The Department of Education

STUDENT LOANS OVERVIEW

Fiscal Year 2019 Budget Proposal

CONTENTS

Page

Account Summary Table.........................................................................................................Q-1

Federal Student Loans:

Authorization .......................................................................................................................Q-2

Program Description ...........................................................................................................Q-3

Repayment Plans................................................................................................................Q-5

Interest Rates and Loan Limits—By Type of Loan.............................................................Q-10

Borrower Interest Rates By Academic Year and Program Component..............................Q-12

Student Loan Program Maximums ....................................................................................Q-13

Credit Reform Estimates ...................................................................................................Q-14

Outstanding Loan Levels...................................................................................................Q-15

FY 2019 Budget Proposal:

Student Loan Reform Proposals .......................................................................................Q-17

FY 2019 Estimated New Direct Loan Volume....................................................................Q-19

FY 2019 Estimated Consolidation Loan Volume................................................................Q-20

The Role of Student Loans................................................................................................Q-20

Postsecondary Cost, Borrowing, and Enrollment by Institutional Sector............................Q-21

FFEL Liquidating Account .................................................................................................Q-23

Federal Student Loan Reserve Fund.................................................................................Q-23

Program Output Measures:

Direct Loans......................................................................................................................Q-24

FFEL Loans ......................................................................................................................Q-25

Median Federal Student Loan Debt...................................................................................Q-26

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

Undergraduate Students by Income Category...................................................................Q-28

Loan Volume by Institutional Sector ..................................................................................Q-29

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

Program Performance Information:

Performance Measures.....................................................................................................Q-30

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

FY 2019 Cohort Lifetime Dollar Default and Recovery Rates ............................................Q-33
Q-1

Q-1

Account Summary Tabl e

Click here for accessible version 

Click here for accessible version

DEPARTMENT OF EDUCATION FISCAL YEAR 2019 PRESIDENT'S BUDGET 

(in thousands of dollars)

Amount Percent

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

 1. New loan subsidies M 10,119,114 9,183,000 5,624,786 (3,558,214) -38.75%

 2. New net loan subsidy (non-add) M (1,178,905) (3,499,805) (8,534,746) (5,034,941) 143.86%

 3. Upward reestimate of existing loans M 35,419,293 4,017,163 0 (4,017,163) -100.00%

 4. Downward reestimate of existing loans (non-add) M (6,989,061) (15,554,834) 0 15,554,834 -100.00%

 5. Net reestimate of existing loans (non-add) M 28,430,232 (11,537,671) 0 11,537,671 -100.00%

 6. Upward modification of existing loans M 0 60,817 0 (60,817) -100.00%

 7. Net modification of existing loans (non-add) M 0 60,817 0 (60,817) -100.00%

Subtotal, loan subsidies 45,538,407 13,260,980 5,624,786 (7,636,194) -57.58%

Subtotal, new loan subsidies and net reestimate/modification (non-add) 27,251,327 (14,976,659) (8,534,746) 6,441,913 -43.01%

Total 1 M 45,538,407 13,260,980 5,624,786 (7,636,194) -57.58%

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

 1. Upward reestimate of existing loans M 11,155,845 2,545,960 0 (2,545,960) -100.00%

 2. Downward reestimate of existing loans (non-add) M (370,011) (236,304) 0 236,304 -100.00%

 3. Net reestimate of existing loans (non-add) M 10,785,834 2,309,656 0 (2,309,656) -100.00%

 4. Downward modification of existing loans (non-add) 2 M 0 0 (655,510) (655,510) ---

 5. Net modification of existing loans (non-add) M 0 0 (655,510) (655,510) ---

Total, FFEL Program Account 1 M 11,155,845 2,545,960 0 (2,545,960) -100.00%

Total, new loan subsidies and net reestimate/modification (non-add) 1 10,785,834 2,309,656 (655,510) (2,965,166) -128.38%

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

1. Pre-1992 student loans M (159,804) (212,095) (186,626) 25,469 -12.01%

NOTES: D = discretionary program; M = mandatory program

Detail may not add to totals due to rounding. 

For most mandatory programs, with the exception of Pell Grants, Credit Liquidating, and Credit Reestimates, the levels shown in the 2017 Appropriation column reflects the 6.9 percent reduction that went into effect on 

October 1, 2016, and the levels shown in the 2018 Annualized CR column reflects the 6.6 percent reduction that went into effect on October 1, 2017, pursuant to the Budget Control Act of 2011 (P.L. 112-25). 

1 The 2018 Annualized CR column reflects the baseline estimate from the 2019 President's Budget.

2 FFEL downward modification reflects Administration proposed policy in the 2019 President's Budget to eliminate Account Maintenance Fees paid to guaranty agencies.

2019 President's Budget 

Category Compared to 2018 Annualized CR 

Code

2017 

Appropriation 

2018 

Annualized CR

2019 

President's 

Budget
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-2

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 2019 Authorization: To be determined

Mandatory Budget Authority:

Loan Subsidies 2018 2019 Change

Net Loan Subsidies1:

DL Net New Loan Subsidy -$3,499,805 -$8,534,746 -$5,034,941

DL Net Reestimate -11,537,671 0 11,537,671

DL Net Modification 60,817 0 -60,817 

DL Total Net Subsidy -14,976,659 -8,534,746 6,441,913

FFEL Net Reestimate $2,309,656 0 -$2,309,656

FFEL Net Modification 0 -655,510 -655,510

FFEL Total Net Subsidy 2,309,656 -655,510 -2,965,166

NOTE: Fiscal year 2018 and 2019 data reflect the 2019 President’s Budget estimates and include the 6.6 

percent 2018 mandatory sequester that is applied to loan origination fees. 

The Direct Loan (DL) net downward reestimate is due primarily to updated discount rates (i.e., the 

collection of interest rates used to calculate the present value of cash flows), increased participation in 

Income Driven Repayment (IDR) plans, and technical changes to how loans in IDR plans are modeled.

The DL net modification reflects costs to forgive accrued interest on borrower defense claims that have 

been denied and pending for more than one year. The FFEL net modification reflects savings due to the 

Administration’s budget proposal to eliminate Account Maintenance Fees paid to guaranty agencies.

