Department of Education

STUDENT LOANS OVERVIEW

Fiscal Year 2021 Budget Proposal 

CONTENTS

Page

Account Summary Table.........................................................................................................R-1

Federal Student Loans:

Authorization.......................................................................................................................R-3

Program Description...........................................................................................................R-4

Repayment Plans ...............................................................................................................R-5

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

Borrower Interest Rates by Academic Year and Program Component..............................R-14

Student Loan Program Maximums....................................................................................R-15

Credit Reform Estimates...................................................................................................R-16

Outstanding Loan Levels ..................................................................................................R-17

FY 2021 Budget Proposal

Student Loan Reform Proposals.......................................................................................R-19

FY 2021 Estimated New Direct Loan Volume ...................................................................R-22

FY 2021 Estimated Consolidation Loan Volume...............................................................R-23

The Role of Student Loans ...............................................................................................R-24

Postsecondary Cost, Borrowing, and Enrollment by Institutional Sector ...........................R-26

FFEL Liquidating Account................................................................................................. R-27

Federal Student Loan Reserve Fund ................................................................................R-27

Program Output Measures

Direct Loans .....................................................................................................................R-28

FFEL Loans......................................................................................................................R-29

Median Federal Student Loan Debt ..................................................................................R-30

Undergraduate and Graduate Borrower Distribution by Family Income.............................R-31

Undergraduate Students by Income Category ..................................................................R-32

Loan Volume by Institutional Sector..................................................................................R-34

Loan Volume by Subsidized and Unsubsidized Stafford Loans ........................................R-35

Program Performance Measures

Performance Measures ....................................................................................................R-35

National Student Loan Cohort Default Rate ......................................................................R-37

FY 2021 Cohort Lifetime Dollar Default and Recovery Rates............................................R-39

 

R-1 

Accou nt Su mmary T able

Click here for accessible version 

DEPARTMENT OF EDUCATION FISCAL YEAR 2021 PRESIDENT'S BUDGET

(in thousands of dollars)

Cat 

Code 2019 Appropriation 2020 Appropriation

2021 President's 

Budget

2021 President's Budget Compared to 

2020 Appropriation

Amount Percent

1.

2.

3.

4.

5.

6.

Total 33,812,461 76,956,947 6,409,396 (70,547,551) -91.67%

Mandatory M 33,812,461 76,956,947 6,409,396 (70,547,551) -91.67%

1.

2.

3.

4.

5.

6.

Total, FFEL Program Account M 3,661,416 13,259,764 0 (13,259,764) -100.00%

Total, new loan subsidies and net reestimate (non-add) 1,562,603 6,394,364 (466,318) (6,860,682) -107.29%

1.

NOTES: D = discretionary program; M = mandatory program 

Detail may not add to totals due to rounding.

Note: Pursuant to the Budget Control Act of 2011 (P.L. 112-25), most mandatory programs, with the exception of Pell Grants, Credit Liquidating, and Credit Reestimates, the levels shown in the 2019 Appropriation column 

reflect the 6.2 percent reduction that went into effect on October 1, 2018; and the levels shown in the 2020 Appropriation column reflect the 5.9 percent reduction that went into effect on October 1, 2019.

1 Includes $350,000 thousand originally appropriated as discretionary funds in the Department of Education Appropriations Act 2019 and $50,000 thousand originally appropriated as discretionary funds in the Department 

of Education Appropriations Act 2020. These amounts support the temporary expansion of the Public Service Loan Forgiveness (TEPSLF) program and is treated in the budget as mandatory funding according to OMB rules.

Federal Direct Student Loans Program Account (HEA IV-D)

Federal Family Education Loans Program Account (HEA IV-B)

Federal Family Education Loans Liquidating Account (HEA IV-B)

New loan subsidies M 4,842,627 11,829,410 6,409,396 (5,420,014) -45.82%

New net loan subsidy (non-add) M (1,646,411) 8,473,200 (8,327,040) (16,800,240) -198.28%

Upward reestimate of existing loans M 28,619,834 64,642,541 0 (64,642,541) -100.00%

Downward reestimate of existing loans (non-add) M (2,309,401) (1,436,593) 0 1,436,593 -100.00%

Net reestimate of existing loans (non-add) M 26,310,433 63,205,948 0 (63,205,948) -100.00%

Upward modification of existing loans1 M 350,000 484,996 0 (484,996) -100.00%

Subtotal, loan subsidies 33,812,461 76,956,947 6,409,396 (70,547,551) -91.67%

Subtotal, new loan subsidies and net reestimate/modification (non-add) 25,014,022 72,164,143 (8,327,040) (80,491,184) -111.54%

Upward reestimate of existing loans M 3,661,416 13,150,794 0 (13,150,794) -100.00%

Downward reestimate of existing loans (non-add) M (2,098,813) (6,865,204) 0 6,865,204 -100.00%

Net reestimate of existing loans (non-add) M 1,562,603 6,285,591 0 (6,285,591) -100.00%

Upward modification of existing loans M 0 108,970 0

Downward modification of existing loans (non-add) M 0 0 (466,318) (466,318) ---

Net modification of existing loans (non-add) M 0 108,773 (466,318) (575,091) -528.71%

Pre-1992 student loans M (237,229) (182,492) (146,836) 35,656 -19.54%
STUDENT LOANS OVERVIEW

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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 2021 Authorization: Indefinite 

Mandatory Budget Authority:

Loan Subsidies

FY 2020 FY 2021 Change 

Net Loan Subsidies1:

DL Net New Loan Subsidy $8,473,200 -$8,327,040 -$16,800,240

DL Net Reestimate 63,205,948 0 -63,205,948

DL Net Modification 484,996 0 -484,996

DL Total Net Subsidy 72,164,143 -8,327,040 80,491,183

FFEL Net Reestimate 6,285,591 0 -$6,285,591

FFEL Net Modification 108,773 -466,318 -575,091

FFEL Total Net Subsidy 6,394,364 -466,318 -6,860,682

NOTE: The Direct Loan (DL) upward net reestimate for fiscal year 2020 is due primarily to updated IDR income 

assumptions using newly available IDR application data. In addition, other factors impacting the reestimate include

updates to the deferment and forbearance assumption model. The DL net modification in FY 2020 reflects an upward 

modification of $50 million as appropriated by Congress to support a temporary expansion of Public Service Loan 

Forgiveness (TEPSLF) and an upward modification of $435 million in DL and $109 million in FFEL for costs 

associated with the regulatory action to provide proactive discharge (unless the borrower elects to reject the 

discharge) to borrowers for whom the Department of Veteran Affairs provides information showing the borrower has a 

total and permanent disability. The FFEL net modification for FY 2021 reflects a savings from the proposed policy of 

eliminating Account Maintenance Fees paid to guaranty agencies. 

1 The Direct Loan Budget Authority (BA) amounts reflect estimated negative BA as shown on page R-1.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

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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 provided 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

R-4 

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. 

PROGRAM DESCRIPTION

The Federal student loan programs provide students and their families with the 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, but 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, 

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 2021, new Direct Loan volume is estimated at $93.8 billion, and Consolidation 

Loans (which include older loans) are estimated at $40.0 billion, for a total of $133.8 billion. In 

fiscal year 2021, new Direct Loan volume alone will account for about 75 percent of all new

postsecondary student aid 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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-5 

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 the 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 uses methodology described 

in the Budget Control Act of 2011. In fiscal year 2020, the nondefense mandatory sequester 

percentage is 5.9 percent, with Stafford and Unsubsidized Stafford loan origination fees equal to 

1.059 percent and PLUS loan fees equal to 4.236 percent.

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). As part of its 2021 budget proposal, the Administration 

proposes to greatly simplify student loan repayment by consolidating these five IDR options into 

a Single IDR plan.

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 very 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 borrower defense—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 below. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

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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] 12

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 fixed

15% of 

borrower’s

discretionary income; 

max pay is 

10-yr fixed

10% of 

borrower’s

discretionary income; 

max pay is 

10-yr fixed

10% of 

borrower’s

discretionary income; 

max pay is 

10-yr fixed

10% of 

borrower’s 

discretionary income

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 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.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-7 

According to the Department’s September 2019 Federal Student Aid Data Center quarterly 

report, enrollment in IDR plans continues to increase. As of the fourth quarter of fiscal year 

2019, approximately 7.8 million Direct Loan borrowers were enrolled in IDR plans, representing 

about 31 percent of all Direct Loan borrowers and 50 percent of all Direct Loan outstanding 

dollars in repayment status. Borrower participation reflects a 7.7 percent increase over fiscal 

year 2018 fourth quarter and 13.4 percent increase in dollars being repaid via IDR plans.

History of Repayment Plans

1990s to early 2000s: Most non-IDR repayment plans have been available since the early 

1990s, and the number of available repayment plans remained constant until the latter 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 

loan forgiveness after 25 years of repayment.

2010: SAFRA created a second IBR plan 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.

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 of the 

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

them, many more students are electing to repay by 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 

2019 Agency Financial Report along with supplemental information on IDR costs.1

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

(https://www2.ed.gov/about/overview/budget/budget19/idrtables.pdf) and as an Excel file 

(https://www2.ed.gov/about/overview/budget/budget19/idrtables.xlsx) 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-8 

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 $1.4 billion for loans originated in 

fiscal year 2018 (i.e., the fiscal year 2018 loan cohort), while a 5 percent decrease in estimated 

borrower income would increase costs by $1.5 billion. A 5 percent increase in estimated PSLF 

plan participation would increase costs by $233 million for the same cohort of loans, while a 5 

percent decrease would decrease costs by $232 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 and the proposed Single IDR plan, which is described in 

more detail below. 

The table below 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 

2021, 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.

Estimated Ratio of Loan Payment Totals to Initial Principal Balance for

Income-Driven Repayment Plans

Borrowers Entering Repayment in Fiscal Year 2021

Annual Income and 

Total Loan Debt ICR

Pre-2014 

IBR

PAYE & 

Post-2014 

IBR REPAYE

PROPOSED

SINGLE

IDR

Income <= 70,000

Debt <= 25,000 2.01 1.66 1.26 1.45 1.34

Income <= 70,000

Debt > 25,000 1.95 1.38 0.90 1.16 1.29

Income 70,001-110,000

Debt <= 40,000 1.89 1.80 1.59 1.58 1.51

Income 70,001-110,000

Debt > 40,000 2.12 1.80 1.21 1.59 1.89

Income > 110,000

Debt <= 60,000 1.85 1.94 1.69 1.67 1.61

Income > 110,000

Debt > 60,000 2.18 2.04 1.42 1.94 2.33

NOTE: This table combines PAYE and New Income-Based repayment plans since they are very similar.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-9 

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 2021. 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, although the complexity of choices may make it difficult for borrowers 

who cannot predict their future incomes to select the optimal plan. 

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 

to limit monthly payments to no more than what they would pay under a standard 10-year 

payment. The Administration’s proposed Single IDR plan, which eliminates the standard 

repayment cap, produces the highest ratios for high-income, high-balance borrowers. These 

borrowers would be expected to pay greater shares of their balances and accrued interest than 

they would in other plans. Further, the proposed Single IDR plan would tend to produce lower 

ratios overall for lower debt borrowers, due in large part to the expedited forgiveness provided to 

borrowers with only undergraduate debt.

