Department of Education

STUDENT LOANS OVERVIEW

Fiscal Year 2023 Budget

CONTENTS

Page

Federal Student Loans:

Authorization.............................................................................................................................2

Program Description.................................................................................................................3

Repayment Plans .....................................................................................................................4

Interest Rates and Loan Limits—By Type of Loan .................................................................11

Borrower Interest Rates by Academic Year and Program Component ..................................13

Student Loan Program Maximums .........................................................................................14

Credit Reform Estimates ........................................................................................................15

Outstanding Loan Levels........................................................................................................16

FY 2023 Budget Proposal

FY 2023 Estimated New Direct Loan Volume ........................................................................18

FY 2023 Estimated Consolidation Loan Volume ....................................................................19

The Role of Student Loans.....................................................................................................20

Postsecondary Cost, Borrowing, and Enrollment by Institutional Sector................................22

FFEL Liquidating Account ......................................................................................................23

Federal Student Loan Reserve Fund .....................................................................................23

Program Output Measures

Direct Loans ...........................................................................................................................24

FFEL Loans ............................................................................................................................25

Median Federal Student Loan Debt........................................................................................26

Undergraduate and Graduate Borrower Distribution by Family Income.................................27

Undergraduate Students by Income Category .......................................................................28

Loan Volume by Institutional Sector.......................................................................................29

Loan Volume by Subsidized and Unsubsidized Stafford Loans .............................................30

Program Performance Measures

Performance Measures ..........................................................................................................30

National Student Loan Cohort Default Rate ...........................................................................32

FY 2023 Cohort Lifetime Dollar Default and Recovery Rates ................................................33
STUDENT LOANS OVERVIEW

1

Federal Family Education Loan Program (FFEL)

(Higher Education Act of 1965, Title IV, Part B)

William D. Ford Federal Direct Loan Program (Direct Loan)

(Higher Education Act of 1965, Title IV, Part D)

(dollars in thousands)

FY 2023 Authorization: Indefinite 

Mandatory Budget Authority:

Loan Subsidies 2022 Estimate 2023 Change

Net Loan Subsidies:

DL Net New Loan Subsidy $6,042,991 $12,733,042 $6,690,051

DL Net Reestimate 13,004,854 0 -13,004,854

DL Net Modification 2,221,570 0 -2,221,570

DL Total Net Subsidy 21,269,415 12,733,042 -8,536,373

FFEL Net Reestimate 9,797,237 0 -9,797,237

FFEL Net Modification 2,157,407 0 -2,157,407

FFEL Total Net Subsidy 11,954,644 0 -11,954,644

NOTE: The Direct Loan (DL) upward net reestimate for fiscal year 2022 is due primarily to updated IDR assumptions. 

In addition, other factors impacting the reestimate include updates to discount rates in recent cohorts. The DL net 

modification in FY 2022 reflects costs related to the extension of COVID-19 emergency relief measures on federal 

student loans through May 1, 2022 and costs related to the shift of default collection activities to Business Process 

Operations. The FFEL net modification for FY 2022 reflects costs related to the extension of COVID-19 emergency 

relief measures on Federal student loans through May 1, 2022 and costs related to extending those relief measures 

to borrowers serviced by Guaranty Agencies.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

2

FEDERAL STUDENT LOANS

Authorization

2005: Language authorizing the loan programs beyond fiscal year 2008 was contained in the 

Higher Education Reconciliation Act (HERA) of 2005 (P.L. 109-171).

2007-2008: The College Cost Reduction and Access Act (CCRAA) (P.L. 110-84) amended loan 

and other Higher Education Act (HEA) programs. The Ensuring Continued Access to Student 

Loans Act (ECASLA) of 2008 (P.L. 110-227) provided the Government with purchase authority 

to buy Federal guaranteed student loans from lenders and ensure access to FFEL loans. It also

increased Unsubsidized Stafford Loan limits for undergraduates.

2010: The SAFRA Act (formerly the Student Aid and Fiscal Responsibility Act), Title II, Subtitle 

A of the larger Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), terminated 

the FFEL loan program. As of July 1, 2010, all new Federal student loans originate in the Direct 

Loan (DL) program. 

2011: The Budget Control Act of 2011 (P.L. 112-25) generated savings by eliminating 

Subsidized Stafford Loans for graduate and professional students and ending most repayment 

incentives for all borrowers—effective July 1, 2012. Savings helped cover a shortfall in the Pell 

Grant program.

2012: The Consolidated Appropriations Act, 2012, (P.L. 112-74) eliminated interest payments 

during the grace period for loans made in academic years 2012-13 and 2013-14 and introduced

a lender option to change the basis for the Government-funded lender interest subsidy known 

as a special allowance payment which ensures a guaranteed rate of return on FFEL student 

loans. The lenders were now given the option to change the calculation basis from commercial 

paper to an alternative index—the 1-month London InterBank Offered Rate (LIBOR)—for 

determining special allowance.

2012: The Moving Ahead for Progress in the 21st Century Act (P.L. 112-141), signed July 6, 

2012, extended the Subsidized Stafford interest rate of 3.4 percent for 1 year and limited the 

Subsidized Stafford in-school interest subsidy to 150 percent of normal program length.

2013: The Bipartisan Student Loan Certainty Act of 2013 (P.L. 113-28) tied student loan interest 

rates to the high-yield 10-year Treasury note plus a basis point add-on per loan type and a cap.

2013: The Bipartisan Budget Act of 2013 (P.L. 113-67) eliminated the amount that FFEL 

guaranty agencies—State and private nonprofit entities that provide default insurance payments 

to lenders, as well as collection and default counseling activities—could keep from defaulted 

loan recoveries. The Act also reduced the maximum amount guaranty agencies could charge a 

borrower on a rehabilitated loan (a defaulted loan that has returned to performing status) from 

18.5 to 16 percent. Guaranty agencies were also now required to send any rehabilitated loans 

to the Department if they could not find a private lender buyer.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

3

2016: The Consolidated Appropriations Act, 2016, (P.L. 114-113) increased the reimbursement 

percentage paid to guaranty agencies by the Department of Education from 95 percent to 100 

percent and extended Account Maintenance Fees paid to guaranty agencies.

2018: The Bipartisan Budget Act of 2018 (P.L. 115-123) continued the authority to make 

Account Maintenance Fee payments to guaranty agencies and modified existing authority to 

allow waiving cohort default rate requirements for public institutions of higher education 

operating in economically distressed counties. In addition, the Act provided authority for 

emergency relief to student loan borrowers who were victims of hurricanes Harvey, Irma, or 

Maria in places such as Puerto Rico and the U.S. Virgin Islands.

2018 & 2019: The Consolidated Appropriations Act, 2018, (P.L. 115-141) and the 2019 

Appropriations Act funding the Department of Education (P.L. 115-245) each provided $350 

million toward Temporary Expanded Public Service Loan Forgiveness (TEPSLF) for borrowers 

who met eligibility for public service employment but were not enrolled in a qualified 

repayment plan.

2020: The Consolidated Appropriations Act, 2020, (P.L. 116-93) provided $50 million for 

TEPSLF. The Coronavirus Aid, Relief, and Economic Security (CARES) Act automatically 

suspended principal and interest payments and set interest rates to 0 percent on federally held 

student loans through September 30, 2020. During the payment suspension, borrowers can 

continue making payments, and any payments made during this time will be applied directly to 

principal. On August 8, 2020, the President signed an Executive order that continued the 

CARES Act borrower relief provisions through December 31, 2020.

2021: The Consolidated Appropriations Act, 2021, (P.L. 116-260) provided $50 million for 

TEPSLF and repealed the 150 percent of normal program length limitation on lifetime 

subsidized loan eligibility. On December 4, 2020, the CARES Act borrower relief provisions 

were extended by administrative action through January 31, 2021. On January 20, 2021, the 

provisions were further extended through September 30, 2021. On August 6, 2021, the 

Department announced an extension of the relief provisions until January 31, 2022.

2022: On December 22, 2021, the Department announced an extension of the CARES Act 

borrower relief provisions through May 1, 2022.

PROGRAM DESCRIPTION

The Federal student loan programs provide students and their families with funds to help meet 

postsecondary education costs. Because funding for the loan programs is provided through 

permanent and indefinite budget authority, student loans are considered separately for budget 

purposes from other Federal student financial assistance programs; however, they should be 

viewed as part of the overall Federal effort to expand access to higher education.

In the FFEL program, private lenders provided loan capital, backed by a Federal guarantee on 

the loans. The Federal Government provided interest subsidies to lenders and reimbursement 

to guaranty agencies for most costs associated with loan defaults and other write-offs. As 

stipulated by SAFRA, the FFEL program ceased making new loans as of July 2010. Since that 

date, the Direct Loan program has originated all new Federal loans. The Direct Loan program, 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

4

created by the Higher Education Amendments of 1992 as a pilot program and expanded by the 

Student Loan Reform Act of 1993, has operated since July 1, 1994. Under this program, the 

Federal Government provides the loan capital, postsecondary schools disburse the loans, and 

loan servicing is handled by the Department through private sector contractors. 

In fiscal year 2023, new Direct Loan volume is estimated at $85.2 billion, and Consolidation 

Loans (which include older loans) are estimated at $27.2 billion, for a total of $112.4 billion. In 

fiscal year 2023, new Direct Loan volume alone will account for about 67 percent of all new 

postsecondary student aid (including loans, grants, and work-study) available from the 

Department.

Four types of loans are available under the current Direct Loan program: Subsidized Stafford, 

Unsubsidized Stafford (Unsub.), PLUS, and Consolidation. Loans can be used only for qualified 

educational expenses, although credit balances that result from loans greater than the cost of 

tuition, fees, and campus housing are paid to students. Subsidized Stafford Loans are available 

to undergraduate students from low- and moderate-income families and are awarded based on 

unmet financial need. Unsubsidized Stafford, PLUS, and Consolidation Loans are available to 

borrowers at all income levels. PLUS Loans are available to parents of dependent 

undergraduate students and to graduate and professional students. Consolidation Loans allow 

borrowers to combine all Higher Education Act Title IV loans—including FFEL, Direct Loans, 

and Perkins Loans, as well as some loans made under the Public Health Service Act—into one 

loan, eliminating multiple monthly payments. 

Direct Loan borrowers are charged a loan origination fee upon taking out a loan. Subsidized and 

Unsubsidized Stafford Loan borrowers pay an origination fee equal to 1 percent of principal. 

