Income-Driven Repayment Plans: Lowering Payments or Digging Students Deeper Into Debt?
IDR plans are designed to reduce monthly repayment amounts on federal student loans. Setting affordable amounts (typically 10-20% of discretionary income; based on income and family) size helps borrowers avoid defaulting. However, both an increased number of IDR borrowers (up by 6.7 million individuals since 2013) and increased amounts owed (total up $443 billion since 2013) have resulted in difficulty in paying down debt, especially if reduced payments do not exceed interest accrued.
The higher their education level, the more likely respondents were to be working for income.
Approximately 50% of respondents with a high school diploma only had paid work during April 2022; this fluctuated throughout COVID and was 56% in December 2021.
Approximately 58% of respondents with a some college had paid work during April 2022; this fluctuated throughout COVID and was 66% in December 2021.
Approximately 60% of respondents with an associate's degree had paid work during April 2022; this fluctuated throughout COVID and was 69% in December 2021.
Approximately 73% of respondents with a bachelor's degree only had paid work during April 2022; this fluctuated throughout COVID and was 56% in December 2021.
Increased Number of Borrowers
| Year |
Number of Borrowers on IDR Plans (in millions) |
Number of Borroweres on Non-IDR Plans (in millions) |
| 2013 |
1.69 |
13.40 |
| 2014 |
2.77 |
14.72 |
| 2015 |
4.21 |
15.42 |
| 2016 |
5.58 |
15.59 |
|
2017
|
6.49
|
15.88
|
|
2018
|
7.21
|
15.87
|
|
2019
|
7.77
|
15.92
|
|
2020
|
8.23
|
15.95
|
|
2021
|
8.39
|
15.67
|
Increased Amounts Owed
| Year |
Balance of Loans on IDR Plans (in billions) |
Balance of Loans on Non-IDR Plans (in billions) |
|
2013
|
79.1
|
253.7
|
|
2014
|
135.1
|
296.6
|
|
2015
|
210.3
|
326.9
|
|
2016
|
287.4
|
344.4
|
|
2017
|
352.5
|
365.4
|
|
2018
|
414.0
|
372.0
|
|
2019
|
469.6
|
385.4
|
|
2020
|
509.5
|
391.8
|
|
2021
|
521.6
|
384.7
|
Next Steps
While IDR plans are intended to keep debt at manageable levels, a massive rise in the number of borrowers has led to exponential growth in loan balances. Compounded by pre-pandemic wage stagnation and the effects of COVID-19, many individuals face untenable financial situations. Many states will also have difficulty reaching attainment goals; for example, Building a Talent Strong Texas aims to graduate 95% of college students with no undergraduate student debt or manageable levels of debt in relation to their potential earnings. Policymakers need to explore solutions to reconcile such goals with the rising debt levels, such limiting accrued interest for those in positions that are low-paying, yet essential to the community (teachers, social workers, etc.).
Data Source: National Student Loan Data System; Data points represent Q4 in each year; Repayment Plan summary includes Direct Loan or Federally Managed borrowers in Repayment, Deferment, and Forbearance categories and excludes borrowers in Default, In-School, and Grace. Recipient counts are based at the loan level. As a result, recipients may be counted multiple times across varying loan statuses.
The Research Institute at Dallas College