The U.S. Department of Education’s Office of Federal Student Aid released its newest quarterly update on federal student loan and Pell Grant awards on Friday, and the data (through the end of the 2014-15 academic year) are nothing short of stunning. As shown in the table below, federal student loan volume dropped by nearly $11 billion in 2014-15 to $89.4 billion, the lowest level since before the federal government ended the old bank-based lending program in 2010. Total Pell Grant awards also declined in 2014-15 to $30.3 billion, more than $5 billion below 2010-11 levels. (For more on trends in Pell awards over the last two decades, see my recent post on the topic.)
What could explain such sharp drops in student loan and Pell Grant dollars? Four factors could be at work:
(1) As America slowly continues to climb out of the Great Recession, more students and families may be earning enough money not to qualify for Pell Grants or need to borrow as much in student loans. Unemployment rates are down sharply since 2010, but median real household income has been nearly flat—so this is probably a minor contributing factor.
(2) Americans may be less willing to borrow for college than they were a few years ago, leading to less student loan debt. I’m more concerned about undergraduate students underborrowing for college than overborrowing, particularly as students react to stories about other people’s (atypical) debt loads and concerns about their financial strength. But this is difficult to prove empirically given current data.
(3) Part of the decline in total Pell awards is likely due to changes in the FAFSA formula that reduced the number of students automatically receiving the maximum Pell Grant in 2012-13 and beyond. But this would not explain continued declines in Pell dollars received.
(4) The most likely explanation to me is decreased enrollment due to an improved labor market inducing some individuals to work instead of attend college combined with the collapse of some of the large for-profit college chains. The most up-to-date data from the National Student Clearinghouse (which is available well ahead of federal estimates) show that enrollment has declined at degree-granting colleges each of the past three years, with the largest declines taking place at community colleges and in the for-profit sector. Lower enrollment, particularly among adult students, leads to fewer students taking out loans and receiving Pell Grants.
As the economy continues to slowly strengthen and the for-profit sector continues to sort itself out, I would expect enrollment (and the number of students receiving Pell Grants) to very slowly increase over the next several years. Future trends in student loan debt are less clear. Given the explosion of students enrolling in income-based repayment programs, students (particularly in graduate programs) might have less of an incentive to keep loan amounts in check. Yet, to this point, there doesn’t seem to be a boom in graduate school loans across the board. It would be worth looking at particular colleges with large programs in fields that are especially likely to qualify for Public Service Loan Forgiveness to see if loan amounts there are up by large amounts.
Robert Kelchen 
For loans it usually takes a number of weeks after the award year ends for all the disbursements to post to that award year. It takes months after that (years in the old ffel program) for award adjustments to occur.
The spreadsheet also says, “Data Refresh Schedule: Data will be refreshed each quarter for at least seven prior quarters to account for adjustments. After the adjustment period, the data will be final.” Unfortunately they don’t provide point-in-time 2013-14, 2012-13, etc., data at the same point in the award cycle as they have there for 2014-15 in July 2015. Same-point-in-time would probably be the best way to guesstimate where 2014-15 will end up.
In any case proprietary loan volume is down every year since 2009-10. Several of the large proprietary chains had announced intentional cuts in enrollment starting in 2010 when they wanted to prepare to meet the standards of the impending 3yr cohort default rate as well as the proposed gainful employment metrics. It also took the public community colleges much longer to gear up for the boom in postsec enrollment during 2007-2010 than the more nimble proprietaries. (And as you point out the CCs don’t have much of an impact on driving loan volumes.)
Good points. The final numbers may move around a little, but I don’t think ED would release numbers if they thought they would change a lot.
http://ifap.ed.gov/eannouncements/082015FederalStudentAidPostsUpdatedReportstoFSADataCenter.html
“In the first two quarters of the 2015-2016 application cycle, approximately 13.7 million FAFSAs were submitted, a 3.8 percent decrease from the same time period last year. 2014-2015 FAFSA submissions were also down three percent from 2013-2014. The 2014-2015 grant and loan volume, as of June 30, 2015, suggests there will be similar declines in disbursements; however, at this time, the 2014-2015 volume is not mature enough to make those comparisons. In addition to typical year-end data adjustments, the 2014-2015 reports are likely to increase as a result of summer disbursements made for the 2014-2015 award year which occur after June 30.”
I’m not sure what “summer disbursements” are, but 2014-15 grant volumes seem unlikely to change much.
Agreed–and thanks for the additional information!