PLUS Loan borrowers pay a 4 percent origination fee. Under sequestration, which is intended to 

limit program costs, the origination fees for Subsidized and Unsubsidized Stafford, and PLUS 

Loans are required to increase based on a percentage that OMB calculates for non-exempt 

nondefense mandatory programs. The sequestration percentage is calculated using a 

methodology described in the Budget Control Act of 2011. In fiscal year 2022—the most recent 

applicable year—the nondefense mandatory sequester percentage will be 5.7 percent, with 

Stafford and Unsubsidized Stafford loan origination fees equal to 1.057 percent and PLUS loan 

fees equal to 4.228 percent.

The CARES Act provided emergency relief measures on federally held student loans, including 

suspending loan payments, halting collections on defaulted loans, and setting interest rates to 0 

percent through September 30, 2020. Subsequent administration actions have extended these 

emergency relief measures through May 1, 2022. These actions have largely insulated Federal 

student loan performance from economic disruption caused by the COVID-19 pandemic while 

reducing loan repayments remitted to the Department. There is great uncertainty regarding 

student loan performance and corresponding cost estimates once these measures expire.

Loan Repayment Plans

Borrowers may choose from four basic types of repayment plans: standard, graduated, 

extended, and Income-Driven Repayment (IDR). The IDR plans include Income Contingent 

Repayment (ICR), Income-Based Repayment (IBR), New IBR, Pay As You Earn (PAYE), and 

Revised Pay As You Earn (REPAYE). 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

5

FFEL borrowers may change repayment plans once per year, and Direct Loan borrowers may 

switch between repayment plans at any time. In general, student loans may be discharged 

when borrowers die, are totally and permanently disabled, or in limited cases, through personal 

bankruptcy. In addition, borrowers who were falsely certified as eligible or were misled by school 

actions or misconduct—often referred to as a borrower defense to repayment—may be eligible 

to have their loans discharged. Finally, if borrowers were enrolled in or recently withdrew from a 

school that closes, they may be eligible for closed-school loan discharge.

There are four main features of repayment plans: eligibility, monthly payment, repayment term, 

and forgiveness. Each repayment plan’s features are summarized on the next page.

According to the Department’s September 2021 Federal Student Aid Data Center quarterly 

report (the most recent report publicly available), enrollment in IDR plans continues to 

increase. As of the fourth quarter of fiscal year 2021, approximately 8.4 million Direct Loan 

borrowers were enrolled in IDR plans, representing about 33 percent of all Direct Loan 

borrowers and 48 percent of all Direct Loan outstanding dollars in repayment status. Borrower 

participation reflects a 1.9 percent increase over fiscal year 2020 fourth quarter and a 2.4

percent increase in dollars being repaid via IDR plans. The percentage of outstanding Direct 

Loan dollars not currently listed on a repayment plan has risen since the start of the COVID-19 

pandemic. As of the first quarter of fiscal year 2020, that percentage was 3.2 percent. As of the 

fourth quarter of fiscal year 2021, the percentage was 13.0 percent.

History of Repayment Plans

1990s to early 2000s: Standard, Graduated, Extended, and ICR have been available since the 

early 1990s. The number of available repayment plans remained constant until the late 2000s.

2007: CCRAA established the IBR plan, which set monthly loan repayments at 15 percent of a 

borrower’s discretionary income, capped at the 10-year standard repayment plan amount, with 

forgiveness of any remaining loan balance after 25 years of repayment.

2010: SAFRA created a second IBR plan, referred to below as post-2014 IBR, which reduced 

monthly payments for future borrowers starting July 1, 2014, from 15 percent of a borrower’s 

discretionary income to 10 percent, and reduced the maximum period for a borrower to receive 

loan forgiveness from 25 to 20 years.

October 2011: Under regulatory authority, the Department accelerated the SAFRA IBR benefits 

for qualified borrowers who were new borrowers as of October 1, 2007 and had received a 

Direct Loan disbursement on or after October 1, 2011. This PAYE plan became available for 

eligible borrowers on December 21, 2012. 

December 2015: Under regulatory authority, the Department began offering the modified 

REPAYE plan to all qualified student borrowers regardless of when they borrowed. The 

REPAYE plan resembles PAYE, with a few key exceptions – such as eliminating the payment 

cap from the 10-year standard repayment plan and providing a more generous interest subsidy. 

As in PAYE, the Government pays 100 percent of interest on subsidized loans for the first three 

years. However, under REPAYE the Government will also pay 50 percent of unpaid interest on 

subsidized loans after three years and 50 percent of interest on unsubsidized loans in all years.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

6

Repayment Plans

Key 

Features Standard Graduated Extended ICR IncomeBased

New

IncomeBasedPAYE REPAYE

Eligibility

All Direct

and FFEL 

loans

All Direct

and FFEL 

loans

Direct or 

FFEL 

borrowers

w/$30,000

or more

in 

outstanding 

student

loans

All Direct

loans except 

for nonConsolidated 

Parent PLUS

Incomeeligible

student 

borrowers

[loans

issued

before

7-1-2014]1

Incomeeligible

student 

borrowers

[loans

issued

7-1-2014

or later]1

Incomeeligible

student 

borrowers

[loans

issued

10-1-2011

or later] 1

All Direct 

Loan

student 

borrowers

Monthly

payment

Remains 

fixed

Increases 

over time

Fixed or 

increases 

over time

20% of 

borrower’s 

discretionary income; 

max pay is 

12-yr fixed2

15% of 

borrower’s 

discretionary income; 

max pay is 

10-yr fixed2

10% of 

borrower’s 

discretionary income;

max pay is 

10-yr fixed2

10% of 

borrower’s 

discretionary income;

max pay is 

10-yr fixed2

10% of 

borrower’s 

discretionary income2

Remaining 

balance 

forgiven 

after 

repayment 

period 

complete?

No No No Yes Yes Yes Yes Yes

Repayment

terms

(in years)

10 10 up to 25 25 25 20 20 20 or 25

NOTES: Standard, Graduated, and Extended plans are fully repaid at the end of term. Only Direct Loans may be 

repaid under ICR, PAYE, and REPAYE plans. However, FFEL Program loans that are consolidated into a Direct

Consolidation Loan are, for the most part, eligible to be repaid under ICR, PAYE, and REPAYE, with the exception of 

Parent PLUS loans that are only allowed into ICR.

1 Generally, plans such as Income-Based and PAYE are available to qualified borrowers who demonstrate a partial 

financial hardship. A partial financial hardship occurs when the monthly payment amount a borrower would otherwise 

have to make for 10 years under the standard repayment plan is more than the monthly payment under this plan. 2 In ICR, discretionary income is defined as the difference between the borrower’s annual income and 100 percent of 

the poverty guideline for their family size and state of residence. In all other IDR plans, discretionary income is the 

difference between the borrower’s annual income and 150 percent of the poverty guideline for their family size and 

state of residence.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

7

Analysis of Borrower Obligations and Loan Payments across IDR Plans

The Department is fully supportive of recommendations by Congressional staff, the Government 

Accountability Office (GAO), the Office of Inspector General, and other policymakers to publish 

more detailed cost information on Income-Driven Repayment. As a result of earlier efforts by the 

Department to advertise the PAYE and REPAYE programs and encourage students to enroll in 

them, many more students are electing to repay their loans on IDR plans. Given this trend, the 

Department conducted a series of sensitivity analyses on incomes for students in IDR, including 

students pursuing Public Service Loan Forgiveness (PSLF). Results were published in the fiscal 

year 2021 Agency Financial Report along with supplemental information on IDR costs.1

The Department’s analysis illustrates how uncertainty around key assumptions can lead to 

significant variance in cohort subsidy cost estimates. For example, a 5 percent increase in 

estimated borrower income would decrease costs by almost $1.1 billion for loans originated in 

fiscal year 2020 (i.e., the fiscal year 2020 loan cohort), while a 5 percent decrease in estimated 

borrower income would increase costs by $1.1 billion. A 5 percent increase in estimated PSLF 

plan participation would increase costs by $137 million for the same cohort of loans, while a 5 

percent decrease would decrease costs by $138 million. 

The following analysis provides insight into how borrower payments, a foundational driver of 

student loan program costs, vary significantly across different IDR plans. This analysis provides 

another helpful approach for examining IDR by showing how different borrowers are affected by 

the plans available under current law. 

The table on the next page compares the major income-driven repayment plan options. The 

plans are compared in terms of the ratio of estimated total amount of payments to the amount 

borrowed for different income and debt categories, which are approximately equal in size. The 

table is based on a representative sample of borrowers expected to enter IDR repayment in 

fiscal year 2023, with income categories defined according to a borrower’s average projected 

income throughout the full repayment period. This method is designed to show how borrowers 

are affected by the different repayment plans. However, it is not appropriate for comparing the 

costs of IDR plans to the Government, as costs of IDR loans are driven by the net present value 

of cash flows as the loans are repaid, not total payments made or total balances forgiven.

1 Supplemental information on IDR costs can be found as a PDF file 

(https://www2.ed.gov/about/overview/budget/budget21/idrtables.pdf) and as an Excel file 

(https://www2.ed.gov/about/overview/budget/budget21/idrtables.xlsx)
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

8

Estimated Ratio of Loan Payment Totals to Initial Principal Balance for

Income-Driven Repayment Plans

Borrowers Entering Repayment in Fiscal Year 2023

Annual Income and 

Total Loan Debt ICR

Pre-2014 

IBR

PAYE & 

Post-2014 

IBR REPAYE

Income <= 70,000

Debt <= 25,000 1.88 1.50 1.10 1.37

Income <= 70,000

Debt > 25,000 1.82 1.18 0.73 0.92

Income 70,001-110,000

Debt <= 40,000 1.94 1.85 1.48 1.59

Income 70,001-110,000

Debt > 40,000 2.11 1.63 1.02 1.38

Income > 110,000

Debt <= 60,000 1.90 1.92 1.62 1.69

Income > 110,000

Debt > 60,000 2.25 1.92 1.26 1.81

For comparison purposes, the table analyzes the projected payments, assuming completion of 

the expected repayment period, under each of the IDR plans for all borrowers projected to enter 

repayment in fiscal year 2023. Student borrowers will choose repayment plans given their 

circumstances, and overall participation in IDR plans will depend on the terms of the IDR plans 

available at a given time.

From the borrowers’ perspective, lower ratios usually indicate more advantageous plans. 

However, the wide variation of ratios by income category across plans illustrates the 

complicated trade-offs borrowers face when considering the payments required and the length 

of time that payments must be made. The variation in ratios reflects the differences in 

repayment terms across the plans. For example, the standard repayment cap allows borrowers 

with higher incomes to limit monthly payments to no more than what they would pay under a 

standard 10-year payment. 