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: 

• $20,100 over their entire repayment period under ICR, 

• $16,600 under pre-2014 IBR,

• $12,600 under PAYE/post-2014 IBR,

• $14,500 under REPAYE, and

• $13,400 under the proposed plan

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

REPAYE, and the Administration’s proposed Single IDR plan. 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 

2021—combined across all IDR plans, since borrowers can switch between plans—assume 

about 9 percent of borrowers would pay their loans off in full; 17 percent would end up not 

1 Analysis in this section reflects assumptions used to calculate the fiscal year 2021 baseline for program cost 

estimates under current law. This does not incorporate assumptions for the Administration’s fiscal year 2021 proposal 

for a Single IDR plan. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-10

completing their repayment term due to prepayment, 13 percent would end up not completing 

their repayment term due to default, and 6 percent would end up not completing their repayment 

term due to other reasons. Approximately 55 percent of borrowers would have some balance 

forgiven; 37 percent would get IDR forgiveness, and 18 percent would qualify for PSLF. 

Of those student borrowers projected to have balances forgiven under IDR, about 56 percent 

would have an amount forgiven less than their original balance, and about 44 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 $55,500, and the 

median amount forgiven is estimated at $37,000. The original median balance for borrowers 

who would qualify for PSLF is estimated at $56,000, and the median amount forgiven under 

PSLF is estimated at $34,000.

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 Administration’s proposed budget retains teacher loan forgiveness programs 

in order to incentivize more high-quality teachers to teach in high-need schools and subjects.

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, the 

specific job performed does not matter as long as the organization meets eligibility requirements

and the borrower is paid out of eligible funds. 

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 receive forgiveness by taking out 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) 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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-11

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. According to 

the release of the first congressionally mandated semiannual report on PSLF and TEPSLF, as 

of September 30, 2019, 109,932 borrowers had submitted 136,473 applications for loan 

forgiveness under the PSLF program. Of the 124,707 applications that had been processed, 56 

percent of them were denied due to not meeting the program requirements for qualifying 

payments, and 15 percent were denied for having ineligible loans. Another 24 percent of PSLF 

applications were denied due to missing or incomplete information on the form, while 4 percent 

had qualifying employer-related issues. Overall, there were 1,139 unique borrowers that had 

PSLF discharges approved, resulting in $71.9 million in total discharges with an average 

balance discharged of $63,127. 

According to the same congressionally mandated report, as of September 30, 2019, the 1,035

applications were approved and 20,343 rejected for the TEPSLF program. Rejections were due 

primarily to borrowers not in repayment for 10 years, not meeting specific payment 

requirements, or not having eligible loans. The 1,035 applications approved resulted in total 

discharges of almost $43.7 million, with an average balance discharged of $42,237. 

The Administration’s fiscal year 2021 budget proposes to eliminate the PSLF program for new 

borrowers on or after July 1, 2021, with an exception for students who borrowed their first loans 

prior to July 1, 2021 and who are borrowing to complete their current course of study.

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 2019-2020 were 

set in June 2019. 
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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 between July 1, 2019 and June 30, 

2020 (academic year 2019-2020) will have an interest rate of 4.53 percent, based on the 10-

year Treasury rate of 2.48 percent plus a statutory add-on of 2.05 percent. The Government 

pays the interest while the student is in school or deferment. The Administration’s fiscal year 

2021 budget proposes to eliminate this subsidy for new borrowers on or after July 1, 2021, 

with an exception for students who borrowed their first loans prior to July 1, 2021, and who 

are borrowing to complete their current course of study.

• 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 (4.53 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 2019-

2020, the rate for graduate students is 6.08 percent, based on the 3.60 add-on and 10-year 

Treasury note of 2.48 percent. The Administration's fiscal year 2021 budget proposes to 

simplify graduate student borrowing by consolidating all graduate borrowing under one 

graduate loan program with the same corresponding loan terms and conditions as current 

Graduate PLUS loans. 

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

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 

between July 1, 2019 and June 30, 2020, is 7.08 percent, based on the 10-year Treasury 

note of 2.48 percent and an add-on of 4.60 percent. The PLUS rate cap is 10.5 percent. 

The Administration's fiscal year 2021 budget proposes to simplify graduate student 

borrowing by consolidating all graduate borrowing under one graduate loan program with 

the same corresponding loan terms and conditions as current Graduate PLUS loans. The 

budget also proposes to establish reasonable loan limits for parent and graduate borrowing.

• 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 
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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.
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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.
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Student Loan Program Maximums

(Whole dollars)

STUDENT STATUS

STAFFORD 

(Subsidized)

TOTAL (Stafford & 

Unsubsidized Stafford) 1,2

DEPENDENT 

UNDERGRADUATES Annual Limits Annual Limits

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

Dependent U ndergraduatesSecond-Year Student 4,500 6,5003

Dependent U ndergraduatesThird-Year+ Student 5,500 7,5003

INDEPENDENT 

UNDERGRADUATES 4 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 STUDENTS 5 0 20,500 

STUDENT STATUS Aggregate Limits Aggregate Limits

DEPENDENT 

UNDERGRADUATES

$23,000 $31,0003 

INDEPENDENT 

UNDERGRADUATES 4

23,000 57,5003 

GRADUATE STUDENTS 5 23,000 138,500 

NOTE: The Administration’s fiscal year 2021 request proposes to simplify the student loan programs by providing one 

loan option, all with reasonable limits, to each type of borrower (undergraduate, graduate, and parent). A comparable 

table showing the impact of this proposal can be found on page R-21. 

 

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. 
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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 Loans 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 being loan servicing, that are funded by the 

discretionary Student Aid Administration (SAA) account. In fiscal year 2021, the Administration 

requests $1.883 billion in SAA funding to administer all Title IV Federal student aid programs. 

