New Study on Income-Driven Repayment Plans

Inside Higher Ed

New Study on Income-Driven Repayment Plans

April 10, 2018

Enrollment in income-driven repayment plans for student loans can change significantly depending on the particular benefit emphasized to borrowers, according to a National Bureau of Economic Research paper released Monday.

Using data from a survey of University of Maryland undergraduates, researchers found that student loan borrowers were more likely to enroll in IDR plans when they were presented as insurance against unaffordable payments, rather than a cost-saving measure. The plans allow borrowers to set their loan payments based on a percentage of their income instead of a standard fixed monthly payment.

The Obama administration sought to boost enrollment in IDR plans — and lower loan default rates — with more outreach to borrowers, including targeted communications. But as of the fourth quarter of 2017, only 28 percent of the 23 million borrowers who had entered repayment on their student loans were enrolled in an income-based plan.