To better understand the ratios in the table, the following example may be helpful. For every 

$10,000 of loans borrowed, borrowers represented by the first category (where annual income 

is less than or equal to $70,000 and where student loan debt is less than or equal to $25,000) 

would pay over their entire repayment period, on average:

• $18,800 over their entire repayment period under ICR,

• $15,000 under pre-2014 IBR,

• $11,000 under PAYE/post-2014 IBR, or

• $13,700 under REPAYE
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

9

Based on the ratios above, borrowers generally would pay less in total under PAYE and 

REPAYE. In general, the PAYE/post-2014 IBR and REPAYE options will consistently result in 

lower total repayment amounts for borrowers than ICR or pre-2014 IBR options. The lower 

total borrower payments do not necessarily reflect higher costs to the Government, 

which are determined by the net present value of repayment cash flows.

Loan Forgiveness1

Estimates of forgiveness under the current IDR plans for borrowers entering repayment in 

2023—combined across all IDR plans, since borrowers can switch between plans—assume 

about 6 percent of borrowers would pay their loans off in full; 16 percent would end up not 

completing their repayment term due to prepayment in full; 13 percent would end up not 

completing their repayment term due to default; 7 percent would end up not completing their 

repayment term due to loan discharge (e.g., total and permanent disability); 40 percent would 

complete their repayment term and receive IDR forgiveness; and 18 percent would qualify for 

PSLF. 

Of those student borrowers whose balances are projected to receive IDR forgiveness, about 

50.5 percent would have an amount forgiven less than their original balance, and about 49.5

percent would have an amount forgiven greater than their original balance. The original median 

balance for borrowers who would qualify for non-PSLF IDR forgiveness is estimated at $49,522, 

and the median amount forgiven is estimated at $35,743. The original median balance for 

borrowers who would qualify for PSLF is estimated at $55,188, and the median amount forgiven 

under PSLF is estimated at $57,455.

Under both the FFEL and Direct Loan programs, new borrowers after October 1, 1998, who are 

employed as teachers in schools serving low-income populations for 5 consecutive, complete 

school years qualify for up to $5,000 in teacher loan forgiveness. This benefit is increased to 

$17,500 for mathematics, science, and special education teachers considered highly qualified 

under criteria defined in section 9101 of the Elementary and Secondary Education Act of 1965, 

as amended. 

The American Rescue Plan Act of 2021 (P.L. 117-02) included a provision that exempts from 

taxation Federal student loan debt that is forgiven between December 31, 2020, and January 1, 

2026.

Public Service Loan Forgiveness

In 2007, CCRAA authorized the PSLF program for nonprofit and public-sector employees. The 

criteria for defining a “public service organization” is broad and covers any Federal, State, or 

local government organization or agency and most charitable non-profit organizations. In 

addition, non-profit employers include most private schools, colleges, and universities and other 

employers with a 501(c)(3) Internal Revenue Service designation. To qualify for PSLF, 

borrowers must work for an organization that meets the PSLF employer eligibility requirements.

1 Analysis in this section reflects assumptions used to calculate the fiscal year 2023 baseline for program cost 

estimates under current law. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

10

Borrowers must make 120 qualifying monthly payments while working full-time for an eligible 

public service organization, but payments do not have to be consecutive. Borrowers who make 

120 qualifying payments under the 10-year standard repayment plan or under any Direct Loan 

Income-Driven Repayment plan, or any combination of the 10-year standard plan and any 

Direct Loan income-driven plan, will have any remaining loan balance forgiven. Amounts 

forgiven under PSLF are exempt from taxation. The PSLF benefit is only available in the Direct 

Loan program, though FFEL borrowers may access the PSLF program by consolidating their 

FFEL program loan into a Direct Consolidation Loan and subsequently making 120 qualifying 

payments. 

The Consolidated Appropriations Act, 2018 (P.L. 115-141) and the Department of Defense and 

Labor, Health and Human Services, and Education Appropriations Act, 2019 (P.L. 115-245)

each provided $350 million in funding to provide loan forgiveness in situations where borrowers 

were denied PSLF only because some or all of their repayments were not made via a qualifying

repayment plan. The Further Consolidated Appropriations Act, 2020 (P.L. 116-94) and 

Consolidated Appropriations Act, 2021, (P.L. 116-260) each provided an additional $50 million. 

This limited opportunity is referred to as the Temporary Expanded Public Service Loan 

Forgiveness (TEPSLF) program. The program operates on a first come, first served basis. 

Funds are available until expended. As in PSLF, borrowers must make 120 qualifying monthly 

payments while working full time for an eligible public service organization.

TEPSLF is only available to Direct Loan borrowers who otherwise meet all the other qualifying 

criteria for PSLF except the eligible repayment plans. The expanded list of repayment plans 

under TEPSLF includes Graduated and Extended Repayment plans, Consolidation Standard,

and Consolidation Graduated plans. 

The first cohort of borrowers became eligible for PSLF discharge in October 2017. As of 

September 30, 2021, 535,940 borrowers had submitted 678,373 applications for loan 

forgiveness under the PSLF program. Of the 134,226 applications that had been 

processed,19.8 percent of PSLF applications were denied due to missing or incomplete 

information on the form. Overall, there were 10,776 unique borrowers that had PSLF discharges 

approved, resulting in more than $1 billion in total discharges with an average balance 

discharged of $94,907. 

As of September 30, 2021, 2,573 PSLF applications were approved and 27,044 were 

determined to be not yet eligible for the TEPSLF program. The not yet eligible determinations

were due primarily to borrowers not eligible for TEPSLF consideration, making less than 120

TEPSLF qualifying payments at time of application, not meeting TEPSLF requirements for 

payments during the last 12 months, or not submitting the income documentation required to 

determine if payments during last 12 months met TEPSLF requirements. The 5,343 applications 

approved resulted in total discharges of almost $237 million, with an average balance 

discharged of $44,324.

On Oct. 6, 2021, the Department announced a pandemic-related waiver to the Public Service 

Loan Forgiveness program statute. The time-limited waiver impacted student loan borrowers 

with Direct Loans, those who have already consolidated into the Direct Loan Program, and 

those who consolidate into the Direct Loan Program by October 31, 2022. Under the new 

temporary rules, any prior period of repayment counts as a qualifying payment, regardless of 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

11

loan program, repayment plan, or whether the payment was made in full or on time. As of early 

March 2022, the waiver has helped more than 105,000 borrowers qualify for loan forgiveness, 

resulting in about $6.4 billion in approved discharges.

Interest Rates and Loan Limits—By Type of Loan

Since 1965, interest rates on Federal student loans have been set in statute. For many years, 

the statute set the terms at fixed or variable rates reset annually. Starting July 1, 2006, as 

specified by amendments to the Higher Education Act passed on February 8, 2002 under P.L. 

107-139, the rate on all Subsidized and Unsubsidized Stafford loans was fixed at 6.8 percent,

while the borrower interest rate on Direct PLUS loans was fixed at 7.9 percent.

The College Cost Reduction and Access Act of 2007 included an annual phased interest rate 

reduction for all new undergraduate Subsidized Stafford loans, with fixed interest rates dropping 

from 6.8 percent to 6 percent on July 1, 2008, until reaching 3.4 percent on July 1, 2011. The 

Moving Ahead for Progress in the 21st Century Act (P.L. 112-141), signed July 6, 2012, 

extended the Subsidized Stafford interest rate of 3.4 percent for 1 year.

The Bipartisan Student Loan Certainty Act of 2013, signed on August 9, 2013, established a 

market-based system tying student loan interest rates to the high-yield 10-year Treasury bill 

plus a statutorily-set basis point add-on up to a statutory cap. Interest rates for each loan type 

are set annually before the award year begins on July 1 but are fixed for the life of the loan, 

similar to fixed-rate home mortgages. The 10-year Treasury rate is determined each year at the 

Treasury bill auction held prior to June 1. The interest rates for academic year 2021-2022 were 

set in June 2021.

Summaries of each loan type follow:

• Subsidized Stafford (Stafford) Loans are low-interest, fixed-rate loans with annual and 

aggregate loan limits for eligible undergraduates who meet financial need criteria. The 

Budget Control Act of 2011 eliminated graduate and professional student eligibility for these 

loans effective July 1, 2012. The interest rate is set annually, remains fixed for the life of the 

loan, and is capped at 8.25 percent. Loans disbursed on or after July 1, 2021, and before 

July 1, 2022, (academic year 2021-2022) will have an interest rate of 3.73 percent, based on 

the 10-year Treasury rate of 1.68 percent plus a statutory add-on of 2.05 percent. The 

Government pays the interest while the student is in school or deferment. 

• Unsubsidized Stafford Loans are low-interest, fixed-rate loans available to student 

borrowers, regardless of financial need, with annual and aggregate loan limits. Interest 

accrues while the borrower is in school. Borrowers may defer payment of interest while in 

school and have the interest capitalized—added to the loan principal—upon entering 

repayment. New Unsubsidized Stafford Loans to undergraduates have the same rate and 

cap as Subsidized Stafford Loans (2.75 percent). However, the interest rate for graduate 

students has an add-on of 3.60 percent and a 9.5 percent cap. For academic year 2021-

2022, the rate for graduate students is 5.28 percent, based on the 3.60 add-on and 10-year 

Treasury note of 1.68 percent. 

• PLUS Loans are available to parents of dependent undergraduate students and to graduate 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

12

and professional degree students. There is no annual or aggregate limit on the amount that 

can be borrowed other than the cost of attendance minus other student financial aid. 

Generally, applicants must not have an adverse credit history. The Government does not 

pay interest accruing on PLUS Loans. The interest rate for new loans first disbursed on or 

after July 1, 2021 and before July 1, 2022, is 6.28 percent, based on the 10-year Treasury 

note of 1.68 percent and an add-on of 4.60 percent. The PLUS rate cap is 10.5 percent. 

