Income-Driven Repayment Plan Enrollment Jumps, Delinquency Rates Drop in New Student Loan Data

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Income-Driven Repayment Plan Enrollment Jumps, Delinquency Rates Drop in New Student Loan Data

August 20, 2015

Growing numbers of student loan borrowers are taking advantage of the Obama Administration’s efforts to ease the burden of student debt, according to figures released today by the U.S. Department of Education. Delinquency rates are down, too.

In new quarterly updates posted on the Department’s Federal Student Aid Data Center, nearly 3.9 million Direct Loan borrowers had enrolled in Income-Driven Repayment plans as of June 30 – a 56 percent increase from June 2014. Those plans – which the Administration has taken steps to expand and improve – help borrowers manage their federal student loan debt by reducing monthly payments based on their income.

“We’ve made it a priority to give Americans better options to manage their student loans and make sure they know about those options,” said U.S. Secretary of Education Arne Duncan. “There’s more work to do, we won’t stop fighting to help people who are struggling to pay back their student loan debt, but the fact that more and more borrowers are taking advantage of the opportunity to cap their monthly payments is a good sign.”

Also revealed in the quarterly numbers, compared to one year ago[1]:

  • Delinquency rates are dropping. The proportion of Direct Loan borrowers who are more than 31 days late in their repayments dropped from 23 percent on June 30, 2014, to 21 percent a year later.
  • The total dollar balance of Direct Loans delinquent for more than 31 days fell from 17.2 percent to 15.9 percent.
  • Likewise, the proportion of delinquent Department-held Federal Family Education Loan (FFEL) borrowers declined from 24.2 percent to 21.8 percent.
  • The total dollar balance of delinquent, Department-held FFEL loans went down from 24.6 to 23 percent.

The new data also reveal other encouraging signs in the numbers of borrowers in deferment and forbearance. Deferments now represent less than 12 percent of outstanding Direct Loan volume, less than 8 percent of outstanding FFEL Program volume and the most frequent reason continues to be because borrowers have returned to school.

The proportion of Direct Loans in forbearance has also decreased, and now represents 10.5 percent of Direct Loan volume.

In addition to refreshing existing data sets, today’s Data Center update also includes new reports on loan and grant activity as well, including, for the first time ever, data on how many income-driven borrowers are making reduced payments based on partial financial hardship (PFH).

Please see the full Information for Financial Aid Professionals (IFAP) notice for important details to note while reviewing the data.

In July, the Obama Administration announced even more efforts to help student borrowers. The Education Department moved forward with plans to provide an additional six million federal loan borrowers with access to student loan payments capped at 10 percent of income, along with other planned improvements including:

  • Creating a streamlined process to identify military service members with FFEL Program student loans and who are eligible for lower interest rates while they are on active duty, a process that the Department already uses for service members with Direct Loans. And,
  • Requiring guaranty agencies to contact FFEL Program student borrowers who are rehabilitating their defaulted loans to provide them information on repayment plans, including income-driven repayment options, to help them decide which repayment plan to choose after rehabilitating.

Last month’s announcement built on years of work by the Administration to help Americans ease the burden of student loan debt. In 2011, the President announced the creation of the Pay As You Earn repayment plan, allowing some borrowers to cap their monthly payments at 10 percent of their discretionary income. The Department of Education has been engaged in an ongoing effort to use innovative communications strategies to inform vulnerable borrowers of their repayment options. The Administration is also implementing a Student Aid Bill of Rights, to ensure process improvements and strong consumer protections for student loan borrowers.

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[1] Because student loans are highly cyclical in nature, it is important to compare figures year over year, and not quarter to quarter.