1 The Direct Loan Budget Authority (BA) amounts reflect estimated negative BA as shown on page Q-1.

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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-3

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

increased Unsubsidized Stafford loan limits for undergraduates.

2010: The SAFRA Act (formerly the Student Aid and Fiscal Responsibility Act), Title II, Part 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 (AY) 2012-13 and 2013-14, and

introduced a lender option to choose 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 (MAP-21) (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.

The Bipartisan Budget Act (BBA) 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 BBA 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.

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.

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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-4

stipulated by SAFRA, the FFEL program ceased making new loans as of July 2010. As of 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 2019, new Direct Loan volume is estimated at $99 billion, and Consolidation Loans 

(which include older loans) are estimated at $51.8 billion, for a total of almost $151 billion. In 

fiscal year 2019, new Direct Loan volume alone will account for about 76 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 

educational expenses. 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 (BCA). In fiscal year 2018, the sequester percentage is 6.6

percent, with Stafford and Unsubsidized Stafford loan origination fees equal to 1.066 percent 

and PLUS loan fees equal to 4.264 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 2019 budget proposal, the Administration 

proposes to greatly simplify student loan repayment by consolidating 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, meet limited hardship criteria, or file 

timely claims should their institutions close. In very limited cases student loans may be 

discharged through personal bankruptcy.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-5

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

and forgiveness. Each repayment plan’s features are summarized below:

Repayment Plans

Key 

Features Standard Graduated Extended ICR

IncomeBased

New

IncomeBased PAYE 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

borrowers

[loans 

issued

before

7-1-2014]1

Incomeeligible

borrowers

[loans 

issued

7-1-2014

or later]1

Incomeeligible

borrowers

[loans 

issued

10-1-2011

or later] 1

All Direct 

Loan

borrowers

1

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

10% of 

borrower’s

discretionary income

10% of 

borrower’s 

discretionary income

Remaining 

Balance 

Forgiven? 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

Q-6

According to the Department’s September 2017 Federal Student Aid (FSA) Data Center 

Quarterly report, enrollment in IDR plans has continued to increase. As of the fourth quarter 

September 2017, approximately 6.5 million Direct Loan borrowers were enrolled in IDR plans,

representing about 28 percent of all Direct Loan borrowers in repayment status and 45.5 

percent of all Direct Loan outstanding dollars in repayment. Borrower participation reflects a 

16.3 percent increase over fiscal year 2016 and a 54 percent increase over fiscal year 2015.

History of Repayment Plans:

1990s to early 2000s: Most 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 Income-Based Repayment (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 these 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, which resembles PAYE, with a few key exceptions (primarily the elimination of 

capping payment at the 10-year standard repayment plan amount), to all qualified student 

borrowers regardless of when they borrowed. At the end of any Income-Driven Repayment plan 

term, qualified borrowers may have their remaining balance forgiven. Current law requires that 

those IDR-forgiven balances are taxable.

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 (OIG), and external policymakers to 

publish more detailed cost information on Income-Driven Repayment. Over time, 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 and also Public Service Loan 

Forgiveness (PSLF). Results were published in the fiscal year 2017 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/budget17/idrtables.pdf) and as an Excel file 

(https://www2.ed.gov/about/overview/budget/budget17/idrtables.xls)
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-7

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

significant variance in cost estimates. For example, a 10 percent increase in estimated borrower 

income would decrease costs by almost $2.3 billion for loans originated in fiscal year 2016 (i.e., 

the fiscal year 2016 loan cohort), while a 10 percent decrease in estimated borrower income 

would increase costs by $2.7 billion. A 10 percent increase in estimated PSLF plan participation 

would increase costs by $600 million for the same cohort of loans, while a 10 percent decrease 

would decrease costs by $586 million. Uncertainty around borrower interest rates can also lead 

to program cost variance. For instance, a 1 percent increase in the projected borrower interest 

rate would reduce projected direct loan subsidy cost by $5.2 billion, while a 1 percent decrease 

in the projected borrower interest rate would increase estimated subsidy costs by $4.7 billion.

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.

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 

2019, 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 but is not appropriate for comparing the costs of IDR 

plans, as costs to the Government 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 2019

Annual Income and 

Total Loan Debt ICR

Pre-2014 

IBR

PAYE & 

Post-2014 

IBR REPAYE

PROPOSED

SINGLE

IDR

Income <= 70,000

Debt <= 25,000 1.81 1.67 1.39 1.39 1.34

Income <= 70,000

Debt > 25,000 1.87 1.53 1.10 1.35 1.45

Income 70,001-110,000

Debt <= 40,000 1.67 1.74 1.59 1.46 1.42

Income 70,001-110,000

Debt > 40,000 1.92 1.85 1.37 1.67 1.88

Income > 110,000

Debt <= 60,000 1.65 1.77 1.65 1.52 1.48

Income > 110,000

Debt > 60,000 1.93 2.01 1.54 1.91 2.13

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

FFEL and Direct Loans

Q-8

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

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

enter repayment in fiscal year 2019. 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 inadvertently lead to some 

confusion by borrowers. 

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

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

borrowers face when considering the payments required and the length of time that payments 

must be made. The variation in ratios reflect 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 proposed Single 

IDR plan, which eliminates the standard repayment cap, produces the highest ratios for highincome, high-balance borrowers who 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, on average, $18,100 over their entire repayment period under ICR versus $16,700

under pre-2014 IBR, $13,900 under PAYE/post-2014 IBR, $13,900 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 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

As noted previously, borrowers who complete their Income-Driven Repayment plan term may 

have their remaining balance forgiven. Estimates of forgiveness under the current IDR plans for 

borrowers entering repayment in 2019—combined across all IDR plans, since borrowers can 

switch between plans—assume about 18 percent of borrowers would pay their loans off in full;

28 percent would end up not completing their repayment term due to default, prepayment, or 

other discharge; 34 percent would get IDR forgiveness; and 20 percent would qualify for Public 

Service Loan Forgiveness (PSLF). 

