4. Evolution of Repayment Plans Prior to 10/7/1998 • Standard: Equal monthly payments amortized over a maximum term of 10 years (FSL and PLUS loans) or a maximum term of between 10 and 30 years (CON loans) • Graduated: Regularly increasing payments amortized over a maximum term of 10 years (FSL and PLUS loans) or maximum term of between 10 and 30 years (CON loans • Income-Contingent Repayment (ICR) – Direct Loans only: Annually re-certified, income-based payments generally equal to 20% of discretionary income, with forgiveness of unpaid balance after 25 years.

  5. Evolution of Repayment Plans Prior to 10/7/1998 (continued) • Income-Sensitive Repayment (ISR) – FFELP Loans only: Annually re-certified payments generally based on annual gross income; no unpaid balance forgiveness or negative amortization; extends repayment up to 5 years • Alternative – Direct Loans only: Available if other DL plans inadequate; also now used in conjunction with REPAYE. New Borrowers on/after 10/7/1998 • All of the above plans, plus… • Extended: Equal or graduated payments amortized over a maximum term of 25 years, for outstanding program-specific balances exceeding $30,000.

  6. Evolution of Repayment Plans On/after 7/1/2009 • All of the above plans, plus… • Income-Based Repayment (IBR): Annually re-certified, income-based payments equal to 15% of discretionary income, with forgiveness of unpaid balance after 25 years On/after 10/1/2011, for New Borrowers on/after 10/1/2007 • All of the above plans, plus… • Pay As You Earn (PAYE) – Direct Loans only: Annually re-certified, income-based payments equal to 10% of discretionary income, with forgiveness of unpaid balance after 20 years

  7. Evolution of Repayment Plans New Borrowers on/after 7/1/2014 • All of the above plans, plus… • New Income-Based Repayment (IBR) – Direct Loans only: Annually re-certified, income-based payments equal to 10% of discretionary income, with forgiveness of unpaid balance after 20 years (replaces previously referenced IBR). On/after 12/17/2015 • All of the above plans, plus… • Revised Pay As You Earn (REPAYE) – Direct Loans only: Annually re-certified, income-based payments equal to 10% of discretionary income, with forgiveness of unpaid balance after 20 (undergrad loans only) or 25 years (one or more loans for graduate study).

  8. Evolution of Repayment Plans For more information about the different Income-Driven Repayment plans available to Direct Loan borrowers (differences between them, etc.), we encourage you to consult the IBR Workgroup’s IDR Comparison Chart at: https://cdn.ymaws.com/www.ncher.us/resource/collection/DACA245A-5783-4EC0-92F3-991881CD4F0C/02-16-17_NCHER_IDR_CompChart_v4_FINAL.pdf

  9. Repayment Data and Trends

  10. Repayment Data – Direct Loansas of 9/30/2015 Source: FSA Data Center report Portfolio by Repayment Plan, published 4/6/2018

  11. Repayment Data – Direct Loansas of 3/31/2018 Source: FSA Data Center report Portfolio by Repayment Plan, published 4/6/2018

  12. Repayment Data – Direct Loansas of 3/31/2019 Source: FSA Data Center report Direct Loan Portfolio by Repayment Plan, published 4.19.2019

  13. Repayment Data – ED-held FFELP Loansas of 3/31/2016 Source: FSA Data Center report Portfolio by Repayment Plan, published 4/6/2018

  14. Repayment Data – ED-held FFELP Loansas of 3/31/2018 Source: FSA Data Center report Portfolio by Repayment Plan, published 4/6/2018

  15. Repayment Data – ED-held FFELP Loans As of 3/31/2019 Source: FSA Data Center report Direct Loan Portfolio by Repayment Plan, published 4.19.2019

  16. DL Portfolio – Borrower Debt Size • Total Dollar Outstanding includes principal and interest. • The Total Dollar Outstanding is in billions. Source: FSA Data Center report Direct Loan Portfolio by Borrower Debt Size, published 4.19.2019

  17. Deferment Trends Source: FSA Data Center report Direct Loan Portfolio by Deferment Type, published 4.19.2019

  18. Deferment Trends Continued Source: FSA Data Center report Direct Loan Portfolio by Deferment Type, published 4.19.2019

  19. Forbearance Trends Source: FSA Data Center report Direct Loan Portfolio by ForbearanceType, published 4.19.2019

  20. CFPB Complaint Trends

  21. Trends in Federal Loan Complaints Source: CFPB Website – Period of June 1, 2016 – May 28, 2019

  22. Discharge and Forgiveness Trends

  23. Borrower Defense to Repayment Source: FSA Data Center reports Borrower Defense – Quarterly Report

  24. Public Service Loan Forgiveness (PSLF) Source: FSA Data Center report Public Service Loan Forgiveness (PSLF) Program Data, published 4.19.2019

  25. Teacher Loan Forgiveness (TLF) *The dollar amounts include outstanding principal and interest balances of loans forgiven. Source: FSA Data Center report Teacher Loan Forgiveness Program, published 4.19.2019