• Consolidation Loans allow borrowers with existing Federal student loans to combine their 

loans and possibly extend their repayment schedules based on their total student loan debt 

outstanding. In general, to consolidate loans in the Direct Loan program, a borrower must 

have an outstanding principal balance on at least one eligible loan made under either the 

FFEL or Direct Loan program. Loans such as Subsidized Stafford, Unsubsidized Stafford, 

PLUS, and sometimes other Consolidation Loans are eligible. In addition, other Federal 

student loans from different programs are also eligible such as Federal Perkins Loans, 

Federal Insured Student Loans, National Defense Student Loans, Health Education 

Assistance Loans, and Nursing Loans. The interest rate for Consolidation Loans is equal to 

the weighted average of the interest rates on the loans consolidated rounded to the nearest 

higher one-eighth of 1 percent, which is then fixed for the life of the loan. The Bipartisan 

Student Loan Certainty Act of 2013 eliminated the cap of 8.25 percent.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

13

Borrower Interest Rates by Academic Year and Program Component

Type of Loan

Loans made on or after 

Oct. 1, 19981

Loans made on or after 

July 1, 20062

Loans made on or after 

July 1, 20133

Stafford and 

Unsubsidized 

Stafford 

91-day Treasury bill rate 

+1.7%, during in-school, 

grace, or deferment 

periods, but T-bill +2.3% 

during repayment; not to 

exceed 8.25%.

Both types: 6.8%; only 

subsidized Stafford loans 

reduced:

6.0%--2008-2009

5.6%--2009-2010

4.5%--2010-2011

3.4%--2011-2012

3.4%--2012-2013

Undergrads: [Sub and 

Unsub] 10-yr. Treasury 

note + 2.05%, w/cap of 

8.25%;

Grads: [Unsub] 10-yr 

Treasury note + 3.6%; 

w/cap of 9.5% 

PLUS 91-day Treasury bill rate 

+3.1%, not to exceed 9%.

Fixed rate of 7.9% for 

Direct PLUS;

increased to 8.5% under 

HERA for FFEL PLUS.

Grad and parent: 10-yr 

Treasury note + 4.6%, 

w/cap of 10.5%.

FFEL 

Consolidation 

Loans4

Weighted average of the 

interest rates on the 

loans consolidated, 

rounded up to the 

nearest one-eighth of 

1 percent, not to exceed 

8.25%.

Weighted average of the 

interest rates on the 

loans consolidated, 

rounded up to the 

nearest one-eighth of 

1 percent, not to exceed 

8.25%.

N/A 

Direct 

Consolidation 

Loans -- Stafford 

and 

Unsubsidized 

Stafford

91-day T-bill rate +2.3%, 

not to exceed 8.25% for 

applications received 10-

1-98 through 1-31-99; 

weighted average basis, 

as above, thereafter.

Weighted average basis, 

as above.

Weighted average of the 

interest rates on the 

loans consolidated, 

rounded to the nearest 

higher one-eighth of 

1 percent.

Direct PLUS 

Consolidation

Same as Direct 

Consolidation Loans for 

Stafford and 

Unsubsidized Stafford. 

Same as Direct 

Consolidation Loans for 

Stafford and 

Unsubsidized Stafford. 

Same as Direct 

Consolidation Loans for 

Stafford and 

Unsubsidized Stafford. 

1 The Transportation Equity Act for the 21st Century lowered interest rates for new Stafford, Unsubsidized Stafford, 

and PLUS loans made on or after July 1, 1998, and before October 1, 1998. These rates were extended under the 

HEA of 1998 to July 1, 2003, and further extended to July 1, 2006, via P.L 107-139. 2 Interest rates from CCRAA of 2007 (P.L. 110-84). 3 Interest rates from the Bipartisan Student Loan Certainty Act of 2013 (P.L. 113-28). 4 The Emergency Student Loan Consolidation Act of 1997, which was included in the Department’s fiscal year 1998 

appropriation, temporarily changed a number of laws affecting Consolidation Loans. Under this Act, which expired 

September 30, 1998, the interest rate for FFEL Consolidation Loans made on or after November 13, 1997, was 

based on the 91 Day Treasury-bill + 3.1 percent, not the weighted average of the interest rates on the loans 

consolidated. SAFRA eliminated new FFEL Loans as of July 1, 2010.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

14

Student Loan Program Maximums

(Whole dollars)

STUDENT STATUS

STAFFORD 

(Subsidized)

TOTAL (Stafford & 

Unsubsidized Stafford)1,2

DEPENDENT 

UNDERGRADUATES Annual Limits Annual Limits

Dependent Undergraduates: First-Year Student $3,500 $5,5003

Dependent Undergraduates Second-Year Student 4,500 6,5003

Dependent Undergraduates Third-Year+ Student 5,500 7,5003

INDEPENDENT 

UNDERGRADUATES4 Stafford Total (Stafford & 

Unsubsidized Stafford)

Independent Undergraduates: First-Year Student $3,500 $9,5003

Independent Undergraduates: Second-Year Student 4,500 10,5003

Independent Undergraduates: Third-Year+ Student 5,500 12,5003

GRADUATE STUDENTS5 0 $20,500 

STUDENT STATUS Aggregate Limits Aggregate Limits

DEPENDENT 

UNDERGRADUATES

$23,000 $31,0003

INDEPENDENT 

UNDERGRADUATES4

23,000 57,5003

GRADUATE STUDENTS5 23,000 138,500 

1 Students who qualify for only a portion of the maximum Stafford Loan limit may borrow up to the remaining loan 

amount under the Unsubsidized Stafford Loan program, with the total amount borrowed limited to cost of attendance 

minus other aid. For example, a dependent first-year student who qualifies for a $2,000 Stafford Loan would be 

eligible for an additional $3,500 in Unsubsidized Stafford up to the total of $5,500. For students borrowing under both 

programs, the loan limits displayed above in the Total (Stafford and Unsubsidized Stafford) column apply.

2 For independent undergraduate students (or dependent undergraduate students whose parents cannot borrow 

under the PLUS program) and for graduate students, the maximum limit during any academic year is: the combined 

Stafford and Unsubsidized Stafford Loan limit shown under the column entitled, "Total (Stafford and Unsubsidized 

Stafford)." For example, a second-year independent student could borrow up to $4,500 in Stafford Loans and up to 

an additional $6,000 in Unsub. Loans for a total of $10,500. 

3 ECASLA of 2008 increased Unsubsidized Stafford amounts by $2,000 annually for loans first disbursed on or after 

July 1, 2008. Aggregate amounts for dependent undergraduates increased by $8,000 and for independent 

undergraduates by $11,500. Graduate student levels did not change. 4 Also includes dependent undergraduates whose parents are unable to borrow under the PLUS program.

5 As of July 1, 2012, graduate and professional students are not eligible for Stafford Loans. Total Stafford Aggregate 

Limit of $23,000 reflects the maximum undergraduate amount, which is included in the graduate level cumulative 

limit. The aggregate loan limit for graduate students is regulated by the Department. As a result of HERA, qualified 

graduate and professional students are also eligible to borrow PLUS loans, where the only limit is the cost of 

attendance minus other student aid as described above.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

15

Credit Reform Estimates

Student loan program costs are estimated consistent with the terms of the Federal Credit 

Reform Act (FCRA) of 1990. Under the Act, future cash flows, meaning costs and revenues 

associated with a loan, are estimated for the life of the loan and discounted back to the date of 

disbursement using Treasury interest rates. This set of interest rates, provided by OMB, (i.e., 

the discount rate) is used to calculate the present value of the cash flows, which also 

determines Federal borrowing costs.

Federal loan programs are often compared using subsidy rates, which represent the Federal 

cost as a percentage of loan originations. Generally, subsidy costs may reflect a combination of 

positive and negative subsidy by loan type, with the relative weightings by loan type and other 

accounting rules determining the overall net positive or negative subsidy. A negative subsidy 

occurs when the present value of cash inflows to the Government is estimated to exceed the 

present value of cash outflows. Under Federal Credit Reform Act rules, costs such as defaults 

and in-school interest benefits are embedded within the program subsidy, while Federal 

administration costs are treated on a cash basis and are not included in the subsidy rate.

Both the FFEL and Direct Loan programs are funded by mandatory and indefinite budget 

authority and, therefore, do not receive annual discretionary appropriations. Both programs also 

incur various administrative expenses, the greatest historically being loan servicing, that are 

funded by the discretionary Student Aid Administration (SAA) account. In fiscal year 2023, the 

Administration requests $2.654 billion in SAA funding to administer all Title IV Federal student 

aid programs. This includes $1.190 billion for student aid salaries and expenses and $1.464

million for loan servicing activities. The fiscal year 2023 SAA budget request is discussed in the 

Student Aid Administration account. 

A subsidy rate is the Federal portion of non-administrative costs—principally interest subsidies 

and defaults—associated with each dollar originated. The subsidy rate reflects the estimated 

unit cost per loan, over the life of the loan, to the Federal Government. For example, a $1,000 

loan with Federal subsidy costs of $100 would have a subsidy rate of 10 percent. If loan subsidy 

costs were negative, such as -$100, then the loan has a negative subsidy rate of -10 percent, 

indicating that the Federal Government was receiving, rather than spending, 10 percent on each 

dollar of loans made. Program changes, economic conditions, and borrower repayment patterns 

can affect subsidy estimates and reestimates.

Annual variations in the subsidy rate are largely due to the relationship between the OMBprovided discount rate, which approximates the Government’s borrowing rate; the interest rate 

at which borrowers repay their loans; and technical assumptions for defaults, repayment 

patterns, repayment plan selection, and other borrower characteristics. The loan subsidy 

estimates are particularly sensitive to fluctuations in the discount rate. Even small shifts in 

economic projections may produce substantial changes in the subsidy rate.

In the current fiscal year 2022, the Direct Loan program had an estimated net positive subsidy –

driven in part by rising enrollment in IDR plans. In fiscal year 2022, the Direct Loan program 

weighted average subsidy rate for new and Consolidation Loans was estimated at 4.91 percent. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

16

However, subsidy rates can vary significantly by loan types. For example, in fiscal year 2022, 

Subsidized Stafford Loans, at 7.98 percent, and Consolidation Loans, at 24.53 percent, had

estimated positive subsidy rates, indicating a cost to the Government. Unsubsidized Stafford 

loans for undergraduates, at 0.77 percent, Unsubsidized Stafford loans for graduates, at 2.88

percent, and PLUS loans for graduate students, at 4.98 percent, also reflected positive subsidy 

rates. PLUS loans for parents (which are not eligible for enrollment in most IDR plans) had 

estimated negative subsidy rates, reflecting a savings to the Government, at -33.74 percent.

Subsidy rates can also vary by repayment option, with the greatest differences appearing 

between costlier IDR plans and other plans such as Standard, Extended, and Graduated. For 

example, in fiscal year 2022, the cohort of Subsidized Stafford loans showed an estimated 

subsidy rate of -1.80 percent under Standard (ten-year repayment), compared to a subsidy rate 

of 29.13 percent under all IDR plans. Unsubsidized Stafford loans (both undergraduate and 

graduate) showed a subsidy rate of -17.41 percent under Standard repayment compared to 

27.62 percent under IDR. 

