Who needs student loan repayment relief?

In March 2020, the federal government suspended payments on all $1.5 trillion in then-outstanding federal student loans to provide financial relief to borrowers during the COVID-19 pandemic.1 Federal student loans now total $1.6 trillion distributed among 43 million borrowers. With the prospect of ending student loan forbearance and resuming payments on that debt, policymakers and student debt groups have put forward various proposals to further help struggling borrowers. These proposals included efforts to reduce payment burdens for existing borrowers through outright debt forgiveness.2 or changes to programs such as Income Contingent Reimbursement (IDR).3 Other reforms aim to make higher education more affordable and thus limit future borrowing4 The ultimate goal of these proposals is to ease the financial burden of student debt: some borrowers’ monthly payments can make up a large portion of net income, and having such large debts can be a barrier to better health. financial (see, for example, Farrell, Greig and Sullivan 2020).

IDR is a set of repayment relief plans available to certain borrowers to reduce their monthly payment and possibly provide loan forgiveness. Under IDR, monthly payments are capped based on the borrower’s income, and if the borrower makes a certain number of IDR payments, any remaining loan balance is forgiven. Although conceptually simple, IDR programs have been criticized for a number of reasons, most of which argue that these programs do not provide sufficient relief to distressed borrowers.5

Expansion of aid through the IDR could take many forms. This could be as simple as enrolling more currently eligible borrowers by cutting red tape, increasing awareness of the program, or even automatically enrolling all borrowers in IDR. Policymakers could also change the underlying parameters of IDR to reduce monthly payments, reduce the time borrowers spend on repayment, and increase the number of borrowers eligible for IDR.

However, there is a lack of information about which borrowers are currently eligible for IDR but not enrolled – their payment levels, income, broader financial situation – and this information is needed to design relief programs. and predict their effects. Specifically, how many are unenrolled due to barriers to enrolling versus choosing not to enroll? How do their finances differ from other borrowers? Data on these borrowers is limited, especially data on borrowers’ current incomes, which is a primary criterion for IDR eligibility. Without this data, it is impossible to know how many people might be eligible for current IDR programs or how many people might be eligible for expanded or revised IDR programs.

In this article, we use bank and credit bureau administrative data to shed light on this group of borrowers. This data covers 117,000 borrowers and includes measures of income, expected monthly payments and actual payments made, providing a uniquely detailed window into student borrower finances. Our conclusion is the following:

  1. A large portion of IDR-eligible borrowers are unregistered, and these unregistered borrowers have significantly lower incomes than other borrowers.
  2. IDR-eligible but unenrolled borrowers appear to be keeping pace with their student loan repayments, but are using a large portion of their income to do so. Listing on the IDR could significantly reduce their payment burden in the short term.
  3. Among IDR-eligible but unregistered borrowers, most would receive debt forgiveness under IDR. But those with relatively higher incomes receive no rebate, and the IDR is equivalent to a loan extension, lowering their monthly payments but increasing the total cost of their debt.
  4. Changes to IDR can significantly expand eligibility and reduce total fees for current IDR enrollees.

These results have several implications for the design of policies aimed at alleviating student debt. First, IDR programs are complex and can have counterintuitive effects on borrowers’ finances. Lower monthly payments extend the time borrowers spend paying and carrying debt on their credit report, potentially increasing the amount of interest they pay as well as the cost of other debt. For some borrowers this is a worthwhile trade-off, and for others it is not.

In our data, we see many IDR-eligible but unregistered borrowers who could see substantial monthly savings. This suggests that making it easier to participate in the IDR, for example by reducing initial and recurrent paperwork, could be very beneficial. Nevertheless, the net benefits available to many other IDR-eligible borrowers are less obvious, and avoiding IDR may be better for those borrowers’ finances.

Together, this means that any decision to automatically enroll borrowers in an IDR program should be accompanied by information about lower monthly payment trade-offs and other aids to help borrowers.


Income-Oriented Repayment (IDR) is a set of programs offered by the Department of Education that allow borrowers to reduce their monthly student debt payments when they have a high debt-to-income ratio and potentially receive a forgiveness of debt after making a number of full and on-time monthly payments under the IDR program.

Each IDR program is a variation of a common model: rather than paying on a standard 10-year amortization schedule, a new monthly payment is calculated based on the borrower’s income. Specifically, the new payment is calculated as a fraction of their Discretionary Income, typically 10%.6 Discretionary income here is the borrower’s adjusted gross income from their tax return minus 150% of the federal poverty guideline.seven

If the IDR amount is less than their current payment, the borrower makes payments at that lower amount for one year. Each year, borrowers must recertify their eligibility and income, and their payment amount is recalculated. This annual process continues until the borrower repays its debt or makes the maximum number of payments required under the IDR to qualify for the forgiveness, 8 usually after 20 years for undergraduate debt.9 Once the borrower has made the required number of payments under the IDR, the remaining balance on their loan is forgiven.

This means that the IDR offers relief in two different ways: lower payments now and a discount in the future. But to qualify for the discount, the borrower must participate in IDR for 20 years, even if their monthly payment amount is $0. Additionally, people on IDR can end up paying a considerable amount for their debt, even if their monthly payments only cover their monthly interest. Ultimately, whether IDR benefits an individual borrower depends on that borrower’s financial situation, personal debt preferences, and financial plans for the future.

Determining how borrowers who are not currently enrolled in IDR might or might not benefit from enrolling in IDR requires rich data on borrower balances and income, which the JPMC Institute is uniquely positioned to provide. .

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