Big Surge Seen in Income-Based, Student Loan Repayment Programs

The number of student loan borrowers turning to income-based repayment programs that offer some loan forgiveness is soaring, according to a prominent U.S. think tank’s analysis of recent U.S. Department of Education data.

The data tracked by the non-partisan New America Foundation (NAF) indicates that the number of U.S. borrowers taking part in one of two plans — Income-Based Repayment (IBR) — has more than doubled in the past year.
IBR and Pay As You Earn (PAYE) are available to Americans who have taken out federally subsidized student loans.
Over the past year, participation in the programs has soared from 950,000 participants, or about six percent of all student loan borrowers, to 1.9 million, or about 10.5 percent.
IBR is the better known and older of the two programs. If you took out your fist student loan before Oct. 1, 2007, then you qualify for the older IBR — which provides a 25-year repayment period and caps a borrower’s monthly payments at 15 percent of discretionary income.
If you took out your first student loan after that date, then you qualify for the revised IBR, known as PAYE — which provides a 20-year repayment period and caps a borrower’s monthly payments at 10 percent of discretionary income. The IBR’s enhancement came courtesy of Obama’s 2010 Health Care and Education Reconciliation Act.
In the 3rd quarter of 2013, 14.4 percent of the Department of Education’s Direct Loan portfolio was involved in IBR or PAYE. Now, that total has risen to 21.8 percent, representing over $1oo billion.
These figures do not include millions of additional borrowers who are in default on their student loans and not making payments. Over recent years, about 15 percent of borrowers have gone into default within three years of leaving school.
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