Outstanding Loan Levels

Based on the budget tables published in the 2023 Budget Appendix, at the end of fiscal year 

2021 the outstanding FFEL and Direct Loan principal is estimated at approximately $1.491

trillion:

According to the Federal Student Aid Data Center quarterly reports, at the end of fiscal year 

2021, the outstanding FFEL and Direct Loan principal and interest balance is $1.606 trillion.

Reestimates of Subsidy Costs

Under the Federal Credit Reform Act (FCRA), the Department is required to annually reestimate 

the cost of outstanding loans by cohort since fiscal year 1992 to reflect updated modeling 

assumptions, the President’s Budget economic assumptions, and historical loan performance. 

1292

149 $4 46

Outstanding Loan Levels ($B): FY 2021

Direct Loans

FFEL

FFEL Liquidating

ECASLA
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

17

For the $1.292 trillion in Direct Loan principal outstanding at the end of fiscal year 2021, the 

Administration’s fiscal year 2023 budget calculates that net future Federal costs of outstanding 

loans are higher than projected in the fiscal year 2022 request; this difference is reflected in the 

2022 reestimate. The 2022 net upward reestimate of +$13.0 billion reflects an upward 

component of about +$26.7 billion and a downward component of about -$13.7 billion. The net 

upward reestimate is due primarily to updated IDR model assumptions and is partially offset by 

discount rate changes in recent cohorts. During fiscal year 2021, the Department completed an

IDR data update to reflect the immediate prior cycle for interest rates, defaults, prepayments, 

contract collection costs, and Death, Disability, and Bankruptcy. In addition, actual data on 

borrower incomes was analyzed using National Student Loan Data System (NSLDS) data. The 

number of actual borrower incomes available for 2019 was very low due to impacts from the 

payment suspension, which led to stable income calibration results compared to the analysis 

done in fiscal year 2021. These updates to the IDR model were the most significant factor in the 

reestimate. This net reestimate represents about 1.0 percent of the total Direct Loan 

outstanding portfolio.

Similarly, the total change in costs for all outstanding FFEL program loans at the end of fiscal 

year 2021—starting with guaranteed loans made as of October 1, 1992—is the 2022 

reestimate. The 2022 FFEL guaranteed loan reestimate reflects an upward component of +$8.5 

billion, without a downward component, for a total net upward reestimate of +$8.5 billion. Thus, 

the estimated Federal cost of prior FFEL program loans is higher by about $8.5 billion than 

previously projected. The FFEL 2022 upward reestimate was due primarily to updated collection 

rates. The ECASLA programs show a net upward reestimate of +$1.3 billion, which when 

combined with the FFEL portion of $8.5 billion produces an overall net upward FFEL reestimate 

of +$9.8 billion in fiscal year 2022, representing about 5.0 percent of the overall FFEL portfolio.

The net upward reestimates in these programs were due primarily to updated repayment plan 

selection. The reestimates in those programs include financing account interest adjustments to 

address differences between net financing account interest executed for cohorts each year and 

amounts earned based on final Treasury interest rates for those cohorts.

Total net FFEL and Direct Loan subsidy budget authority costs for the past 5 fiscal years are 

shown below:

(dollars in thousands)

Fiscal Year FFEL Direct Loans

2018 $2,309,656 -$15,259,864

2019 1,562,603 25,014,022

2020 9,734,183 109,669,910

2021 9,304,404 124,111,109

2022 11,954,644 21,269,415

NOTE: Subsidy costs include net reestimates (combined upward and downward) of prior cohorts and net 

modifications, which may produce significant annual fluctuations. The Direct Loan total in fiscal year 2022 is primarily 

due to a large net upward reestimate of $13.0 billion. Major drivers of the upward Direct Loan reestimate include 

updates to the Income Driven Repayment Model and revisions to the discharge model driven by updated discharge 

data and increased closed school activity. Downward reestimates were driven by discount rate assumption updates.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

18

FY 2023 BUDGET PROPOSAL

The Administration looks forward to working with Congress on changes to the Higher Education 

Act that ease the burden of student debt, including improvements that make the IDR and PSLF 

programs more accessible and generous. The Administration would like to create an IDR plan 

that allows borrowers to make affordable monthly payments without being unfairly burdened by 

accumulating interest, and that helps borrowers stay out of delinquency and default. A new IDR 

plan should also provide an achievable pathway to forgiveness after a reasonable number of 

monthly payments. In addition, the Administration would like to create an expanded PSLF 

program that makes loan forgiveness simple for Federal student loan borrowers working in 

public service. An expanded PSLF program should make forgiveness easily attainable for 

eligible borrowers. Finally, the Administration intends to work with Congress to ensure access to 

student financial aid for students who are Deferred Action for Childhood Arrivals recipients, 

commonly known as DREAMers.

FY 2023 ESTIMATED NEW DIRECT LOAN VOLUME

New Direct Loan dollar volume increased significantly from 2007 to 2011 as the financial crisis 

drove many non-traditional students to seek higher education. However, from 2011 to 2018, as 

the economy recovered, loan volume declined. Disruption in the traditional brick and mortar 

delivery of higher education during the COVID-19 pandemic has both continued to depress loan 

volume as well as affect the mix of volume among loan types. Consistent with long-term student 

loan trends, the fiscal year 2023 budget estimates a modest increase in total loan volume.

Subsidized and Unsubsidized Stafford Loans are projected to account for about 73 percent of 

new Direct Loan volume in fiscal year 2023, with PLUS loans at 27 percent. Graduate school 

loan volume is estimated to increase 13 percent between 2018 and 2023, accounting for 41

percent of new volume in fiscal year 2018 and 47 percent in fiscal year 2023. It is still uncertain 

whether effects on enrollment due to the pandemic are temporary or more of a permanent trend. 

The table below includes actual loan volume disbursed through fiscal year 2021.

New Student Loan Volume (Non-Consolidation)

(dollars in Millions)

Program Volume FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023

Subsidized Stafford $20,224 $19,550 $17,050 $16,245 $16,025 $15,868

Unsubsidized Stafford 48,092 47,974 46,366 45,843 46,346 46,224

PLUS 23,171 23,988 21,576 22,369 22,657 23,091

Total New Loan Volume 91,487 91,512 84,992 84,457 85,029 85,183

Graduate School Portion 37,543 38,495 38,643 39,438 40,161 40,222

NOTES: Loan volume reflects net commitments. Figures for fiscal years 2021-2023 are baseline estimates.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

19

Many factors—including rising college costs, legislative changes, eligibility changes, availability 

of State aid, availability of Federal aid, economic conditions, and enrollment demographics—

affect new loan demand. Historical loan volume data and current projections are shown above.

FY 2023 ESTIMATED CONSOLIDATION LOAN VOLUME

Direct Loan Consolidation volume surged from about $35 billion in fiscal year 2014 to $49 billion 

in fiscal year 2017 but has since declined. The increase from 2014 through 2017 may have 

resulted from greater marketing and outreach on the part of additional Consolidation Loan 

servicers brought under contract in July 2014, although increased borrowing in fiscal years 

2009-2011 and higher borrower loan balances could also be contributing factors. In 2021, 

Consolidation volume showed a marked decline, as most borrowers took advantage of 

provisions of the extensions to the CARES Act and opted against making voluntary principal 

payments.

The 2012 surge was due to a special six-month incentive repayment program, where borrowers 

who had both a FFEL and a Direct Loan were offered an additional 0.25 percent interest rate 

reduction to consolidate their loans under this special program. Repayment incentives also 

included the regular 0.25 percent interest rate reduction for electronic payment.

0

20

40

60

80

100

120

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 18 20 22

$ (Billions)

Fiscal Year

New Student Loan Volume (Non-Consolidation)
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

20

THE ROLE OF STUDENT LOANS

Federal student loans play a key role, along with Federal grants and Federal education tax 

credits, in helping families meet postsecondary school costs. The following charts show that 

Federal student loans are the largest component of the Federal postsecondary aid system. 

Federal student loans (excluding Consolidation loans) accounted for about 62 percent of 

academic year 2020-2021 Federal student aid, while Federal grants, including the Post-9/11 

Veterans Educational Assistance Program and Federal Work Study, accounted for 

approximately 29 percent. Federal tax benefits accounted for 9 percent. This breakout is based 

on data from Table 1 in the “College Board Trends in College Pricing and Student Aid 2021” 

online report1.

1 See Table 1, https://research.collegeboard.org/trends/college-pricing.

0

10

20

30

40

50

60

70

80

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 18 19 20 21 22 23

Volume: $ Billions

Fiscal Year

Consolidation Loan Volume

FFEL Direct Loans
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

21

Federal Postsecondary Assistance: Academic Year 2020-2021

According to this report, approximately $235 billion in total funds from Federal, State, 

institutional, and private sources were used to help finance postsecondary expenses for

academic year 2020-21. The Federal Government provided about $134 billion, or 57 percent, of 

all these funds, while State, institutional, and private sources (i.e., non-Federal) provided about 

43 percent. The chart below shows the historical trend for major Federal aid programs over the 

past decade based on data in this 2021 College Board online report.

Federal student 

loans

62% Federal grants 

and work-study 

29%

Federal 

education tax 

credits

9%

0

20

40

60

80

100

120

140

160

180

200

220

08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21

Federal Aid AY 08-09 to 20-21

Pell Grants Federal Loans Federal Work Study

Federal Education Tax Benefits Veterans and Military Grants
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

22

POSTSECONDARY COST, BORROWING, AND ENROLLMENT BY 

INSTITUTIONAL SECTOR

The 2021 “College Board Trends in College Pricing” online report shows that the average 

annual total cost of attendance, including tuition and fees and room and board (in current 

dollars), at a public 4-year college, increased by 32 percent from $17,160 in 2011-12, to 

$22,690 in 2021-221. Over the same 10-year period, the average yearly total cost at a private 4-

year college increased by 36 percent, from $37,970 to $51,690. Using just tuition and fees 

shows that public 4-year schools increased from $8,280 in 2011-12 to $10,740 in 2021-22, a 30

percent increase, while private 4-year schools increased from $27,880 to $38,070, a 37 percent 

increase. Tuition and fees—there is no room and board—at public 2-year community colleges

increased from $2,970 in 2011-12 to $3,800 in 2021-22, a 28 percent increase, but a much 

lower overall cost.