Of those student borrowers whose balances are projected to be forgiven, about 71 percent 

would have an amount forgiven less than their original balance, and about 29 percent would 

1 Analysis in this section reflects assumptions used to calculate the 2019 Budget’s student loan baseline 

for program cost estimates under current law. This does not incorporate assumptions for the 2019 Budget 

proposal for a Single IDR plan.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-9

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 $46,000, and the

median amount forgiven is estimated at $23,000. The original median balance for borrowers 

who would qualify for PSLF is estimated at $44,000 and the median amount forgiven under 

PSLF is estimated at $24,000.

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 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 a Public-Service Loan Forgiveness (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) IRS designation. Moreover, the 

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

requirements. 

Borrowers must make 120 separate monthly payments while employed by 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 first cohort of borrowers became eligible for PSLF discharge in October 2017. The 

Department introduced a voluntary Employment Certification Form in January 2012 that helps

track qualifying payments. Recent data from the Federal Student Aid Data Center show that 

through quarter three of fiscal year 2017, about 1.86 million borrower forms were submitted, and 

about two-thirds of those were considered certified. However, it should be noted that submission 

of this form is optional; borrowers may apply for forgiveness after completion of their 120 

qualifying payments.

The Budget proposes to eliminate the PSLF program for new borrowers on or after July 1, 2019 

with an exception for students who borrowed their first loans prior to July 1, 2019 and who are 

borrowing to complete their current course of study.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-10

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 (CCRAA) 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 (MAP-21) (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 2017-2018 were 

set in June 2017.

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. The Government pays the interest while the student is 

in school or deferment. The President’s fiscal year 2019 Budget proposes to eliminate this 

subsidy for new borrowers on or after July 1, 2019, with an exception for students who 

borrowed their first loans prior to July 1, 2019 and who are borrowing to complete their 

current course of study. Loans disbursed between July 1, 2017 and June 30, 2018, 

(academic year 2017-2018) will have an interest rate of 4.45 percent, based on the 10-year 

Treasury rate of 2.40 percent plus a statutory add-on of 2.05 percent.

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

borrowers, regardless of financial need, and have 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 (4.45 percent). However, the interest rate for graduate students has an addon of 3.60 percent and a 9.5 percent cap. For academic year 2017-2018, the rate is 6.00

percent based on the 3.60 add-on and 10-year Treasury note of 2.40 percent. 

• 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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-11

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, 2017 and June 30, 2018, is 7.00 percent based on the 10-year Treasury 

note of 2.40 percent and an add-on of 4.60 percent. The PLUS rate cap is 10.5 percent. 

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

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

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

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

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

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

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

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

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

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

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

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

FFEL and Direct Loans

Q-12

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 inschool, grace, or 

deferment periods, but 

T-bill +2.3% during 

repayment; not to 

exceed 8.25%.

Both types: 6.8%; only 

Stafford loans reduced:

6.0%--2008-2009

5.6%--2009-2010

4.5%--2010-2011

3.4%--2011-2012

3.4%--2012-2013

Undergrads: [Sub and 

Unsub] 10-yr. Treasury 

note + 2.05%, w/cap of 

8.25%;

Grads: [Unsub] 10-yr 

Treasury note + 3.6%; 

w/cap of 9.5% 

PLUS 91-day Treasury bill 

rate +3.1%, not to 

exceed 9%.

Fixed rate of 7.9% for 

Direct PLUS;

increased to 8.5% 

under HERA for FFEL 

PLUS.

Grad and parent: 10-yr 

Treasury note + 4.6%, 

w/cap of 10.5%.

FFEL 

Consolidation 

Loans4

Weighted average of 

the interest rates on the 

loans consolidated, 

rounded up to the 

nearest one-eighth of 

1 percent, not to exceed 

8.25%.

Weighted average of 

the interest rates on the 

loans consolidated, 

rounded up to the 

nearest one-eighth of 

1 percent, not to 

exceed 8.25%.

N/A 

Direct 

Consolidation 

Loans-- 

Stafford and 

Unsubsidized 

Stafford

91-day T-bill rate 

+2.3%, not to exceed 

8.25% for applications 

received 10-1-98 

through 1-31-99; 

weighted average 

basis, as above, 

thereafter.

Weighted average 

basis, as above.

Weighted average of 

the interest rates on the 

loans consolidated, 

rounded to the nearest 

higher one-eighth of 

1 percent.

Direct PLUS 

Consolidation

Same as Direct 

Consolidation Loans for 

Stafford and 

Unsubsidized Stafford. 

Same as Direct 

Consolidation Loans for 

Stafford and 

Unsubsidized Stafford. 

Same as Direct 

Consolidation Loans for 

Stafford and 

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

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

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

year 1998 appropriation, temporarily changed a number of laws affecting Consolidation Loans. Under this 

Act, which expired September 30, 1998, the interest rate for FFEL Consolidation Loans made on or after 

November 13, 1997, was based on the 91 Day Treasury-bill + 3.1 percent, not the weighted average of 

the interest rates on the loans consolidated. SAFRA eliminated new FFEL Loans as of July 1, 2010.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-13

Student Loan Program Maximums

(Whole dollars)

STUDENT STATUS

STAFFORD 

(Subsidized)

TOTAL (Stafford & 

Unsubsidized Stafford)

DEPENDENT 

UNDERGRADUATES

Annual Limits Annual Limits

Dependent U ndergraduates: First-Year Student $3,500 $5,5001

Dependent U ndergraduatesSecond-Year Student $4,500 $6,5001

Dependent U ndergraduatesThird-Year+ Student $5,500 $7,5001

INDEPENDENT 

UNDERGRADUATES 2,3 Stafford Total (Stafford & 

Unsubsidized Stafford)

Independent Undergraduates: First-Year Student $3,500 $9,5001

Independent Undergraduates: Second-Year Student $4,500 $10,5001

Independent Undergraduates: Third-Year+ Student $5,500 $12,5001

GRADUATE STUDENTS 4 0 $20,500 

STUDENT STATUS Aggregate Limits Aggregate Limits

DEPENDENT 

UNDERGRADUATES

$23,000 $31,0001

INDEPENDENT 

UNDERGRADUATES 2,3

$23,000 $57,5001

GRADUATE STUDENTS 4 $23,000 $138,500 

1 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. 2 Also includes dependent undergraduates whose parents are unable to borrow under the PLUS 

program.