This includes $1.149 billion for student aid salaries and expenses and $735 million for loan 

servicing activities. The fiscal year 2021 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 disbursed. 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 2020, the Direct Loan program had an estimated net positive subsidy – 

driven in part by rising enrollment in IDR plans. In fiscal year 2020, the Direct Loan program 

weighted average subsidy rate for new and Consolidation Loans was estimated at 5.89 percent. 
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However, subsidy rates can vary significantly by loan types. For example, in fiscal year 2020, 

Subsidized Stafford Loans, at 14.03 percent, Consolidation Loans, at 20.74 percent, 

Unsubsidized Stafford loans for undergraduates, at 2.33 percent, and PLUS loans for graduate 

students, at 3.48 percent, had estimated positive subsidy rates, indicating a cost to the 

Government. Unsubsidized Stafford loans for graduates, at -0.48 percent, had estimated 

negative subsidy rates, reflecting a savings to the Government. PLUS loans for parents also 

reflected negative subsidy rates at -27.88 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 2020, the cohort of Subsidized Stafford loans showed an estimated 

subsidy rate of 11.77 percent under Standard (ten-year repayment), compared to a subsidy rate 

of 23.65 percent under all IDR plans. Unsubsidized Stafford loans (both undergraduate and 

graduate) showed a subsidy rate of -8.61 percent under Standard repayment compared to 

22.00 percent under IDR. 

The Administration’s Single IDR proposal, if enacted, would result in significant cost savings to 

the Government. For example, the subsidy rate for Unsubsidized Stafford loans for all IDR plans 

is 22.00 percent for loans originated in fiscal year 2020. If those same loans repaid under the 

Single IDR plan, the subsidy rate would be projected to drop to 2.67 percent. 

Outstanding Loan Levels

Based on the budget tables published in the 2021 Budget Appendix, at the end of fiscal year

2019, outstanding FFEL and Direct Loan principal is estimated at approximately $1.4 trillion: 

Reestimates of Subsidy Costs

Under 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 

1165

174 4 53

Outstanding Loan Levels ($B): FY 2019

Direct Loans

FFEL

FFEL Liquidating

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

For the $1.165 trillion in Direct Loan principal outstanding at the end of fiscal year 2019, the 

Administration’s fiscal year 2021 budget proposal calculates that net future Federal costs of 

outstanding loans are higher than projected in the fiscal year 2020 request; this difference is 

reflected in the 2020 reestimate. The 2020 net upward reestimate of $63.2 billion reflects an 

upward component of about $64.6 billion and a downward component of about -$1.4 billion. The 

net upward reestimate is due primarily to updated IDR income assumptions. During fiscal year

2019, the Department updated the IDR model by using actual IDR application data from the 

National Student Loan Data System (NSLDS) to supplement information previously used from 

the Department of Treasury’s Office of Tax Analysis to project income values in the future. The 

impact of this new data source was the most significant factor in the re-estimate. This net 

reestimate accounts for about 5.4 percent of the total Direct Loan outstanding portfolio. 

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

2019—starting with guaranteed loans made as of October 1, 1992—is the 2020 reestimate. The 

2020 FFEL guaranteed loan reestimate reflects an upward component of +$7.70 billion and a 

downward component of -$6.68 billion, for a total net upward reestimate of $1.02 billion. Thus, 

the estimated Federal cost of prior FFEL loans is higher by about $1.02 billion than previously 

projected. The FFEL 2020 net upward reestimate was due primarily to interest rate projections 

provided by OMB and updated collection rates. The ECASLA programs show a net upward 

reestimate of +$5.27 billion, which when combined with the FFEL portion of $1.02 billion, 

produces an overall net upward FFEL reestimate of +$6.29 billion in fiscal year 2020, 

representing about 11.0 percent of the overall FFEL loan portfolio. The net upward re-estimates 

in these programs were due primarily to interest rates provided by OMB and updated collection 

and prepayment rates. 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

2016 -$1,074,690 -$1,472,077

2017 10,785,834 27,251,327

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

2019 1,562,603 25,014,022

2020 6,394,364 72,164,143

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

modifications, which may produce significant annual fluctuations. The DL total in fiscal year 2020 is primarily due to a 

large net upward reestimate of $63.2 billion. FFEL totals include ECASLA programs. 
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FY 2021 BUDGET PROPOSAL

The Administration’s fiscal year 2021 budget request addresses student debt by streamlining 

student loan programs and repayment options, instituting sensible and reasonable annual and 

lifetime loan limits for parents and graduate students, and redirecting inefficient subsidies to 

prioritize debt relief for undergraduate borrowers struggling to repay. These loan proposals are 

part of a larger effort in the fiscal year 2021 President’s Budget to simplify funding for college 

while addressing the unique needs of today’s students.

All policies referenced for student loans would apply to loans originated on or after July 1, 2021, 

with an exception for students who borrowed their first loans prior to July 1, 2021 and are 

borrowing to complete their current course of study. These policies together would save 

approximately $169 billion over ten years.

STUDENT LOAN REFORM PROPOSALS

Evaluation of a Separate Federal Student Aid

Today, the Office of Federal Student Aid (FSA) manages the servicing of one of the largest 

consumer loan portfolios in the world. In addition, FSA provides oversight for more than 6,000 

institutions of higher education that participate in the Title IV programs; develops and 

implements the Free Application for Student Aid (FAFSA) process; and secures the data of the 

over 40 million Americans with Federal student loans. Recognizing the significant growth in the 

scope and complexity of FSA’s responsibilities since its establishment as a performance-based 

organization more than 20 years ago, the President’s Budget proposes the evaluation of FSA as 

a separate organization, with reformed governance. An updated governance model could 

significantly increase FSA’s ability to serve students and taxpayers by improving its 

management, oversight, and administration of the Federal student aid programs.