Students rely on the Federal loan programs to help close the gap between what their families 

are expected to pay (“expected family contribution”) and the cost of attendance (including 

tuition, fees, and room and board). Using undergraduate enrollment data from the Department’s 

Integrated Postsecondary Education Data System (IPEDS), the College Board’s 2021 “Trends 

in Student Aid” report estimates student full-time equivalency (FTE) patterns, providing context 

on where undergraduates choose to attend. The latest enrollment data, from fall 2019, shows 

that about 43 percent of all undergraduate students were enrolled at 4-year public institutions, 

20 percent at 4-year private nonprofit institutions, 31 percent at 2-year public colleges, and 6

percent at private for-profit schools.

2019 Fall Undergraduate Enrollment (Percent of FTE)

The table below shows a summary breakout percentage distribution of specific financial aid 

sources by school sector. For example, the portion of Pell Grant funds going to students in 

public 4-year schools is about the same as that going to students in public 2-year schools, but 

more than double the portion in private 4-year and for-profit school sectors. Subsidized Stafford 

1 See Table 2, https://trends.collegeboard.org/college-pricing.

Public 4-Year

43%

Private Nonprofit 4-

Year

20%

For-Profit

6%

Public 2-Year

31%
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

23

Loan funds are concentrated in the public 4-year sector, and Grad PLUS funds are 

concentrated in the private 4-year sector. The public 2-year sector has the lowest borrowing 

percentages of any sector. 

Percentage Distribution of Selected Federal Aid Funds by Sector, 2018-19

Type of Aid Public 4-yr Private 4-yr Public 2-yr For-profit

Pell Grant 37% 17% 33% 13%

Subsidized Stafford 45% 28% 11% 15%

Unsubsidized Stafford 41% 39% 5% 15%

Parent PLUS 51% 42% 1% 6%

Grad PLUS 27% 68% 0% 6%

NOTE: Row percentages may not sum to 100 due to rounding; columns are not intended to sum to 100.

FFEL LIQUIDATING ACCOUNT

Per the Federal Credit Reform Act of 1990, the cost of FFEL student loan commitments made 

prior to fiscal year 1992 is appropriated annually under indefinite authority and shown in a 

Liquidating Account on a cash basis. This account does not issue any new loans, nor estimate 

loan-lifetime costs by cohort, and does not use a net present value calculation. The Liquidating 

Account pays for pre-1992 student loan activities, such as loan default payments, special 

allowance payments, and interest benefits. Consequently, as default and in-school interest 

costs on these older loans decline over time and recoveries on defaulted loans continue to be 

collected, annual revenues—offsetting collections—will more than offset annual costs, resulting 

in negative program costs for which no new budget authority is needed. Based on the 2023 

President’s Budget, total net outlays in the Liquidating Account are estimated at -$143 million in 

fiscal year 2022, and -$213 million in fiscal year 2023, meaning collections are expected to 

exceed payments. A portion of these net collections is returned to the U.S. Treasury as a capital 

transfer each year.

FEDERAL STUDENT LOAN RESERVE FUND

The Amendments to the HEA of 1998 clarified that reserve money held by public and non-profit 

guaranty agencies participating in the FFEL program are Federal property when held in the 

Federal fund, (i.e., Reserve Fund), as opposed to funds held in the Operating Fund over which 

guaranty agencies retain control. The Federal fund is used to pay default claims from FFEL 

lenders, and other claims related to death, disability, bankruptcy, and closed schools. This fund 

also pays fees to support successful guaranty agency efforts to avert defaults. Federal 

reimbursements for default claim payments are also paid into this fund. The Consolidated 

Appropriations Act, 2016, increased the reimbursement percentage paid to guaranty agencies 

by the Department of Education from 95 percent to 100 percent.

The Reserve Fund’s major revenues are reinsurance payments from the Federal Government, 

and its major expenses are insurance payments to lenders. The Fund began fiscal year 2021 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

24

with an adjusted unobligated balance of about $2.0 billion and ended the year with a balance of 

about $2.0 billion, which became the starting balance for fiscal year 2022. Fiscal year 2022 is 

estimated to have an ending balance of $1.0 billion.

PROGRAM OUTPUT MEASURES1

Direct Loans 2021 footnote

2022 Footnote2023Footnote

Direct Stafford Loans:

Direct Stafford: Loan volume ($ in millions)2 $16,245 $16,025 $15,868

Direct Stafford Number of loans (in thousands) 4,628 4,562 4,515

Direct Stafford Average loan (whole $) $3,510 $3,513 $3,514

Direct Stafford Subsidy rate2 13.05% 7.98% 12.18%

Direct Unsubsidized Stafford Loans 

(Undergraduate):

Direct Unsubsidized: Loan volume ($ in millions)2 $18,476 $18,502 $18,482

Direct Unsubsidized: Number of loans (in thousands) 4,856 4,816 4,775

Direct Unsubsidized: Average loan (whole $) $3,805 $3,842 $3,870

Direct Unsubsidized: Subsidy rate2 9.37% 0.77% 4.17%

Direct Unsubsidized Stafford Loans 

(Graduate):

Direct Unsubsidized: Loan volume ($ in millions)2 $27,367 $27,844 $27,742

Direct Unsubsidized: Number of loans (in thousands) 1,790 1,800 1,776

Direct Unsubsidized: Average loan (whole $) $15,289 $15,472 $15,618

Direct Unsubsidized: Subsidy rate2 12.01% 2.88% 8.18%

Direct PLUS Loans (Parents of 

Undergrads):

Direct Unsubsidized: Loan volume ($ in millions)2 $10,297 $10,340 $10,611

Direct Unsubsidized: Number of loans (in thousands) 658 650 653

Direct Unsubsidized: Average loan (whole $) $15,640 $15,911 $16,257

Direct Unsubsidized: Subsidy rate3 -25.34% -36.83% -35.84

Direct PLUS Loans (Graduate): 

Direct PLUS: Loan volume ($ in millions)2 $12,072 $12,317 $12,480

Direct PLUS: Number of loans (in thousands) 595 595 593

Direct PLUS: Average loan (whole $) $20,282 $20,692 $21,028

Direct PLUS: Subsidy rate3 13.50% 4.98% 10.77%

Direct Consolidation Loans:

Direct Consolidation: Loan volume ($ in millions)2 $19,965 $26,217 $27,240

Direct Consolidation: Number of loans (in thousands) 324 380 401

Direct Consolidation: Average loan (whole $) $61,616 $68,939 $67,991

Direct Consolidation: Subsidy rate3 22.61% 24.53% 32.52%

1 Numbers in Program Output Measures tables may not add due to rounding. 2 Net commitments (disbursements) that are less than amounts committed (e.g., due to loan cancellations).

3 This rate generally reflects the Federal cost per new loan dollar. When negative, this rate indicates a net savings to

the Federal Government. Subsidies are weighted on gross volumes and are consistent with the rates shown in the 

text table on Student Loan Program Costs that appears in the Budget Appendix.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

25

Direct Loans 2021 footnote

2022 Footnote2023Footnote

Total Direct Loans1:

Total Di: Loan volume ($ in millions)2 $104,421 $111,246 $112,422

Total Dire ct Number of loans (in thousands) 12,852 12,803 12,713

Total DirectAverage loan (whole $) $8,125 $8,689 $8,843

Subsidy Cost3:

Total DirectNew loan subsidy cost ($ in millions) $414 $6,043 $12,733

Total Direct Subsidy Net Reestimate ($ in millions) 52,836 13,005 0

Total Direct Net Modification ($ in millions) 70,862 2,222 0

DL Total Net Subsidy ($ in millions) 124,111 21,269 12,733

Total Direct Weighted Average Subsidy rate4 0.34% 4.91% 10.27%

Outstanding Loan Volume ($ in billions):

Total Direct Loans Outstanding5 $1,292 $1,338 $1,362

There are no new FFEL program loans. Information on the FFEL annual reestimates and

subsidy modifications, as well as outstanding loan volume, are presented below.

FFEL Loans 2021 2022 2023

Subsidy Cost

Subsidy Cost: Net Reestimate ($ in millions)6 $3,192 9,797 0

Subsidy Cost: Net Modification ($ in millions) 6,112 2,157 0

Total FFEL Net Subsidy ($ in millions) 9,304 11,955 0

Outstanding Loan Volume ($ in billions):

Outstanding: FFEL Loans $149 $139 $128

Outstanding: ECASLA Loans 46 46 38

Outstanding: Liquidating Account Loans 4 4 4

Total Combined Outstanding Loan 

Volume7

199 185 170

1 Totals reflect DL program amounts only—no Perkins Loans. 2 Net commitments (disbursements) that are less than amounts committed (e.g., due to loan cancellations). 3 Subsidy amounts of existing loans are estimated on a net present value basis. Negative subsidy results in a net 

savings to the Federal Government. Net reestimates and modifications may reflect both upward and downward 

amounts—consistent with data on page 1. 4 This rate generally reflects the Federal cost per new loan dollar. When negative, this rate indicates a net savings to 

the Federal Government. Subsidies are weighted on gross volumes and are consistent with the rates shown in the 

text table on Student Loan Program Costs that appears in the Budget Appendix. 

5 Reflects total Direct Loan principal (including Consolidations) as the end-of-year estimate. 6 Subsidy amounts are estimated on a net present value basis, and since no new FFEL loans are made, only net 

reestimates and net modifications are reported. Reestimates may reflect both upward and downward amounts—

consistent with data on page 1.

7 Reflects total FFEL and Liquidating account loan principal (including Consolidations) as end-of-year estimate.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

26

MEDIAN FEDERAL STUDENT LOAN DEBT

The median level of outstanding Federal student loan balances owed (i.e., Subsidized Stafford 

and Unsubsidized Stafford Loans) per student for all undergraduate borrowers upon entering 

repayment has increased substantially over time, from $3,498 in 1990, to $8,750 in 2000, and to 

$18,727 for those who entered repayment in 2020. Graduate borrower median federal loan debt 

has also increased substantially from $8,626 in 1990, to $22,906 in 2000, and $45,828 in 2020.

Amounts are shown in current dollars, unadjusted for inflation, and are based on data from the 

NSLDS. Graduate debt reflects borrowing at the graduate level only.

Median Undergraduate Federal Student Loan Debt When Entering Repayment

Median Graduate Federal Student Loan Debt When Entering Repayment

0

5,000

10,000

15,000

20,000

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 16 18 20

Debt Level: Whole Dollars

Enter Repayment Fiscal Year 

0

10,000

20,000

30,000

40,000

50,000

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20

Debt Level: Whole Dollars

Enter Repayment Fiscal Year
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

27

UNDERGRADUATE AND GRADUATE BORROWER DISTRIBUTION BY 

FAMILY INCOME

This chart reflects the percentage of dependent and independent undergraduate borrowers of 

Subsidized and Unsubsidized Stafford Loans at various family income levels, according to 

NSLDS data for academic year (AY) 2020-2021. Graduate student data is also presented.