3

 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.

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. Under HERA, qualified graduate and professional students are eligible to borrow PLUS loans, 

where the only limit is the cost of attendance minus other student aid.

4 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.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-14

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 that are funded by the discretionary Student Aid 

Administration (SAA) account. In fiscal year 2019, the Administration requests $1.772 billion in 

SAA funding to administer all Title IV Federal student aid programs. This includes $762 million 

for student aid salaries and expenses and $1,010 million for loan servicing activities. The fiscal 

year 2019 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 10 percent on each dollar of loans made 

instead of incurring a cost. 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 that approximates the Government’s borrowing rate, the interest rate at 

which borrowers repay their loans, as well as technical assumptions for defaults, repayment 

patterns, 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 2018, the Direct Loan program has an estimated net total negative 

subsidy—due in part to the spread between Federal borrowing costs based on the discount rate 

and the interest rates owed by borrowers. In fiscal year 2018, the Direct Loan program weighted 

average negative subsidy rate for new and Consolidation Loans is estimated at -2.18 percent. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-15

However, subsidy rates can vary significantly by loan types. For example, in fiscal year 2018,

Subsidized Stafford Loans estimated at 8.30 percent and Consolidation Loans at 14.18 percent 

have positive subsidy rates, indicating a cost to the Government, while Unsubsidized Stafford 

loans for undergraduates estimated at -6.21 percent and Unsubsidized Stafford loans for 

graduates at -12.64 percent have negative subsidy rates, reflecting a savings to the 

Government. PLUS loans also reflect negative subsidy rates at -31.40 percent for 

undergraduates and -23.33 percent for graduates.

Subsidy rates also vary according to repayment options, with the greatest differences appearing 

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

example, in current fiscal year 2018, the cohort of Subsidized Stafford loans show an estimated 

subsidy rate of 6.30 percent under Standard (ten-year repayment), compared to a subsidy rate 

of 22.77 percent under all IDR plans. Unsubsidized Stafford loans show a subsidy rate of -17.66

percent under Standard repayment compared to 22.46 percent under IDR. 

However, in fiscal year 2019, based on the Administration’s proposals, the estimated subsidy 

rate for Subsidized Stafford is 4.20 percent under Standard repayment compared to 

12.39 percent under all IDR plans, while the Standard repayment rate for Unsubsidized Stafford 

loans is -18.44 percent versus 1.22 percent under IDR plans. The much lower IDR subsidy rates 

in fiscal year 2019 compared to fiscal year 2018 reflect Budget proposals that would significantly 

reduce costs to taxpayers while preserving key repayment benefits for student borrowers.

Outstanding Loan Levels

Based on the budget tables published in the 2019 Budget Appendix, at the end of fiscal year

2017, outstanding FFEL and Direct Loan principal totaled approximately $1,277 billion:

999

210

5 63

Outstanding Loan Levels ($B): FY 2017

Direct Loans

FFEL

FFEL Liquidating

ECASLA
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-16

Reestimates of Subsidy Costs

Under credit reform, the Department annually reestimates the cost of outstanding loans since 

fiscal year 1992 by loan cohort to reflect updated modeling assumptions, the President’s Budget 

economic assumptions, and historical loan performance. 

For the $999 billion in Direct Loan principal outstanding at the end of 2017, the President’s fiscal 

year 2019 Budget calculates that net future Federal costs of all outstanding loans is lower than 

projected in the 2018 President’s Budget; this difference is the 2018 reestimate. The 2018 total

net downward reestimate of -$11.5 billion reflects an upward component of about +$4 billion 

and a downward component of -$15.5 billion. This net reestimate accounts for about 1.2 percent 

of the total Direct Loan outstanding portfolio. The net downward reestimate is due primarily to 

updated Federal discount rates, increased participation in Income Driven Repayment (IDR) 

plans, and technical changes to how loans in IDR plans are modeled. In response to 

recommendations from a GAO audit report, the Department incorporated an adjustment for 

inflation into the IDR submodel as well as estimates for IDR subsidies by loan type. In addition, 

assumptions in the submodel were updated for default collection, death, disability,and 

bankruptcy, and prepayment rates.

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

2017—starting with guaranteed loans made as of October 1, 1992—is the 2018 reestimate. 

The 2018 FFEL guaranteed loan reestimate reflects an upward component of +$1.44 billion and 

a downward component of -$10 million, for a total net upward reestimate of +$1.43 billion. Thus, 

the estimated Federal cost of prior FFEL loans (1992-2017) is higher by about $1.43 billion than 

previously projected. The FFEL 2018 net upward reestimate was due primarily to interest rates 

provided by OMB and updated prepayment rate model assumptions. The Ensuring Continued 

Access to Student Loans Act (ECASLA) programs show a net upward reestimate of +$878.8 

million, which when combined with the FFEL net upward guaranteed portion of +$1.43 billion

produces an overall net upward FFEL reestimate of +$2.3 billion in fiscal year 2018,

representing about 0.8 percent of the overall FFEL loan portfolio.

Total net FFEL and Direct Loan subsidy costs for the past 5 fiscal years are shown below:

(dollars in thousands)

Fiscal Year FFEL Direct Loans

2014 -$5,676,042 -$15,715,097

2015 -3,293,567 17,303,195

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

2017 10,785,834 27,251,327

2018 2,309,656 -14,976,659

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

modifications, which may produce significant annual fluctuations, such as in fiscal year 2015 when Direct Loans (DL)

expanded an income-based repayment plan to all borrowers. The DL subsidy in FY 2018 includes an upward 

modification of $60.8 million reflecting costs to forgive accrued interest on borrower defense claims that have been 

denied and pending for more than one year. FFEL totals also reflect ECASLA programs, consistent with the Budget.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-17

FY 2019 BUDGET PROPOSAL

The President’s fiscal year 2019 Budget proposal addresses student debt by simplifying student 

loan repayment and redirecting inefficiencies in the student loan program to prioritize expedited 

debt relief for undergraduate borrowers. These loan proposals are part of a larger effort in the 

fiscal year 2019 President’s Budget to simplify funding for college while addressing the unique 

needs of today’s students.