Protect Students and Taxpayers from Growing Student Loan Burden

The Budget protects graduate and parent borrowers from racking up crushing debt – and 

taxpayers from the cost of forgiving excessive balances – by instituting sensible annual and 

lifetime loan limits. The Budget proposes to set an aggregate limit on Parent PLUS loans for 

undergraduate students of $26,500—the difference between the dependent undergraduate 

aggregate limit of $31,000 and the independent undergraduate aggregate limit of $57,500. In 

addition, dependent undergraduate students would be eligible to borrow an additional amount 

(up to the independent undergraduate limit) depending on the parent’s remaining eligibility 

Parent PLUS borrowing. As a result, all undergraduates would be able to access up to $57,500

in financing through a combination of parent and student borrowing. The Budget also proposes 

to set annual and aggregate limits of $50,000 and $100,000, respectively, for graduate students, 

exclusive of any undergraduate borrowing. 

In addition, the Budget provides higher education institutions greater flexibility to ensure their 

students avoid excessive student loan debt and are able to repay their loans. As such, the 

Budget proposes to provide financial aid administrators greater latitude to limit excessive loan 

borrowing and to allow schools to condition students’ loan disbursements on completion of
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mandatory annual financial literacy training (i.e., loan counseling). The loan counseling 

proposal will allow institutions to reach borrowers in innovative ways, either through online 

programs or in-person classes or counseling sessions, thereby building evidence of what works. 

Simplify Student Loan Programs 

The current Federal student loan system is unnecessarily complex for borrowers to navigate. 

The Administration proposes to simplify the student loan programs by providing one loan option, 

all with reasonable limits, to each type of borrower (undergraduate, graduate, and parent). The 

Budget proposes to consolidate all undergraduate borrowing under the Unsubsidized Stafford 

loan program. Therefore, all new undergraduate Federal student loans would be unsubsidized. 

Subsidies should be provided to borrowers struggling to repay, as is proposed in the Single IDR 

plan below, rather than to borrowers on the front end who ultimately may easily be able to repay 

their loans. Graduate student borrowing would additionally be simplified by consolidating all 

graduate borrowing under one graduate loan program with the same corresponding loan terms 

and conditions as current Graduate PLUS loans. (Note that in the following tables, figures for 

this loan program will be shown in 2021 under Grad PLUS). Parent borrowers would still be 

able to take advantage of the Parent PLUS loan program with the limit described above. 

 
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Student Loan Maximums (proposed)

DEPENDENT 

UNDERGRADUATES Annual Limits

Dependent U ndergraduates: First-Year Student $5,500

Dependent U ndergraduatesSecond-Year Student 6,500

Dependent U ndergraduatesThird-Year+ Student 7,500

INDEPENDENT 

UNDERGRADUATES 

Stafford

Total (Stafford & Unsubsidized Stafford)

Independent Undergraduates : First-Year Student $9,500

Independent Undergraduates : Second-Year Student 10,500

Independent Undergraduates : Third-Year+ Student 12,500

GRADUATE STUDENTS3 50,000 

STUDENT STATUS Aggregate Limits

DEPENDENT 

UNDERGRADUATES

$31,000

INDEPENDENT 

UNDERGRADUATES 2

57,5001

PARENTS OF DEPENDENT 

UNDERGRADUATES

26,500

GRADUATE STUDENTS 3 100,000

1 Dependent undergraduates would be eligible to borrow an additional amount (up to the independent undergraduate 

limit) depending on the parent’s eligibility for additional borrowing (but the combination of the student’s and parent’s 

borrowing may never exceed the independent undergraduate limit). 2 Also includes dependent undergraduates whose parents are unable to borrow under the PLUS program.

3 Does not include undergraduate borrowing. 

Simplify Student Loan Repayment

In recent years, income-driven repayment (IDR) plans, which offer borrowers the option of 

making affordable monthly payments based on income and family size, have grown in both 

popularity and cost. However, choosing and enrolling in the right repayment plan is overly 

complicated by the numerous statutory and regulatory repayment plans currently required to be 

offered to borrowers. In addition, the benefits provided by these plans are not necessarily

focused on the most vulnerable student borrowers.

The Administration proposes to greatly simplify student loan repayment by consolidating five 

IDR plans into a single plan. The Single IDR plan would set a borrower’s monthly payment at 

12.5 percent of discretionary income, while eliminating the standard repayment cap to ensure 

that high-income, high-balance borrowers make payments commensurate with their income. 
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Married borrowers who file separately would have their payments determined based on both 

their and their spouse’s income. For borrowers with undergraduate student debt only, any 

balance remaining after 15 years of repayment would be forgiven. For borrowers with any 

graduate debt, any balance remaining after 30 years of repayment would be forgiven. To further 

improve and simplify loan repayment, the fiscal year 2021 budget request proposes autoenrolling severely delinquent borrowers in the Single IDR plan.

Eliminate Public Service Loan Forgiveness 

The Administration proposes to eliminate the PSLF program for new borrowers on or after July 

1, 2021 with an exception for students who borrowed their first loans prior to July 1, 2021 and 

who are borrowing to complete their current course of study. Also, previous borrowers who are 

applying for forgiveness under the TEPSLF program would not be affected by this proposal. The 

PSLF program is not only complicated for borrowers to navigate, but it also inefficiently targets 

subsidies only to those borrowers in public service jobs or jobs at not for profit organizations. 

Instead, the Administration proposes to support all borrowers pursuing any career—not just 

public service careers—through the Single IDR plan which will allow borrowers to make 

affordable monthly payments based on their income and will provide forgiveness to eligible 

undergraduate borrowers on any balance remaining after 15 years of repayment. 

Eliminate Account Maintenance Fees (AMF) paid to Guaranty Agencies 

The President’s fiscal year 2021 budget proposes to eliminate AMF payments to guaranty 

agencies. Since the move to 100 percent direct lending, these agencies have pared back 

services and are able to generate significant fee income through debt collection activities.