Approximately 51 percent of Subsidized Stafford Loan dependent borrowers come from families 

with under $60,000 in family income, compared to about 36 percent of the Unsubsidized

Stafford Loan dependent borrowers. Notably, more than 50 percent of all Unsubsidized Stafford 

Loan dollars go to dependent students from families with incomes greater than $100,000.

Independent undergraduate student borrowers are fairly similar in their borrowing pattern for 

both Subsidized and Unsubsidized Stafford loans. About half of all independent undergraduate 

student recipients of Subsidized or Unsubsidized loans are from households in the under-

$20,000 income category. Graduate student borrowers are concentrated in the under-$20,000 

income category.

Percentage of Borrowers and Dollars of Aid by Income Category: AY 2020-21 (NSLDS)1

Dependent Students (Income Categories = dollars in thousands)

Loan Type Measure 0-$20 $20-40 $40-60 $60-80 $80-100 $100+

Subsidized 

Stafford

Borrowers 17.1% 18.4% 15.9% 14.0% 11.8% 22.7%

Subsidized 

Stafford

Dollars 16.7% 18.5% 16.3% 14.4% 11.9% 22.2%

Unsub. Stafford Borrowers 11.8% 12.8% 11.4% 10.8% 10.8% 42.4%

Unsub. Stafford Dollars 8.4% 8.8% 7.8% 7.8% 9.3% 58.0%

Independent Students (Income Categories = dollars in thousands)

Loan Type Measure 0-$20 $20-40 $40-60 $60-80 $80-100 $100+

Subsidized 

Stafford

Borrowers 47.4% 29.3% 11.6% 5.7% 3.2% 2.7%

Subsidized 

Stafford

Dollars 46.7% 29.8% 11.8% 5.8% 3.3% 2.7%

Unsub. Stafford Borrowers 45.2% 28.0% 11.6% 6.2% 3.9% 5.2%

Unsub. Stafford Dollars 43.0% 27.6% 11.7% 6.6% 4.3% 6.8%

Graduate Students (Income Categories = dollars in thousands)

Loan Type Measure 0-$20 $20-40 $40-60 $60-80 $80-100 $100+

Unsub. Stafford Borrowers 42.7% 19.3% 13.1% 8.1% 5.7% 10.9%

Unsub. Stafford Dollars 49.7% 18.3% 11.4% 6.9% 4.7% 9.0%

PLUS Borrowers 56.3% 17.4% 9.8% 5.6% 3.7% 7.2%

PLUS Dollars 58.8% 17.0% 9.0% 5.2% 3.3% 6.7%

1 In these three tables, Loan Type measures for Borrowers and Dollars add across columns to 100 percent.

Income category columns $20-40 through $100+ reflect income amounts of $20,001- $40,000 and so forth.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

28

UNDERGRADUATE STUDENTS BY INCOME CATEGORY

This table, using the most recent National Postsecondary Student Aid Study (NPSAS 2016)

data from academic year 2015-2016, shows the percentage of all undergraduates according to 

income categories; and within income categories, the percentage of each income group that 

received Subsidized Stafford Loans, Unsubsidized Stafford Loans, or any form of Federal aid, 

such as Pell Grants, Work Study, or student loans. For example, 18 percent of all dependent 

undergraduates are from families with total income under $20,000 and, of that group, 36.8

percent received Subsidized Stafford Loans, 27.3 percent received Unsubsidized Stafford 

Loans, and 80.9 percent reported receiving some type of Federal aid.

This table shows that Federal aid in general goes to lower- and middle-income groups, as 

intended. For instance, in the dependent students table, the two lowest family income 

categories—0-$19,999 (0-$20) and $20,000-$39,999 ($20-40)—have the highest percentages 

of students receiving some form of Federal aid, corresponding to 80.9 percent and 76.2 percent, 

respectively, while the highest income category—$100,000+—reflects the lowest percentage of 

dependent undergraduates receiving aid, at 39.8 percent.

Percentage of Undergraduate Students by: 1) Income Level and 2) Within Income Level,

By Type of Federal Aid: Academic Year 2015-16 (NPSAS)1

Dependent Students (Income Categories = dollars in thousands)

Group Type Measure 0-$20 $20-40 $40-60 $60-80 $80-100 $100+

Undergraduates Students 18.0% 16.9% 13.1% 11.7% 9.6% 30.7%

Subsidized Stafford % Receiving 36.8% 39.4% 44.5% 39.8% 35.9% 17.9%

Unsub. Stafford % Receiving 27.3% 30.0% 35.2% 35.1% 37.9% 35.6%

Federal Aid % Receiving 80.9% 76.2% 68.3% 50.0% 45.5% 39.8%

Independent Students (Income Categories = dollars in thousands)

Group Type Measure 0-$20 $20-40 $40-60 $60-80 $80-100 $100+

Undergraduates Students 49.5% 23.3% 11.2% 6.1% 4.1% 5.8%

Subsidized Stafford % Receiving 33.7% 33.7% 26.4% 23.3% 19.0% 8.5%

Unsub. Stafford % Receiving 29.4% 29.0% 24.6% 22.6% 21.5% 15.3%

Federal Aid % Receiving 58.2% 53.7% 42.4% 34.0% 26.0% 16.2%

1 In both tables above, the “Undergraduates” percentages will add across columns to 100 percent. However, the 

“% Receiving” aid measures are not all mutually exclusive. Therefore, they are not intended to and will not sum to 

100 percent, across columns or by income level.

“Federal Aid” reflects percentages of students receiving any form of Federal aid including student loans, grants, or 

work-study.

Student data collection activities for NPSAS 2020 concluded in January 2021 but preliminary data is not yet available.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

29

LOAN VOLUME BY INSTITUTIONAL SECTOR

The following charts are based on NSLDS and related data.

Distribution of New Loan Volume Dollars by Institution

FY 2021 4-Yr. Public 4-Yr. Private 2-Yr. Public 2-Yr. Private Proprietary

Direct Loans 43.1% 40.6% 3.3% 0.2% 12.8%

The following graph depicts annual gross commitment loan volume trends by 4-year, 2-year, 

and proprietary school sectors. (Direct Loans are from program inception in fiscal year 1994.)

Annual Loan Volume by 4-Year, 2-Year, and Proprietary School Sectors

• Loan volume at 4-year institutions increased steadily from more than $5 billion in fiscal year

1984 to almost $83 billion in fiscal year 2011. It remained relatively level until an uptick in 

2016 and a noticeable decrease in 2020 to just under $70 billion. In 2021, there was a slight 

increase to $71 billion. Loan volume at 4-year institutions accounted for about 81 percent of 

all volume in fiscal year 2021.

• Loan volume at proprietary institutions increased substantially between fiscal years 1999

and 2010. However, proprietary school loan volume has continued to decline between fiscal 

years 2010 and 2021, from $29.4 billion to $11.2 billion. Proprietary school loan volume 

accounted for 26 percent of total volume in fiscal year 2010 but only 13 percent in 2021.

• Loan volume at 2-year institutions is comparatively small as school costs are also much 

lower. Volume remained steady at about $2 to $4 billion for many years before increasing to 

$8 to $10 billion after the economic downturn in 2008. Levels have since decreased 

annually for the past 7 years, to $3.1 billion in fiscal year 2021.

0

10

20

30

40

50

60

70

80

90

'84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 16 18 20

Volume: $ Billions

Fiscal Years 1984 - 2021

4-year 2-year Proprietary
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

30

LOAN VOLUME BY SUBSIDIZED AND UNSUBSIDIZED STAFFORD 

LOANS

As of July 1, 2012, graduate and professional students are no longer eligible for Subsidized 

Stafford Loans, explaining the sharp decrease in the Subsidized Stafford Loan volume in that 

year. Since then, graduate and professional borrowing has seen a steady increase, while 

undergraduate borrowing has declined. Those trends explain the widening gap between 

Subsidized and Unsubsidized Stafford Loan volume in recent years.

Subsidized Stafford Loan and Unsubsidized Stafford Loan Volume1

.

PROGRAM PERFORMANCE INFORMATION

Performance Measures

This section presents selected program performance information, including, for example, 

program goals, objectives, measures, and performance targets and data. Achievement of 

program results is based on the cumulative effect of the resources provided in previous years, 

and those requested in fiscal year 2023 and future years, as well as the resources and efforts 

invested by those served by this program. 

Certain loan-specific performance measures are included in this section, including teacher loan 

forgiveness, default rates, and loan recovery rates. However, because the student loan 

programs and other Federal financial aid programs are often viewed in combination, they 

typically rely on the same performance measures, strategies, and program improvement 

activities. Such measures are discussed in the Student Financial Assistance Congressional 

Justification and are not repeated here.

1 Loan volume is estimated for fiscal years 2021-2023.

0

10

20

30

40

50

60

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 18 19 20 21 22 23

Volume: $ Billions

Fiscal Year Subsidized Stafford

Unsubsidized Stafford
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

31

Teacher Loan Forgiveness: In response to a GAO recommendation regarding the 

development of program performance measures for Teacher Loan Forgiveness (TLF), the 

Department initiated a metric to track the number of borrowers who receive TLF.

Since trends in loan forgiveness tend to follow trends in the Stafford loan program, this metric 

will track the number of Stafford borrowers (Subsidized and Unsubsidized) who receive 

forgiveness per year, including loans from both Direct Loan and FFEL programs. Borrowers 

receiving Teacher Loan Forgiveness are estimated to increase as the Department finds ways to 

better publicize and promote this program. Specifically, the Department is working on ways to 

raise awareness among current and incoming students and among potentially eligible borrowers 

who have already entered the workforce. In fiscal year 2020, approximately 33,860 teachers 

received loan forgiveness amounting to $303 million in dollars discharged, with an average 

balance discharged of about $8,958.