All student loan policies would apply to loans originated on or after July 1, 2019, with an 

exception for students who borrowed their first loans prior to July 1, 2019 and who are 

borrowing to complete their current course of study. Calculated against the President’s fiscal 

year 2019 Budget baseline, these policies would save approximately $203 billion over ten years.

Student Loan Reform Proposals

Simplify Student Loan Programs and Repayment

In recent years, Income-Driven Repayment (IDR) plans, which offer student borrowers the 

option of making affordable monthly payments based on factors such as income and family size, 

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

complicated by the numerous repayment plans authorized and required by law to be offered to 

student borrowers. 

The President’s fiscal year 2019 Budget 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. Married borrowers who file 

separately would have their payments determined based on both 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 the implementation and 

effectiveness of IDR, the Budget proposes auto-enrolling severely delinquent borrowers and 

instituting a process for borrowers to consent to share income data for multiple years. To 

facilitate these program improvements, and to reduce improper payments, the Budget proposes 

to streamline the Department of Education’s ability to verify applicants’ income data held by the 

Internal Revenue Service (IRS).

While retaining teacher loan forgiveness programs in order to incentivize more high-quality 

teachers to teach in high-need schools and subjects, the 2019 Budget proposes eliminating 

inefficient subsidies to help put the Nation on a more sustainable fiscal path and prioritize 

expedited debt relief for undergraduate borrowers. The fiscal year 2019 Budget proposes 

eliminating Public Service Loan Forgiveness, Subsidized Stafford Loans, and the payment of 

Account Maintenance Fees to guaranty agencies. These proposals would also help simplify the 

student loan programs.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-18

Eliminate Subsidized Stafford Student Loans

To simplify the types of loans undergraduate borrowers can take out, the President’s fiscal year 

2019 Budget proposes to eliminate these inefficient subsidies. Therefore, all new undergraduate 

student loans would be unsubsidized. This policy would apply to loans originated on or after July 

1, 2019, with an exception for borrowers continuing to borrow to complete their current course of 

study.

Eliminate Account Maintenance Fees (AMF) paid to Guaranty Agencies

The President’s fiscal year 2019 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.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-19

FY 2019 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. In keeping with long-term student loan trends,

the fiscal year 2019 Budget estimates modest increases in total loan volume in future years.

Subsidized and Unsubsidized Stafford Loans are estimated to account for 75 percent of new 

Direct Loan volume in fiscal year 2019, with PLUS loans at 25 percent. The graduate school 

portion of borrowing is estimated to increase 12.5 percent between fiscal years 2014 and 2019, 

accounting for 36 percent of new volume in fiscal year 2014 and 40 percent in fiscal year 2019.

New Student Loan Volume (Non-Consolidation)

(Dollars in Millions)

Program Volume FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Subsidized Stafford $25,730 $23,957 $22,426 $21,542 $21,627 $17,181

Unsubsidized Stafford 54,590 51,657 50,237 49,816 51,134 56,833

PLUS 18,867 19,965 21,772 22,455 23,914 25,000

Total New Loan Volume 99,187 95,579 94,434 93,813 96,675 99,014

Graduate School Portion 35,335 35,008 35,867 37,093 38,650 39,741

NOTES: Loan volume reflects net commitments. 

Figures for fiscal years 2018-2019 are estimates.

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 below.

0

20

40

60

80

100

120

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

$ (Billions)

Fiscal Year

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

FFEL and Direct Loans

Q-20

FY 2019 Estimated Consolidation Loan Volume

Direct Loan Consolidation volume surged from about $35 billion in fiscal year 2014 to $46 billion 

in fiscal year 2015 and is estimated to increase steadily to about $52 billion in fiscal year 2019. 

The increase in 2015 may be due to increased 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 temporary incentive repayment program, where borrowers 

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

reduction incentive to consolidate their loans under this special program (January-June 2012).

Repayment incentives also included the regular 0.25 percent interest rate reduction for 

electronic payment.

The Role of Student Loans

A major goal of the Federal student aid programs is to assist families in meeting college costs. 

Federal student loans play a key role along with Federal grants, Federal Work-Study funds, and 

Federal education tax credits. The following charts show that Federal student loans are the 

largest component of the Federal postsecondary aid system. Data show new Federal student 

loans (excluding Consolidation loans) accounted for about 61 percent of academic year 2016-

2017 Federal student aid, while Federal grants and work-study accounted for 27 percent.

Federal tax benefits accounted for 12 percent. The recently passed Tax Cuts and Jobs Act of 

2017 (PL 115-97) made no 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 2017”

(Student Aid Trends) online report, which is stated in constant 2016 dollars,

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

Volume: $ Billions

Fiscal Year

Consolidation Loan Volume

FFEL Direct Loans
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-21

Federal Postsecondary Assistance: Academic Year 2015-2016

According to this report, approximately $251 billion in total funds from Federal, State, 

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

academic year 2016-17. The Federal Government provided about $154 billion, or 61 percent of 

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

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

past decade based on data in the College Board online report.

Postsecondary Cost, Borrowing, and Enrollment by Institutional Sector

The 2017 “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 

Federal student 

loans

61%

Federal grants 

and work-study

27%

Federal 

education tax 

credits

12%

0

25

50

75

100

125

150

175

200

225

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17

Federal Aid AY 06-07 to 16-17

Pell Grants Federal Loans

Federal Work Study Federal Education Tax Benefits

Veterans and Military Grants
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-22

4-year college increased by 53 percent from $13,560 in 2007-08, to $20,770 in 2017-18 (see 

Table 2, https://trends.collegeboard.org/college-pricing.) Over the same 10-year period, the 

average yearly total cost at a private 4-year college increased by 47 percent, from $31,990 to 

$46,950. Using just tuition and fees shows that public 4-year schools increased from $6,190 in 

2007-08 to $9,970 in 2017-18, a 61 percent increase, while private 4-year schools increased 

from $23,420 to $34,740, a 48 percent increase.