FY 2021 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 2017, as 

the economy recovered, loan volume declined. Consistent with long-term student loan trends,

the fiscal year 2021 budget estimates a modest increase in total loan volume. Subsidized and 

Unsubsidized Stafford Loans are projected to account for about 66 percent of new Direct Loan 

volume in fiscal year 2021, with PLUS loans at 34 percent. Under the fiscal year 2021 proposed 

policy, Subsidized Stafford loans would be eliminated, with an exception for students who 

borrowed their first Subsidized Stafford loans prior to July 1, 2021 and who were borrowing to 

complete their current course of study. Graduate school volume is estimated to increase 8 

percent between 2016 and 2021, accounting for 38 percent of new volume in fiscal year 2016 

and 41 percent in fiscal year 2021. 
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New Student Loan Volume (Non-Consolidation)

(Dollars in Millions)

Program Volume FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Subsidized Stafford $22,436 $21,375 $21,223 $19,419 $19,686 $15,733 

Unsubsidized Stafford 50,229 49,203 50,808 47,823 48,861 46,130 

PLUS 21,775 22,723 23,833 23,418 24,161 31,897 

Total New Loan Volume 94,440 93,301 95,864 90,661 92,708 93,760 

Graduate School Portion 35,834 37,092 39,136 37,914 38,702 38,834 

NOTES: Loan volume reflects net commitments. Figures for fiscal years 2019-2020 are baseline estimates and 2021 

amounts are based on proposed policies from the PB 2021 request. 

Many factors such as college costs, legislative changes, eligibility changes, State aid, Federal 

aid, economic conditions, and enrollment demographics affect new loan demand. Historical loan 

volume data and current projections are shown above. 

FY 2021 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 leveled off. 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. 

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 

0

20

40

60

80

100

120

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

$ (Billions)

Fiscal Year

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

FFEL and Direct Loans

R-24

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

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

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 61 percent of 

academic year 2018-2019 Federal student aid, while Federal grants, including the Post-9/11 

Veterans Educational Assistance Program and Federal Work Study, accounted for 

approximately 28 percent. Federal tax benefits accounted for 11 percent. The Tax Cuts and 

Jobs Act of 2017 (PL 115-97) made no substantive changes to the existing higher education tax 

credits, including the American Opportunity and Lifetime Learning tax credits. 

This breakout is based on data from Table 1 in the “College Board Trends in Student Aid 2019” 

(Student Aid Trends) online report, shown in constant 2018 dollars1. 

1 See Table 1, https://trends.collegeboard.org/student-aid. 

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

Volume: $ Billions

Fiscal Year

Consolidation Loan Volume

FFEL Direct Loans
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-25

Federal Postsecondary Assistance: Academic Year 2018-2019

According to this report, approximately $259 billion in total funds from Federal, State, 

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

academic year 2018-19. The Federal Government provided about $152 billion, or 59 percent, of 

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

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

past decade based on data in this 2019 College Board online report.

Federal student 

loans

61%

Federal grants 

and work-study 

28%

Federal 

education tax 

credits

11%

0

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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

Federal Aid AY 08-09 to 18-19

Pell Grants Federal Loans Federal Work Study

Federal Education Tax Benefits Veterans and Military Grants
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-26

POSTSECONDARY COST, BORROWING, AND ENROLLMENT BY 

INSTITUTIONAL SECTOR

The 2019 “College Board Trends in College Pricing” 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 44 percent from $15,240 in 2009-10, to $21,950 in 2019-201 . Over 

the same 10-year period, the average yearly total cost at a private 4-year college increased by 

42 percent, from $35,070 to $49,870. Using just tuition and fees shows that public 4-year 

schools increased from $7,070 in 2009-10 to $10,440 in 2019-20, a 48 percent increase, while 

private 4-year schools increased from $25,740 to $36,880, a 43 percent increase. Tuition and 

fees—there is no room and board—at public 2-year community colleges increased from $2,570

in 2009-10 to $3,730 in 2019-20, a 45 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 2019 “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 2017, shows 

that over 42 percent of all undergraduate students were enrolled at 4-year public institutions, 19 

percent at 4-year private nonprofit institutions, 32 percent at 2-year public colleges, and 7 

percent at private for-profit schools. 

2017 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 

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

Public 4-Year

42%

Private Nonprofit 4-

Year

19%

For-Profit

7%

Public 2-Year

32%
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-27

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

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, 2017-18

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

Pell Grant 36% 17% 33% 13%

Subsidized Stafford 46% 27% 12% 14%

Unsubsidized Stafford 41% 38% 6% 15%

Parent PLUS 51% 42% 1% 6%

Grad PLUS 26% 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 2021 

President’s Budget, total net outlays in the Liquidating Account are estimated at -$184 million in 

fiscal year 2020, and -$148 million in fiscal year 2021, 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 Higher Education Act 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.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-28

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 2019 

with an adjusted unobligated balance of about $2.2 billion and ended the year with a balance of 

about $2.0 billion, which becomes the starting balance for fiscal year 2020. Fiscal year 2020 is 

estimated to have an ending balance of $2.0 billion.