The following table reflects current baseline actuals (2010 – 2020) and target levels—starting 

with 2017, the first year of establishing this measure. Student data collection activities for the 

2020 NPSAS concluded in January 2021, but preliminary data is not yet available.

Teacher Loan Forgiveness Performance Measure

Fiscal Year

Target

Number of Borrowers 

Receiving Forgiveness

Actual

Number of Borrowers 

Receiving Forgiveness

2010 20,740

2011 28,952

2012 28,371

2013 35,009

2014 39,395

2015 38,520

2016 38,460

2017 37,000 42,330

2018 38,000 45,093

2019 42,500 39,697

2020 43,500 33,860

2021 45,000

2022 46,000

2023 47,000

2024 48,500

General Borrowing Trends: Based on the 2008 National Postsecondary Student Aid Study 

(NPSAS), 46.9 percent of all undergraduates reported receiving some type of Federal Title IV 

financial aid in 2007-08, and 34.5 percent reported borrowing a Federal Stafford (Subsidized or 

Unsubsidized) Loan. In the 2012 NPSAS, 57.2 percent of undergraduates reported receiving 

some type of Federal Title IV aid, and 40.1 percent reported having borrowed a Federal Stafford 

Loan in 2011-12.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

32

Data from the 2016 NPSAS reveals 54.4 percent of undergraduates reported receiving some 

type of Federal Title IV aid, and 36.2 percent reported having borrowed a Federal Stafford Loan

in 2015-16, reflecting a decrease in the portion of students who reported borrowing in recent 

years. Of undergraduates who borrowed a Federal Stafford Loan, the average amount 

borrowed was $5,000 in 2007-08, $6,400 in 2011-12, and $6,600 in 2015-16.

In addition, graduate and professional student borrowing reflects a similar pattern. According to 

the 2008 NPSAS, 38.9 percent of graduate and first-professional students reported borrowing a 

Subsidized or Unsubsidized Stafford Loan in 2007-08, while in 2011-12 this figure was 

43 percent. Data from the 2016 NPSAS shows 39.9 percent. The average Stafford Loan amount 

borrowed by graduate and first-professional students was $15,600 in 2007-08, $17,000 in 2011-

12, and $18,200 in 2015-16. Graduate students were not eligible for Subsidized Stafford Loans 

as of July 1, 2012.

The percentage of graduate students who reported borrowing PLUS loans jumped from 

4.9 percent in 2007-08 to 9.9 percent in 2011-12, with the average amount growing from 

$15,500 to $18,600. Some of this trend was due to the change in graduate student eligibility for 

Subsidized Stafford and to the increasing use of PLUS, rather than private loans. Data from the 

2016 NPSAS shows that 10 percent of graduate students reported borrowing PLUS Loans with 

an average amount of $22,300. Student data collection activities for the 2020 NPSAS concluded 

in January 2021, but preliminary data is not yet available.

In fiscal year 2021, the Direct Loan program, excluding Consolidations, provided approximately 

$85 billion in new loan assistance to an estimated 6.2 million qualified borrowers. In doing so, 

the Federal student loan programs helped ensure access to postsecondary education by 

providing loans to students and their families at lower interest rates and with more favorable 

repayment terms than student borrowers would likely be able to obtain elsewhere. While private 

loans are another source of aid, many private lenders have underwriting standards that would 

restrict access to students with little or no work experience or credit history. In addition, private

loans do not always offer the same benefits as Federal loans and may have higher interest 

rates.

NATIONAL STUDENT LOAN COHORT DEFAULT RATE

Given the substantial volume of Federal student loans, with more than a trillion dollars 

outstanding, ensuring that those taxpayer-funded loans are repaid is critical to the long-term 

success of the student loan program. Since the consequences of default on a Federal student 

loan are severe, the Department is committed to ensuring that borrowers can easily select a 

repayment plan and manage their repayments.

The national student loan “cohort default rate” measures student loan borrower default behavior 

in the first 3 years of repayment but excludes PLUS loan defaults. This cohort default rate 

measure was established by the Omnibus Budget Reconciliation Act of 1990 to exclude “highdefault” institutions from participation in the loan programs. The measure looked at the 

performance of an institution’s loans in the first 2 years of repayment. Under this law, schools 

were excluded from FFEL, Direct Loan, and Pell Grant program eligibility for at least 3 years if 

they hit or exceeded a 25 percent default rate threshold for 3 consecutive years.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

33

The Higher Education Opportunity Act of 2008 (HEOA) raised the 25 percent threshold to 

30 percent for fiscal years 2012 and beyond. HEOA also changed the window from 2 years to 3 

years, starting with the borrowers who would enter repayment in fiscal year 2009. Only the 3-

year cohort default rate is now published, starting with the 2012 cohort. The first official 3-year 

cohort default rate was 13.4 percent for the 2009 cohort and was published on September 28, 

2012. The most recent 3-year cohort default rate for the 2018 cohort was 7.3 percent. This 

reflects approximately 4.1 million borrowers from 5,996 postsecondary institutions who entered

repayment, and 300,625 of these borrowers defaulted within a 3-year period.

The national cohort default rate also includes component data on cohort default rates by school 

sectors. The 2018 cohort default rates published showed public 2-year school sector with 11.5

percent, the proprietary school sector with 11.2 percent, and the private non-profit 2-year school 

sector with 12.1 percent. The rates are lower for borrowers at 4-year public and private schools: 

5.4 percent and 5.0 percent, respectively. As the CARES Act borrower relief provisions overlap 

with future cohort default rates, these rates may become temporarily less instructive about 

borrower default behavior, however the Department will continue to publish cohort default rates 

annually.

2-Year and 3-Year National Cohort Default Rates

The national cohort default rate (as shown above) measures prior borrower default behavior in 

just the first 2 years or 3 years of repayment—any defaults outside this period are not 

incorporated into the default rate. As a result, this rate does not reflect the forward-looking 

“lifetime dollar default rates” used in budget formulation to project future default costs. Lifetime 

default rates account for defaults over the entire loan-life and are significantly higher than the 3-

year cohort default rate. 

FY 2023 COHORT LIFETIME DOLLAR DEFAULT AND RECOVERY RATES

The following table shows the estimated dollar default and recovery rates for the 2023 cohort of 

new loans in the Direct Loan program. The default rates reflect the percentage of dollars 

17.617.2

21.422.4

17.8

15

11.610.710.49.6 8.8

6.9

5.6 5.9 5.4 5.2 4.5 5.1 4.6 5.2

6.7 7.0

8.8 9.1 10

13.4

14.713.7

11.8

11.311.510.810.19.7

7.3

0

5

10

15

20

25

'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 13 14 15 16 17 18

Default Rate (%)

Fiscal Year (Repayment Cohort)

2-Year National 3-Year National
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

34

estimated to go into default over the life of the cohort. The recovery rates reflect the percentage 

of dollars the Federal Government estimates it will recover on those defaults. Since interest 

continues to accrue during default, it drives the estimate of total collections. However, the 

Federal Government might only recover some or none of the dollars for a default, particularly if 

a borrower enters an IDR plan after entering repayment. Due to extension of the CARES Act 

borrower relief provisions through May 1, 2022, collection activities on defaulted loans in the 

Direct Loan program are currently suspended.

FY 2023 Baseline Cohort Lifetime Dollar Default and Recovery Rates

Direct Loans

Lifetime 

Default 

Rate

Cash 

Recovery 

Rate

Cash 

Recovery Rate

(net of CCC)

NPV Recovery 

Rate (net of 

CCC)

Subsidized Stafford 27.32% 103.22% 98.78% 87.55%

Unsub Stafford 

(Undergrad) 

32.23% 104.11% 99.70% 88.20%

Unsub Stafford (Graduate) 13.62% 97.85% 93.12% 86.39%

Unsub Stafford 

(Combined)

21.06% 101.68% 97.14% 87.51%

PLUS (Undergrad) 15.23% 96.74% 92.85% 81.56%

PLUS (Graduate) 10.32% 104.66% 99.44% 91.29%

PLUS (Combined) 12.58% 100.25% 95.77% 85.72%

Lifetime Default Rate: Default rates for the 2023 cohort of Direct Loans range from a high of 

32.23 percent for Unsubsidized Stafford Loans to undergraduates down to 10.32 percent for 

PLUS Loans to graduate students. Lifetime dollar defaults as a percentage of disbursements 

reflect outstanding principal and interest at time of default divided by original loan dollar 

amounts disbursed, all on a cash basis, without adjusting for net present value.

Cash Recovery Rate: This cash recovery rate follows the methodology used in prior years 

where contract collection costs (CCC) are included in the gross recovery rate. This column 

reflects cumulative principal, interest, and fee recoveries on defaulted loans divided by the 

outstanding principal and interest at time of default, all on a cash basis. It includes collection 

costs that are assessed on the loans of defaulted borrowers and paid to collection agencies.

However, these collection costs on loans owned by the Department may not be assessed on 

those borrowers who meet certain conditions and enter back into a good standing on their 

loans. Rehabilitated loan payments and loans that consolidate from a defaulted status are 

included in the collection rate for the cohort the loan was originated. 

For instance, borrowers may choose to rehabilitate a defaulted loan which would get the loan 

out of default status. Generally, this involves borrowers making nine voluntary reasonable and 

affordable monthly payments (as determined by the loan holder) within 20 days of the due date 

and within a period of 10 consecutive months. Reasonable and affordable is considered equal 

to 15 percent of annual discretionary income divided by 12. In some cases, alternative monthly 

payments can be arranged that are lower. Collection costs are not assessed on loans in a 

rehabilitation status.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

35

Cash Recovery Rate (net of CCC): This column shows cash recovery rates net of contract 

collection costs—where contract collection costs are not included—since the dollars do not 

return to the Federal Government but are used to pay private debt collection contractors.

This column reflects cumulative principal, interest, and fee recoveries on defaulted loans divided 

by the outstanding principal and interest at time of default, all on a cash basis. It does not 

include collection costs. However, these collection costs may not be assessed on those 

borrowers who meet certain conditions and enter back into a good standing on their loans.

These estimates also assume that borrowers who return to good standing repay their loans 

under the original loan terms.

NPV Recovery Rate (net of CCC): This rate shows recovery rates net of contract collection 

costs using a net present value (NPV) basis, which takes into account the factor of time on the 

dollar value of missed payments due to default and subsequent default collections. Under the 

NPV basis, the recovery rates reflect the discounting of missed payments due to default and 

subsequent loan collections over a 40-year loan lifetime window. The NPV recovery rate helps 

provide a broader context over time for determining the success of collection efforts in 

recovering defaulted Direct Loans.

This column reflects cumulative principal, interest, and fee recoveries on defaulted loans divided 

by the outstanding principal and interest at time of default on an NPV basis, using 2023 budget 

discount rates. It does not include collection costs. However, these collection costs may not be 

assessed on those borrowers who meet certain conditions and who return to repayment and

good standing on their loans. These estimates also assume that borrowers who return to good 

standing repay their loans under the original loan terms.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

36

Account Summary Table Click here for accessible version