Also of interest during this period are the tution and fees—there is no room and board—at public 

2-year (community colleges). Those schools increased from $2,290 in 2007-08 to $3,570 in 

2017-18, a 56 percent increase, but a much lower overall cost. Historically, increases in public 

college costs are often tied to State budget reductions to higher education funding. 

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

are expected to pay (“estimated 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 2017 “Trends in Student Aid” report

estimates student full-time equivalency (FTE) patterns providing context on where 

undergraduates choose to attend. The latest enrollment data (Fall 2015),shows that about 41

percent of all undergraduate students were enrolled at 4-year public institutions, 18 percent at 4-

year private nonprofit institutions, 32 percent at 2-year public colleges, and 9 percent of all 

undergraduates were enrolled at private for-profit schools.

2015 Fall Undergraduate Enrollment (Percent of FTE)

Public 4-Year

41%

Private Nonprofit 

4-Year

18%

For-Profit

9%

Public 2-Year

32%

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

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

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

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

FFEL and Direct Loans

Q-23

Loan funds are concentrated in the public 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, 2015-16

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

Pell Grant 33% 16% 34% 16%

Subsidized Stafford 43% 26% 14% 17%

Unsubsidized Stafford 40% 37% 6% 17%

Parent PLUS 49% 42% 1% 8%

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 2019

Budget request, total net outlays are estimated to be -$212 million in fiscal year 2018 and -$187

million in fiscal year 2019, 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 (HEA) of 1998 clarified that reserve money held 

by public and non-profit guaranty agencies participating in the FFEL program are Federal 

property when held in the Federal fund, (i.e., Reserve Fund), as opposed to funds held in the

Operating Fund over which guaranty agencies retain control. The Federal fund is used to pay 

default claims from FFEL lenders, and other claims related to death, disability, bankruptcy, and 

closed schools. This fund also pays fees to support successful guaranty agency efforts to avert 

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

Consolidated Appropriations Act, 2016, increased the reimbursement percentage paid to 

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

The Reserve Fund began fiscal year 2017 with an adjusted unobligated balance of about 

$1.2 billion. The Fund’s major revenues are reinsurance payments from the Federal 

Government, and its major expenses are insurance payments to lenders. These and other cash 

flows are estimated to result in an ending balance in fiscal year 2017 of about $1.7 billion, which 

becomes the starting balance for fiscal year 2018. Fiscal year 2018 is estimated to have an 

ending balance of $2.2 billion.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-24

PROGRAM OUTPUT MEASURES

Direct Loans 2017 footnote

2018 Footnote2019

footnote

Direct Stafford Loans:

Direct Stafford: Loan volume ($ in millions)

1 $21,542 $21,627 $17,181

Direct Stafford Number of loans (in thousands) 6,181 6,198 4,934

Direct Stafford Average loan (whole $) $3,485 $3,489 $3,482

Direct Stafford Subsidy rate2 9.20% 8.30% 6.40%

Direct Unsubsidized Stafford Loans

(Undergraduate):

Direct U nsubsi dized:Loan volume ($ in millions)

1 $22,665 $23,181 $28,268

Direct U nsubsi dized:Number of loans (in thousands) 6,236 6,290 6,597

Direct U nsubsi dized:Average loan (whole $) $3,634 $3,686 $4,285

Direct U nsubsi dized:Subsidy rate2 -0.88% -6.21% -8.69%

Direct Unsubsidized Stafford Loans

(Graduate):

Direct U nsubsi dized:Loan volume ($ in millions)

1 $27,151 $27,953 $28,565

Direct U nsubsi dized:Number of loans (in thousands) 1,828 1,863 1,890

Direct U nsubsi dized:Average loan (whole $) $14,853 $15,003 $15,111

Direct U nsubsi dized:Subsidy rate2 -2.62% -12.64% -12.62%

Direct PLUS Loans (Undergraduate):

Direct U nsubsi dized:Loan volume ($ in millions)

1 $12,513 $13,217 $13,824

Direct U nsubsi dized:Number of loans (in thousands) 933 960 989

Direct U nsubsi dized:Average loan (whole $) $13,410 $13,762 $13,972

Direct U nsubsi dized:Subsidy rate2 -31.04% -31.40% -34.19%

Direct PLUS Loans (Graduate): 

Direct PLU S: Loan volume ($ in millions)

1 $9,942 $10,697 $11,176

Direct PLU S: Number of loans (in thousands) 565 588 602

Direct PLU S: Average loan (whole $) $17,582 $18,187 $18,550

Direct PLU S: Subsidy rate2 -1.22% -23.33% -19.09%

Direct Consolidation Loans:

Direct C onsoli dati on:Loan volume ($ in millions)

1 $48,762 $50,295 $51,848

Direct C onsoli dati on:Number of loans (in thousands) 856 872 885

Direct C onsoli dati on:Average loan (whole $) $56,935 $57,707 $58,559

Direct C onsoli dati on:Subsidy rate2 3.58% 14.18% 8.43%

Total Direct Loans3:

Total Di: Loan volume ($ in millions)

1 $142,575 $146,970 $150,862

Total Dire ct Number of loans (in thousands) 16,600 16,771 15,898

Total Dir ectAverage loan (whole $) $8,589 $8,764 $9,489

Subsidy Cost:

Total DirectNew loan subsidy cost ($ in millions)

4 -$1,179 -$3,500 -$8,535

Total D irect Subsidy Net Reestimate ($ in millions)

4 28,430 -11,538 0

Total Direct Net Modification ($ in millions)

4 0 61 0

DL Total Net Subsidy ($ in millions) 27,251 -14,977 -8,535

Total Direct Average Weighted Subsidy rate2 -0.75% -2.18% -5.20%
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-25

Direct Loans 2017 footnote

2018 Footnote2019

footnote

Outstanding Loan Volume ($ in billions):

Total Direct Loans Outstanding5 $999 $1,081 $1,159

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 Q-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 2017 2018 2019

Subsidy Cost

Subsidy C ost: Net Reestimate ($ in millions)1 $10,786 2,310 0

Subsidy C ost: Net Modification ($ in millions 0 0 -$656

Total FFEL Net Subsidy ($ in millions) 10,786 2,310 -656

Outstanding Loan Volume ($ in billions):

Outstanding: FFEL Loans $210 $190 $174

Outstanding: ECASLA Loans 63 55 47

Outstanding: Liquidating Account Loans 5 4 4

Total Combined Outstanding Loan Volume2 278 249 225

1 Subsidy amounts are estimated on a net present value basis and since no new loans are made, only net 

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

amounts—consistent with data on page Q-1. The reestimate in fiscal year 2017 is largely due to updated 

collection assumptions and ECASLA reestimates are also included, consistent with the Budget Appendix.

