Media sites keep publishing stories with alarming facts about student loan borrowers taking decades to pay off their loans or not denting their loan balance after years in repayment. While those are frightening headlines suggesting a stark future for student loan borrowers, there may be a simple explanation.

Income-Driven Repayment

Since 2009, income-driven repayment (IDR) programs have allowed borrowers to make payments based on how much money they earn instead of on their loan balances. These programs extend the repayment term to 20–25 years and forgive the remaining balance at the end of the term.

For borrowers with high balances, IDR plans are the best option to manage their loans. According to a CFPB report, the number of people leaving college with $20,000 in debt or more has doubled since 2002; for those leaving college with $50,000, the rate has tripled.

What This Does to the Numbers

Income-driven repayment plans send false alarms in the numbers by showing that borrowers hold debt for longer and their balances grow instead of decrease.

  • The CFPB study showed that 20–30 percent of borrowers are taking longer than the 10-year Standard repayment schedule to pay off their loans.
  • About 30 percent of borrowers who are five years into repayment (up from 16 percent eight years ago) are not making payments big enough to cover the interest. Therefore, their loan balances are growing.

This paints a picture of crisis in the student loan world. But for borrowers on IDR plans, accounting for about 14 percent of all borrowers, they are symptoms of relief. And once borrowers start getting loan forgiveness (as soon as the year 2029), the numbers will start looking very different.

Partially Accurate

While the CFPB study showed that most borrowers whose balance is increasing are in fact delinquent, the numbers are different based on the amount of debt borrowers hold.

Those with smaller balances, many of whom may not have completed their education, are more likely to have loans in “poor standing,” a term the study used to mean they were late on payments.

Those with higher balances are more likely to be in good standing. For borrowers with $50,000 or more in debt who hadn’t made any payments toward their principal in five years of repayment, about 64 percent are in good standing. They likely have an IDR plan to be grateful for.

While the IDR programs are meant to benefit borrowers with any amount of student loan debt, the numbers show this isn’t the case.

Perhaps the main response to these numbers should focus on why borrowers with lower balances are more likely to be in poor standing — and what we can do to help them. Getting them into IDR plans, though it may not change the numbers too much, might be the first step to improving the financial lives of student loan borrowers.