Does Income-Based Repayment for Student Debt Work?

Posted on September 21, 2018 at 9:00am by
Picture of Female College Student

To default on your student loans, you need to miss around a year of payments. Here in the United States, approximately 1 million student loan borrowers hit that mark every year. However, there are signs that this trend is changing, and income-based repayment plans might be one of the reasons why.

How Are Income-Based Repayment Programs Affecting Student Debt?

The New York Federal Reserve is reporting that 9 percent of student loans are overdue by 30 days or more. Back in 2013, that number was 11 percent. That means fewer student loan borrowers are defaulting on their loans, and experts are pointing to several causes.

Improvements in the economy is one of the reasons these experts believe these rates are going down. Plentiful jobs are resulting in more stable incomes, and while that’s keeping people from defaulting, job availability is not the only reason default rates are dropping. Income-based repayment plans point to another piece of the declining default puzzle.

When rates of delinquency for standard 10-year repayment plans and non-income-based repayments are compared to income-based repayment plans, a clear pattern emerges. The 10-year plans have an 18 percent delinquency rate and the non-income-based plans have a lower 14 percent rate. Both of these figures are high – compared to the 8 percent delinquency rate sported by the income-based plans.

What Does This Mean for Student Loan Borrowers?

The good news: with fewer defaults on income-based repayment plans, and more borrowers enrolling in these programs, student debt default rates are coming down overall. But many analysts believe that income-based repayments will not completely solve the problem of student loan defaults. After all, the real issue is the imbalances of earnings and the cost of education to qualify to make those earnings.

Depending on the school and degree, many student loan borrowers have over $100,000 in student loans. For federal student loan borrowers with this kind of debt, there are more repayment options available compared to those with private loans.

The Sader Law Firm can help all student loan borrowers explore these options. Our experience with student loans is nationally recognized, so contacting our attorneys could be a strong step toward fixing your student debt.

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