NCPA - National Center for Policy Analysis

Federal Student Loans and Income-Based Repayment Plans

September 29, 2015

In 2014, the total federal student loan debt in the United States was $1 trillion. Although the Department of Education offers income-based repayment plans and pay-as-you-earn options, only 13 percent of the total 51 percent of eligible borrowers participated in either program.

  • 14 percent of borrowers defaulted on their loans within 3 years of entering repayment.
  • Starting in 2017, the plan is to forgive all Direct Loan balances for any borrower who worked in public service for at least 10 years.
  • Potentially 4 million borrowers could qualify for the Public Service Loan Forgiveness program.

While income-based repayment plans are not the best option for all borrowers, information on the various repayment options should be readily available. The Department of Education should continue to notify qualified borrowers about their repayment options. By explaining benefits from plans, borrowers could lower their payments and hopefully reduce the number of default student loans.

Source:  "Federal Student Loans: Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and Forgiveness Options," Government Accountability Office, September 17, 2015.

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