By: Jordan Matsudaira, Daniel Pollard, and Victoria Lee
This month payments on most non-defaulted federal student loans came due for the first time in 43 months. The Biden-Harris Administration is working hard to support borrowers as they successfully navigate this return to repayment, and we are making sure they have the resources, tools, and information they need to find the best repayment plans and access other programs that can help them manage their student loans. Borrowers always are encouraged to use self-service options on their loan servicer websites including enrolling in auto-debit, updating their contact information, checking their loan balance, and applying for an income-driven repayment plan, such as the Saving on A Valuable Education (SAVE) plan, the most affordable repayment plan ever.
This blog presents data showing trends in payments from just prior to the start of the pause on federal loan payments through September of 2023. Several commenters have looked to data on aggregate deposits into the Treasury General Account from the U.S. Department of Education (Department) from the Daily Treasury Statement to track borrowers’ progress in making repayments because these are available daily with very little lag. The Department collects more detailed data on individual loan payments from its loan servicers in the National Student Loan Data System (NSLDS) that enable more sophisticated analyses, but these data become available with a more significant lag. We illustrate how data from these different sources depict how student loan payments evolved from prior to the student loan payment pause through September 2023—the month before payments came due after its end. We hope to provide observers with more context to aid in the interpretation of the DTS data that are more readily available and anticipate providing updates in the future.
The United States Treasury reports daily cash and debt operations—withdrawals and deposits from various federal agencies—through the Daily Treasury Statement (DTS). DTS deposits include all payments and collections on ED-serviced loans (including payments to loans in the Direct Loan Program, and payments to federally managed FFEL and Perkins loans). Collections from consolidation of ED-held loans by private companies are included in the deposits to Treasury, but consolidations of non-defaulted loans are not. Deposits do not include payments and collections on commercially held FFEL loans or Perkins Loans held by colleges and universities. Collections on ED-serviced loans in default include voluntary payments and non-payment deposits (e.g. administrative wage garnishment, offsets, rehabilitation payments, and direct consolidation).
The Department collects data on individual-level payments borrowers make to federal loan servicers through its National Student Loan Data System (NSLDS). These data include payments on ED-serviced loans that are not in default, but not collections from loans in default (though such data is available in separate systems) which are reported in the DTS. Scheduled zero-dollar payments for borrowers on Income Driven Repayment plans are also included. In FY 2019, collections from federal loan servicers constituted about 91.7% of all deposits reported in the DTS data, with collections from DMCS accounting for another 6.3%. Just over 2% of deposits were unrelated to student loans. Prior to the student loan payment pause about these numbers were lower during the payment pause, averaging about 86.6% and 4.7% over FY 2022.
Figure 1 below shows how trends in the deposits to ED accounts in the DTS data compare to internal ED data from NSLDS. While the DTS tend to report higher values of aggregate payments (because the data include collections on ED-serviced loans as well as collections on defaulted loans and a variety of deposits to the Department unrelated to borrowers at all), the trends in DTS aggregate payments and ED internal data on aggregate payments mirror each other very closely. As both data series show, payments fell abruptly at in April of 2020 with the start of the payment pause, but did not fall to zero. Using NSLDS data, borrowers with non-defaulted loans serviced by ED made monthly payments of about $5.1 billion in the last half (i.e. July to December) of CY 2019; which fell to $2 billion in the same months in 2020 and 2021, and about $981 million in the last half of 2022.
Starting between June and July of 2023, aggregate monthly payments recorded in NSLDS increased and then jumped in August and September to levels that were higher than prior to the payment pause. In the first six months of the 2023, the average monthly treasury payment to ED was $1.2 billion. This increased to $2.1 billion in July 2023, $6.4 billion in August 2023, and just under $7.0 billion in September.
Figure 1: Aggregate Borrower Payments by Month: October 2018 to September 2023
The Department’s NSLDS data allow a more granular view of payment trends, and in particular allow us to decompose aggregate payments into the number of borrowers making payments and the average payment per borrower. Figure 2 shows recent trends through the first nine months of 2023 in the number of borrowers making (non-zero) dollar payments and their average payment, and the same data for the last year before the payment pause (2019) for reference. In the first half of this year, about 1.1 million borrowers made non-zero payments each month—down from an average of 11.9 million over the same period in 2019 (an additional 2.4 million borrowers were making zero-dollar payments on IDR in the first half of 2019). The average payment per borrower was about $756 in the first half of 2023, up from $410 in 2019.
Figure 2 makes it clear that the surge in aggregate payments shown in DTS data between August and September were driven by much larger payments driven by a small number of borrowers. Relative to the first half of the year, the number of borrowers making payments rose to 1.4 and 2.1 times higher, respectively, in August and September this year. At the same time, average payments spiked to 5.9 and 3.2 times its level in the first half of the year.
Figure 2: Total Borrowers and Average Payments, 2019 and 2023 (through September)
As a result of this spike in payments, aggregate average payments (from NSLDS data) were 27% higher on average in August and September of 2023 than they were in the same two months of 2019. This overall increase was a function of average payments being 8.2 times higher in those months in 2023 relative to 2019, while the number of borrowers making (non-zero) payments in August and September was only 17% of the number in those months in 2019.
This month, we expect a greater number of borrowers to start making payments on their student loans, and as that happens the average payment per borrower will likely fall back closer to its 2019 level. It may be several months, however, before aggregate payment data shown in the DTS provide an indication for the number of borrowers making payments, especially in comparison to years prior to the pause. The Biden-Harris Administration has made substantial changes to fix the student loan system, so we do not necessarily expect to match 2019 patterns moving forward. As increasing numbers of borrowers avail themselves of more generous repayment options in the new Saving on a Valuable Education (SAVE) income driven repayment plan, overall monthly payments are likely to decline.