PROGRAM OUTPUT MEASURES

Direct Loans 2019 footnote

2020 Footnote2021 Footnote

Direct Stafford Loans:

Direct Stafford: Loan volume ($ in millions)1 $19,419 $19,686 $15,733

Direct Stafford Number of loans (in thousands) 5,536 5,623 4,479

Direct Stafford Average loan (whole $) $3,508 $3,518 $2,660

Direct Stafford Subsidy rate2 10.84% 14.03% 4.19%

Direct Unsubsidized Stafford Loans

(Undergraduate):

Direct U nsubsi dized:Loan volume ($ in millions)1 $20,814 $21,426 $26,168

Direct U nsubsi dized:Number of loans (in thousands) 5,659 5,771 6,068

Direct U nsubsi dized:Average loan (whole $) $3,678 $3,713 $4,313

Direct U nsubsi dized:Subsidy rate2 -3.22% 2.33% -7.47%

Direct Unsubsidized Stafford Loans

(Graduate):

Direct U nsubsi dized:Loan volume ($ in millions)1 $27,010 $27,434 $19,952

Direct U nsubsi dized:Number of loans (in thousands) 1,805 1,810 1,380

Direct U nsubsi dized:Average loan (whole $) $14,960 $15,157 $14,462

Direct U nsubsi dized:Subsidy rate2 -1.06% -0.48% -12.07%

Direct PLUS Loans (Parents of Undergrads):

Direct U nsubsi dized:Loan volume ($ in millions)1 $12,514 $12,893 $13,025

Direct U nsubsi dized:Number of loans (in thousands) 875 882 903

Direct U nsubsi dized:Average loan (whole $) $14,305 $14,610 $14,417

Direct U nsubsi dized:Subsidy rate2 -34.87% -27.88% -37.49%

Direct PLUS Loans (Graduate): 

Direct PLU S: Loan volume ($ in millions)1 $10,904 $11,268 $18,872

Direct PLU S: Number of loans (in thousands) 595 602 882

Direct PLU S: Average loan (whole $) $18,312 $18,730 $21,394

Direct PLU S: Subsidy rate2 -2.19% 3.48% -22.87%

Direct Consolidation Loans:

Direct C onsoli dati on:Loan volume ($ in millions)1 $39,893 $39,829 $39,994

Direct C onsoli dati on:Number of loans (in thousands) 653 647 645

Direct C onsoli dati on:Average loan (whole $) $61,131 $61,521 $62,018

Direct C onsoli dati on:Subsidy rate2 18.15% 20.74% 14.15%

Total Direct Loans3:

Total Di: Loan volume ($ in millions)1 $130,553 $132,537 $133,755

Total Dire ct Number of loans (in thousands) 15,123 15,335 14,357
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-29

Direct Loans 2019 footnote

2020 Footnote2021 Footnote

Total Dir ectAverage loan (whole $) $8,633 $8,643 $9,316

Subsidy Cost:

Total DirectNew loan subsidy cost ($ in millions)4 -$1,647 $8,473 -$8,327

Total D irect Subsidy Net Reestimate ($ in millions)4 26,310 63,206 0

Total Direct Net Modification ($ in millions)4 350 485 0

DL Total Net Subsidy ($ in millions) 25,014 72,164 -8,327

Total Direct Weighted Average Subsidy rate2 3.04% 5.89% -5.76%

Outstanding Loan Volume ($ in billions):

Total Direct Loans Outstanding5 $1,165 $1,221 $1,276

NOTE: Numbers may not add due to rounding. 

 

1 Net commitments (disbursements) that are less than amounts committed (e.g., due to loan cancellations). 2 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. 3 Totals reflect DL program amounts only—no Perkins Loans. 4 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 R-1. 5 Reflects total Direct Loan principal (including Consolidations) as the end-of-year estimate.

FFEL PROGRAM LOANS

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

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

FFEL Loans 2019 2020 2021

Subsidy Cost

Subsidy C ost: Net Reestimate ($ in millions)1 $1,563 $6,286 0

Subsidy C ost: Net Modification ($ in millions) 0 109 -466

Total FFEL Net Subsidy ($ in millions) 1,563 6,395 -466

Outstanding Loan Volume ($ in billions):

Outstanding: FFEL Loans $174 $162 $152

Outstanding: ECASLA Loans 53 43 34

Outstanding: Liquidating Account Loans 4 4 4

Total Combined Outstanding Loan Volume2 231 208 190

1 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 P-1. A modification in fiscal year 2021 will reflect proposed policy to eliminate account 

maintenance fees paid to guaranty agencies, resulting in savings. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-30

2 Reflects total FFEL and Liquidating account loan principal (including Consolidations) as end-of-year estimate.

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 $3,493 in 1990, to $8,725 in 2000, and to 

$18,678 for those who entered repayment in 2018. Graduate borrower median federal loan debt 

has also increased substantially from $8,651 in 1990, to $22,880 in 2000, and $45,703 in 2018. 

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

National Student Loan Data System (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

Debt Level: Whole Dollars

Enter Repayment Fiscal Year 
STUDENT LOANS OVERVIEW

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R-31

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) 2018-2019. Graduate student data is also presented. 

Approximately 53 percent of Subsidized Stafford Loan dependent borrowers come from families 

with under $60,000 in family income, compared to about 39 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 2018-19 (NSLDS)

Dependent Students (Income Categories = dollars in thousands)

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

Subsidized Stafford Borrowers 18.2% 19.0% 15.8% 14.1% 11.7% 21.2%

Subsidized Stafford Dollars 17.9% 19.1% 16.2% 14.3% 11.8% 20.7%

Unsub. Stafford Borrowers 13.1% 13.9% 12.1% 11.5% 11.4% 38.0%

Unsub. Stafford Dollars 10.3% 10.5% 8.9% 8.8% 10.1% 51.4%

Independent Students (Income Categories = dollars in thousands)

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

Subsidized Stafford Borrowers 51.8% 27.6% 10.5% 5.2% 2.8% 2.2%

Subsidized Stafford Dollars 51.0% 28.0% 10.6% 5.3% 2.9% 2.2%

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

Debt Level: Whole Dollars

Enter Repayment Fiscal Year
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-32

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

Unsub. Stafford Borrowers 49.4% 26.6% 10.6% 5.7% 3.5% 4.3%

Unsub. Stafford Dollars 47.3% 26.3% 10.8% 6.1% 3.9% 5.6%

Graduate Students (Income Categories = dollars in thousands)

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

Unsub. Stafford Borrowers 43.2% 19.5% 13.1% 8.0% 5.6% 9.6%

Unsub. Stafford Dollars 50.1% 18.3% 11.4% 6.8% 4.7% 8.1%

PLUS Borrowers 57.9% 16.9% 9.6% 5.3% 3.3% 6.0%

PLUS Dollars 60.5% 16.4% 8.9% 4.9% 3.0% 5.5%

NOTE: 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. 