  26. What’s Pending

  27. Cancer Treatment Deferment • Enacted under the ED Appropriations Act 2019 for loans disbursed on or after 9.28.18 and loans disbursed before 9.28.18 that were in repayment on 9.28.18. • The borrower is entitled to postpone the repayment of their loan(s) during the period of treatment for cancer and will also receive a post-deferment grace period of 6 months. Period of deferment can not begin prior to 9.28.2018. • Unlimited eligibility however only applied for 12 months at a time. • A borrower may have mixed eligibility (i.e., loans disbursed before 9.28.18 that were in school or grace (i.e., not in repayment) on 9.28.18 do not qualify). For the loan(s) that do not qualify for the deferment the borrower is eligible for a general forbearance. • Pending publication of the Cancer Treatment Deferment Request form. • In the meantime ED has directed servicers to place a 60 day non-capping extendable administrative forbearance on the loans to suspend payment until the form becomes available. (confirmed 1.18.19 for commercial FFEL servicers) • ED clarified 2.4.19 that all FFELP and Direct loan types are subsidized, except FFELP PLUS, SLS, and Unsubsidized Consolidation. • While FFELP Unsubsidized Stafford is subsidized during the deferment, ED’s view is that a subsidy may not be paid to a FFELP holder under the HEA. • Joint-trade letter sent to ED 5.7.19 to address FFELP loan holder’s assured equitable return under 438 of the HEA.

  28. Student Loan Receivables NCHER 2019 Current and Emerging Trends

  29. Agenda • Treasury offset • GA inventory • GA recoveries • PCA CPME evaluation • Commonalities and Differences of GA and PCA debt efforts • Customer Service scripting and standards • Future direction

  30. Change in Treasury Offset • Went from annual to monthly • Too early to tell the impact, but from GA’s perspective weekly might be a better approach

  31. GA Inventory Comparison

  32. Three GA’s No Longer in Program from 2016 FY • Montana – Collection Inventory $55 million • Rhode Island – Collection Inventory $105 million • South Carolina – Collection Inventory $283 million • Decision of GA to no longer participate has many variables to that decision and trying to determine through collection inventory remaining could be a factor.

  33. Rehabilitations

  34. Consolidations

  35. Administrative Wage Garnishments

  36. Voluntary Payments

  37. Total Recoveries

  38. PCA CPME • There are several factors • Borrowers Resolved Factor: A resolved borrower account that is removed from the contractor’s inventory during the performance period by any of the following means: • i. Paid in full • ii. Compromised • iii. Rehabilitated • iv. Consolidated v. Discharged due to death • vi. Approved for total and permanent disability (TPD) discharge by the Department’s TPD Servicer • vii. Incarcerated • viii. Referred for litigation

  39. PCA CPME Cont. • A Service Quality (SQ) Score will be computed for each contractor. Initially, the SQ Score will be the sum of the weighted versions of two SQ Sub-Factors or Scores: Call Counseling Compliance and Borrower Satisfaction. • a. Call Counseling Compliance Score • **This was previously 50% of the weight and now is 100% of the weight effective 4/1/19.

  40. PCA CPME Cont. • Borrower Satisfaction Score • i. Dividing the number of complaints against the contractor. • ii. Subtracting the Share of Complaints score from the contractor’s Share of Portfolio • ** This has been changed to 100% focus on the Call Counseling and complaints are no longer included in the calculation.

  41. PCA CPME Score

  42. Commonalities of GA and PCA • Challenging futures in their space • Providing customer service • Repayment opportunities • Managing subcontractors

  43. Differences of GA and PCA • PCA’s do not process any TOP information • AWG hearing process done at ED • Security clearances • Fee payment • Collection cost waived after rehab process • E-sign • Scripting of calls

  44. Pro’s and Con’s of Scripting • Pro: • Consistency • Easier to Monitor • Can provide recording of information • Con: • Robotic • Challenges of deviating • Harder to monitor

  45. Customer Service Standards • Come with consistent definition and metrics for: • Abandon rate • Average Speed of answer • Wrap up time • Survey evaluations • These should be for the life of the loan

  46. Future Direction • Continued education to the student and families • Need to evolve quicker with technology for consumer • Artificial Intelligence • Challenge of this evolution with regulators • More partnerships, alliances and possibly less players

  47. Federal Forms Publication of Final Approved Forms: Deferment • Unemployment Deferment Request (UNEM) - Expired 9/30/18 • Economic Hardship Deferment Request (HRD) - Expired 9/30/18 • Graduate Fellowship Deferment Request (GFL) - Expired 9/30/18 • Parent PLUS Borrower Deferment Request (PLUS) - Expired 9/30/18 • Rehabilitation Training Deferment Request (RHT) - Expired 9/30/18 • In-School Deferment Request (SCH) - Expired 9/30/18

  48. FEDERAL FORMS Continued Forbearance • Mandatory Forbearance Request (SERV) - Expired 9/30/18 • Mandatory Forbearance Request (SLDB) - Expired 9/30/18 • General Forbearance Form (GFB) – Expired 2/28/19 Other • SCRA Interest Rate Limitation Request (SCRA) - Expired 10/31/18 • Income-Driven Repayment Plan Request (IDR) - Expired 10/31/18 • Reaffirmation Agreement (REA) - Expired 6/30/18 • Forgery Discharge (FORG) - New

  49. Questions?

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