: 2 million Americans have been repaying their federal student-loans for 20 years

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Two million federal student-loan borrowers have been repaying their debt for at least 20 years. 

That’s one takeaway from an analysis of student-loan borrower data published by the National Consumer Law Center and the Student Borrower Protection Center this week. The impetus for the report, which is based on information obtained from the Department of Education through public records requests, was to assess borrowers’ experiences accessing cancellation through income-driven repayment. 

These plans allow borrowers to repay their debt as a percentage of their income, instead of as a standard monthly payment related to the size of the loan and the interest rate. Borrowers in these plans are also eligible to have their loan balance discharged, after 20 or 25 years, depending on the repayment plan. 

The oldest income driven repayment plan was first made available to borrowers in 1995 and required 25 years of repayment, which means that last year was the first that borrowers would be eligible for cancellation under that plan. Just 32 have received it so far, according to the analysis. 

‘We shouldn’t see borrowers paying for more than two decades.’

— Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center

That figure combined with the data indicating that two million borrowers have been repaying their loans for at least 20 years is troubling, said Persis Yu, the director of the Student Loan Borrower Assistance Project at NCLC and a co-author of the analysis. 

For years, policymakers, think tank staffers and others have touted income-driven repayment as a benefit that makes the student loan program “workable for low-income families,” Yu said. The data signals to her that the payment plans aren’t achieving that goal. 

“If you have a program that is supposed to keep payments affordable, it’s supposed to  prevent default, it’s supposed to ensure that borrowers aren’t paying for more than two decades, then we shouldn’t see borrowers paying for more than two decades,” Yu said. “That should be a very rare occurrence.” 

More borrowers may receive relief in the coming years

It’s likely that in the coming years a larger number of borrowers will see their loans cancelled through income-driven repayment. The Obama administration expanded the program both in 2009 and 2014 and now more than half of borrowers with direct loans (the type of federal student loan all borrowers have received since 2010) are repaying their debt through these programs, a large uptick from the number who originally took part in the plans in 1995 and would now be eligible for forgiveness. 

The Congressional Budget Office estimates that cancellation under these plans should ramp up after 2030. 

“You’re working with a small number of people in the first place who were in it,” said Nicholas Hillman, an associate professor in the school of education at The University of Wisconsin-Madison. “A lot can happen in your life in 25 years; to whittle it down to 32 at the end, 32 people who must have stuck with that bureaucratic mess over this period of time, in some ways that’s not at all surprising because it’s a gauntlet.” 

’32 people who must have stuck with that bureaucratic mess over this period of time.’

— Nicholas Hillman, an associate professor in the school of education at The University of Wisconsin-Madison

“I really don’t know how to judge it,” he added. 

The Department didn’t provide figures to NCLC about how many people started out in that “gauntlet” to get a sense of the share that made it through. Of course, some borrowers may have used income-driven repayment only temporarily as a way to deal with an income shock. Others may have paid off the loan before reaching cancellation. 

That 2 million borrowers have been repaying their debt for more than 20 years is another indicator to Yu of the obstacles to successful loan repayment and management. As such, servicers and other companies and organizations that manage the federal student-loan repayment process are making the process more, not less, difficult, she added. 

For a borrower to get to the cancellation point, they have to make sure they don’t fall off the repayment plan for 20 or 25 years. That includes tasks like recertifying their income every year they’re in the program. 

‘Canary in the coal mine’

One of Hillman’s concerns about income-driven repayment and its role in the student-loan program more broadly is this burden it places on the individual to be successful in financing their education and repaying their debt. 

“It galvanizes this idea of education being a private good, it basically seals that envelope for us, when we say that loans should be based on future earnings,” he said. “It really helps us overlook the great need for public investment to prevent borrowing in the first place.” 

Yu became curious about the number of borrowers receiving cancellation through income-driven repayment based on anecdotal evidence that NCLC’s clients that they were facing challenges. The Public Service Loan Forgiveness program, which allows borrowers working in public service to have their federal student debt cancelled after 10 years of payments, has been notoriously difficult to access. 

“That was our canary in the coal mine that this wasn’t going to go well,” she said. The road to cancellation under income-driven repayment is much longer than under PSLF and the program is serving a wider audience of borrowers. 

Since student debt ticked up in the wake of the Great Recession and the Obama administration expanded income-driven repayment, stakeholders have paid close attention to whether this process is working — and see it as a proxy for assessing the overall success of the student-loan program. 

A policy providing low-income insurance

Typically, the question of whether income-driven repayment is working has been framed as whether borrowers in need could access it and if once they did, it prevented them from defaulting on their loans. 

The question of whether borrowers received cancellation wasn’t as much of a focus, perhaps because it would have been impossible until last year. That’s how Robert Shireman, a senior fellow at the Century Foundation, and a former White House and Department of Education staffer who worked on income-driven repayment since the 1990s, put it. 

“I do think of income-driven repayment as being low-income insurance,” he said. “College did not work out from an income perspective and we don’t complain that too few people’s houses have burned down,” he added, comparing borrowers who ultimately need to access the cancellation benefit of income-driven repayment to those who need to make a claim on homeowner’s insurance when their house burns down. 

Still, he said, understanding whether borrowers can receive cancellation through the program is crucial to monitoring its success. “In that kind of insurance situation, did you have a lot of people whose houses burnt down and the insurance failed to pay up? I think that’s the test with income-driven repayment.” 

In addition, access to cancellation was always a key feature of the program, according to Shireman. For borrowers with low incomes, the payments they make are often so low that they don’t cover the interest leading to what’s called negative amortization — or a situation where even when you make a loan payment the balance continues to climb. 

“I totally felt like this was absolutely necessary,” Shireman said of debt relief through income-driven repayment. “We cannot do this to people unless there’s cancellation, there has to be light at the end of the tunnel.” 

Role of income-driven repayment gains momentum

Now, amid debate over broad-based student-debt cancellation, the role of income-driven repayment and whether borrowers can actually access the debt relief it promises at the end has gained new resonance. Some critics of debt cancellation have argued that tweaking income-driven repayment would offer a disproportionate benefit to low-income borrowers as compared to a more widespread student-loan cancellation policy, which they say would provide a larger benefit to high-income borrowers.  

To proponents of mass cancellation, that so many borrowers have been paying for more than two decades and struggle to access relief through income-driven repayment renders that argument mute. The brief published this week urges the Secretary of Education to audit the income-driven repayment program to determine whether borrowers who should have benefited from relief through it are missing out due to student loan company mismanagement. 

Any borrowers who receive cancellation through income-driven repayment (or otherwise) in the next five years won’t face a tax bill on the relief, as laid out in the stimulus package signed by President Joe Biden this week. 

“People shouldn’t be in repayment for two decades,” Yu said. “At some point we need to say our programs didn’t work for you, and just cancel those loans.” 

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