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)

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)
STUDENT LOANS OVERVIEW

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R-33

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%

NOTES: 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 LOANS OVERVIEW

FFEL and Direct Loans

R-34

LOAN VOLUME BY INSTITUTIONAL SECTOR

The following charts are based on NSLDS and related data.

Distribution of New Loan Volume Dollars by Institution

FY 2019 4-Yr. Public 4-Yr. Private 2-Yr. Public 2-Yr. Private Proprietary

Direct Loans 42.1% 39.3% 4.2% 0.2% 12.0% 

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 about $5 billion in fiscal year 1983 

to almost $83 billion in fiscal year 2011. It remained relatively level until an uptick in 2016 

and a noticeable decrease in 2017 to $77 billion, where it remained level through 2019. 

Loan volume at 4-year institutions accounted for about 81 percent of all volume in fiscal year 

2019. 

• 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 2019, from $29.4 billion to $11.3 billion. Proprietary school loan volume 

accounted for 26 percent of total volume in fiscal year 2010 but only 12.0 percent in 2019. 

• 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 $4.2 billion in fiscal year 2019. 

0

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20

30

40

50

60

70

80

90

'83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 17 19

Volume: $ Billions

Fiscal Years 1983 - 2019

4-year 2-year Proprietary
STUDENT LOANS OVERVIEW

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R-35

LOAN VOLUME BY SUBSIDIZED AND UNSUBSIDIZED STAFFORD 

LOANS

A substantial portion of loan volume growth in the last decade is attributable to the Unsubsidized 

Stafford Loan program. 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.

Subsidized Stafford Loan and Unsubsidized Stafford Loan Volume

NOTE: Loan volume is estimated for fiscal years 2019-2021. The 2021 levels reflect proposed polices.

PROGRAM PERFORMANCE INFORMATION

Performance Measures

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

goals, objectives, measures, and performance targets and data; and an assessment of the 

progress made toward achieving program results. Achievement of program results is based on 

the cumulative effect of the Federal resources provided for the program as well as the resources 

and efforts invested by those served by the 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.

0

10

20

30

40

50

60

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 18 19 20 21

Volume: $ Billions

Fiscal Year Subsidized Stafford

Unsubsidized Stafford
STUDENT LOANS OVERVIEW

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R-36

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 2019, approximately 36,500 teachers 

received loan forgiveness amounting to $345.2 million in dollars discharged, with an average 

balance discharged of about $9,458.

The following table reflects current baseline actuals (2009 – 2019) and target levels—starting 

with 2017, the first year of establishing this measure. 

Teacher Loan Forgiveness Performance Measure

Fiscal Year

Target

Number of Borrowers 

Receiving Forgiveness

Actual

Number of Borrowers 

Receiving Forgiveness

2009 14,550

2010 20,679

2011 28,725

2012 28,367

2013 34,989

2014 39,391

2015 38,506

2016 38,439

2017 37,000 42,297

2018 38,000 41,344

2019 42,500 36,462

2020 43,500

2021 45,000

2022 46,000

2023 47,000

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. 

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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

R-37

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. 

In fiscal year 2019, the Direct Loan program, excluding Consolidations, provided approximately 

$91 billion in new loan assistance to an estimated 7.2 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 Administration is committed to ensuring that borrowers can easily select a 

repayment plan and manage their repayments. 

The Administration’s proposed policy for creating a Single IDR plan will enhance the prospects 

of student repayment success by simplifying and streamlining income-driven options into one 

uniform plan for new borrowers.

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.
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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 recent 3-year cohort default rate for the 2016 cohort was 10.1 percent. This reflects 

4.5 million borrowers from 6,130 postsecondary institutions who entered repayment, and 

458,687 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 2016 cohort default rates published showed public 2-year schools sector with 15.9

percent, the proprietary school sector with 15.2 percent, and the private non-profit 2-year 

schools sector with 15.2 percent. The rates are lower for borrowers at 4-year public and private 

schools: 6.8 percent and 6.3 percent, respectively.

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. 

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

11.311.510.810.1

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

Default Rate (%)

Fiscal Year (Repayment Cohort)

2-Year National 3-Year National
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FY 2021 COHORT LIFETIME DOLLAR DEFAULT AND RECOVERY RATES

The following table shows the estimated dollar default and recovery rates for the 2021 cohort of 

new loans in the Direct Loan program under proposed policy. The default rates reflect the

percentage of dollars estimated to go into default over the life of the particular 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. 

FY 2021 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 18.79% 104.10% 98.18% 88.41%

Unsub Stafford 

(Undergrad) 22.88% 104.09% 98.11% 88.37%

Unsub Stafford (Graduate) 9.01% 97.54% 93.70% 89.07%

Unsub Stafford 

(Combined) 16.88% 102.57% 97.10% 88.53%

PLUS (Undergrad) 9.85% 99.48% 93.09% 81.85%

PLUS (Graduate) 8.05% 87.13% 83.98% 83.98%

PLUS (Combined) 8.79% 92.78% 88.15% 82.94%

Note: Estimated fiscal year 2021 lifetime default rates and associated collection costs are affected by the fiscal year 

2021 proposal to auto-enroll severely delinquent borrowers in the Single IDR proposed plan and institute a process 

for borrowers to consent to share income data for multiple years.

Lifetime Default Rate: Default rates for the 2021 cohort of Direct Loans range from a high of 

22.88 percent for Unsubsidized Stafford Loans to undergraduates down to 8.05 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 may not be assessed on those borrowers who meet certain 

conditions and enter back into a good standing on their loans. 

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
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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.

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 2020 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.