The downward modification in fiscal year 2019 reflects proposed policy to eliminate Account Maintenance 

Fees paid to guaranty agencies.

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

estimate.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-26

Median Federal Student Loan Debt

National Student Loan Data System (NSLDS) data reveal that 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 $3,491 in 1990, to $8,713 in 2000, and to $18,548 for those who 

entered repayment in 2016. Graduate student loan debt has also increased substantially from 

$8,546 in 1990, to $22,876 in 2000 and $44,821 in 2016. Amounts are shown in current dollars.

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

Debt Level: Whole Dollars

Enter Repayment Fiscal Year 

0

10,000

20,000

30,000

40,000

50,000

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

Debt Level: Whole Dollars

Enter Repayment Fiscal Year
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-27

Undergraduate and Graduate Borrower Distribution by Family Income

These charts reflect 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) 2016-2017. Graduate student data is also presented.

Approximately 55 percent of Subsidized Stafford Loan dependent borrowers come from families 

with under $60,000 in family income, compared to about 40 percent of the Unsubsidized

Stafford Loan dependent borrowers. Notably, almost 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 also concentrated in the under-

$20,000 income category.

Percentage of Borrowers and Dollars of Aid by Income Category: AY 2016-17 (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 19.3% 19.4% 16.1% 14.3% 11.6% 19.2%

Subsidized Stafford Dollars 18.9% 19.6% 16.5% 14.6% 11.6% 18.8%

Unsub. Stafford Borrowers 13.7% 14.1% 12.3% 12.0% 11.6% 36.3%

Unsub. Stafford Dollars 10.7% 10.6% 9.1% 9.3% 10.7% 49.7%

Independent Students (Income Categories = dollars in thousands)

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

Subsidized Stafford Borrowers 52.3% 27.1% 10.5% 5.2% 2.7% 2.1%

Subsidized Stafford Dollars 51.7% 27.4% 10.7% 5.4% 2.8% 2.1%

Unsub. Stafford Borrowers 49.7% 26.0% 10.8% 5.8% 3.5% 4.3%

Unsub. Stafford Dollars 47.3% 25.6% 11.0% 6.3% 4.0% 5.7%

Graduate Students (Income Categories = dollars in thousands)

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

Unsub. Stafford Borrowers 42.6% 20.2% 13.6% 8.1% 5.9% 9.5%

Unsub. Stafford Dollars 50.1% 18.5% 11.7% 6.8% 4.8% 8.0%

PLUS Borrowers 60.3% 16.3% 9.2% 5.0% 3.3% 5.8%

PLUS Dollars 63.3% 15.4% 8.5% 4.5% 2.9% 5.4%

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.
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-28

Undergraduate Students by Income Category

These tables, using NPSAS 2012 data from academic year 2011-2012, show 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, in the Dependent Students table, 15.8 percent of all dependent undergraduates 

are from families with total income under $20,000 and, of that group, 43.7 percent received

Subsidized Stafford Loans, 33 percent received Unsubsidized Stafford Loans, and 83.2 percent 

reported receiving some type of Federal aid.

These tables show 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-$20,000 and $20,001-$40,000—have the highest percentages of students 

receiving some form of Federal aid, corresponding to 83.2 percent and 73.8 percent, 

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

dependent undergraduates receiving aid, at 38 percent.

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

Type of Federal Aid: Academic Year 2011-12 (NPSAS)

Dependent Students (Income Categories = dollars in thousands)

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

Undergraduates Students 15.8% 17.9% 12.4% 13.7% 11.9% 28.3%

Subsidized Stafford % Receiving 43.7% 40.8% 48.7% 39.9% 32.1% 17.8%

Unsub. Stafford % Receiving 33.0% 31.3% 39.1% 37.4% 36.9% 33.2%

Federal Aid % Receiving 83.2% 73.8% 69.2% 49.0% 44.3% 38.0%

Independent Students (Income Categories = dollars in thousands)

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

Undergraduates Students 50.0% 24.1% 11.9% 6.9% 3.5% 3.7%

Subsidized Stafford % Receiving 44.0% 37.5% 28.4% 23.0% 21.0% 9.9%

Unsub. Stafford % Receiving 37.3% 32.4% 25.1% 23.3% 23.1% 19.6%

Federal Aid % Receiving 69.6% 54.9% 42.4% 31.7% 27.8% 20.8%

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

Q-29

Loan Volume by Institutional Sector

The following charts are based on NSLDS and related data.

Distribution of New Loan Volume Dollars by Institution

FY 2017 4-Yr. Public 4-Yr. Private 2-Yr. Public 2-Yr. Private Proprietary

Direct Loans 42.6% 38.4% 5.2% 0.2% 13.5%

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, after which it decreased modestly to about $80 

billion. It remained level until an uptick in 2016 and a noticeable decrease in 2017. Loan 

volume at 4-year institutions accounts for about 81 percent of all volume in fiscal year 2017.

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

and 2010. However, proprietary school loan volume declined between fiscal years 2010 and 

2017, from $29.4 billion to $12.7 billion. In fiscal year 2010, proprietary school loan volume 

was 26 percent of total volume, and in fiscal year 2017, 13.5 percent.

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

Volume remained steady at about $2 to 4 billion for many years before increasing to $8 to10

billion after the economic downturn in 2008. Levels have since decreased annually for the 

past 5 years, accounting for only 5.5 percent of all loan volume in 2017.

