Who uses income-driven student loan repayment?

A recent report from the US Department of Education’s Office of Inspector General indicates that enrollment in income-driven repayment (IDR) plans, which allow borrowers to repay student loans based on how much they earn, has increased substantially over the past five years. $51.5 billion of the student loan debt from the 2014–15 cohort of borrowers is being repaid through an IDR plan, compared with $7.1 billion from the 2010–11 cohort of borrowers. As more borrowers enroll in IDR, it is important to understand the demographics of those who use this program.

Income-driven repayment plans, which typically set payments at a given share of a borrower’s income and grant forgiveness after a set period, have been in place for several years but are frequently the subject of reform proposals from politicians on both sides of the aisle. The Urban Institute’s new data tool, Charting Student Loan Repayment, allows you to model the effects of different loan policies or design your own plan.

The costs of an IDR plan depend not only on the parameters, but also on who uses it. For example, borrowers with high debt and modest incomes entering IDR plans could have a higher amount of loan debt forgiven than borrowers with low debt and low incomes. Because the federal government absorbs the costs of unrepaid loans, knowing how the benefits of IDR are distributed is important.

Read more at The Urban Institute: https://www.urban.org/urban-wire/who-uses-income-driven-student-loan-repayment