0

10

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

Volume: $ Billions

Fiscal Years 1983 - 2016

4-year 2-year Proprietary
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-30

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. Fiscal year 2019 reflects the proposed policy to make all Stafford 

Loans unsubsidized for new borrowers, with an exception for borrowers continuing to borrow to 

complete their current course of study.

Subsidized Stafford Loan and Unsubsidized Stafford Loan Volume

NOTE: Loan volume is estimated for fiscal years 2017-2019.

PROGRAM PERFORMANCE INFORMATION

Performance Measures

This section presents selected program performance information, including GPRA goals, 

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

progress in achieving program results. Achievement of program results is based, in part, on the 

cumulative effect of program resources available in previous years as well as in fiscal year 2019

and future years, and the resources and efforts invested by those served by this program.

The student loan programs and other Federal financial aid programs help remove financial 

barriers to postsecondary education. Because these programs rely on the same performance 

measures, strategies, and program improvement activities, such measures are discussed in the

Student Financial Assistance account and are not repeated here.

However, in response to a GAO recommendation regarding the development of program 

performance measures for Teacher Loan Forgiveness (TLF), the Department has 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 

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

Volume: $ Billions

Fiscal Year Subsidized Stafford

Unsubsidized Stafford
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-31

borrowers who receive forgiveness per year, including loans from both Direct Loan and FFEL 

programs. This number is estimated to increase in future years as the Department finds ways to 

better publicize and promote these programs as GAO recommended. 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.

The following table reflects current baseline (2010 – 2017) and target (2018 – 2022) levels for 

the number of Stafford Loan borrowers receiving Teacher Loan Forgiveness.

Teacher Loan Forgiveness Performance Measure

Fiscal Year

Number of Borrowers 

Receiving Forgiveness

2010—Baseline 20,676

2011 28,720

2012 28,052

2013 34,680

2014 39,180

2015 38,122

2016 36,736

2017 36,004

2018—Target 38,000

2019 40,000

2020 42,000

2021 44,000

2022 46,000

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. Initial 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 student borrowing in recent years. Of undergraduates who borrowed 

a Federal Stafford Loan, the average amount borrowed was $5,000 in 2007-08, $6,400 in 

2011 -12, and $6,600 in 2015-16. More data from the 2016 NPSAS is due out in spring 2018.

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. Initial 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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-32

$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. Preliminary 

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 2017, the Direct Loan program, excluding Consolidations, provided approximately 

$94 billion in new loan assistance to an estimated 7.9 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 they would be able to obtain elsewhere. Without access to Federal 

student loans, many students might not be able to obtain educational loans, since 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 have few of the protections of Federal 

loans and often have higher interest rates.

National Student Loan Cohort Default Rate

Given the annual volume of Federal student loans, ensuring that those taxpayer-funded loans 

are repaid is critical to the long-term success of the student loan program. In addition, 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 have student loan payments 

that are manageable.

The Administration’s proposed policy for creating a Single Income-Driven Repayment (Single 

IDR) plan further enhances the prospects of student repayment success by simplifying and 

streamlining income-driven options into one uniform plan for new borrowers.

With the introduction of an Income-Driven Repayment (IDR) plan approach, the Department has 

significantly improved a borrower’s opportunity to select a repayment plan that can help make 

student loan debt more manageable, and borrowers have been responding. For example, data 

from the Department’s FSA Data Center show that the number of Direct Loan borrowers 

enrolled in an IDR plan has increased since fiscal year 2015 by 54 percent to almost 6.5 million 

borrowers in fiscal year 2017.

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 (OBRA), to 

exclude “high-default” institutions from participation in the loan programs. The measure looks 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.

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. 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-33

The first official 3-year cohort default rate was 13.4 percent issued for the 2009 cohort, and

published on September 28, 2012. The most recent 3-year cohort default rate for the 2014 

cohort was 11.5 percent. For the 2014 cohort, 5.048 million borrowers from 6,173

postsecondary institutions entered repayment, and 580,671 of those borrowers defaulted within

a 3-year period.

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

sectors. The 2014 cohort default rates published showed public 2-year schools sector with 

18.3 percent, the proprietary school sector with 15.5 percent, and the private non-profit 2-year 

schools sector with 18.1 percent. The rates are lower for borrowers at 4-year public and private 

schools: 7.6 percent and 7.0 percent respectively.

2-Year and 3-Year National Cohort Default Rates

The national “cohort default rate” (as shown above) measures 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 “lifetime dollar default rates” used 

in budget formulation to project future default costs. Lifetime default rates account for defaults 

over the entire loan-life and are significantly higher than the 3-year cohort default rate. 

FY 2019 Cohort Lifetime Dollar Default and Recovery Rates

The following table shows the estimated dollar default and recovery rates for the 2019 cohort of 

new loans in the Direct Loan program. The default rates reflect the percentage of dollars that 

are 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 income-driven repayment plan after entering repayment.

17.617.2

21.422.4

17.8

15

11.610.710.4 9.6 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

11.311.5

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

Default Rate (%)

Fiscal Year (Repayment Cohort)

2-Year National 3-Year National
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-34

FY 2019 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 15.69% 99.23% 91.86% 81.98%

Unsub Stafford (Undergrad) 16.59% 99.92% 92.08% 81.84%

Unsub Stafford (Graduate) 6.10% 84.86% 80.95% 78.55%

Unsub Stafford (Combined) 11.32% 95.84% 89.07% 80.99%

PLUS (Undergrad) 9.60% 96.27% 87.91% 76.45%

PLUS (Graduate) 4.67% 82.34% 78.01% 78.10%

PLUS (Combined) 7.40% 92.34% 85.12% 76.86%

Note: Estimated fiscal year 2019 lifetime default rates and associated collection costs are affected by the 

2019 Budget 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 2019 cohort of Direct Loans range from 

16.59 percent for Unsubsidized Stafford Loans to undergraduates down to 4.67 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.

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 
STUDENT LOANS OVERVIEW

FFEL and Direct Loans

Q-35

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 a NPV basis, using 2019 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.