CFPB Issues Report on Income-Driven Student Loan Repayment Plans

With student loans becoming the biggest non-mortgage type of debt in the United States, the federal government has created income-driven repayment (IDR) plans to curb student loan debt stress. Recently, the Consumer Financial Protection Bureau (CFPB) released a Data Point showing how student loan borrowers use IDR, how it may benefit them, and how it helps reduce borrow delinquencies. The Data Point series was established to “further the Bureau’s objective of providing an evidence-based perspective on consumer financial markets, consumer behavior, and regulations to inform the public discourse,” according to the study.

The report shows some variation in borrower circumstances, including borrowers seeking both temporary and long-term relief, as well as borrowers struggling with high delinquency rates or high balances. Still, while IDR plans provide relief, many users continue to struggle.

The report also found that the share of borrowers in active student loan repayment was 27 percent higher after their first year in IDR. Additionally, roughly two-thirds of borrowers re-enrolled in their IDR within two months after the first reduction plan period ended, and more than 80 percent of those enrolled in IDR needed payment relief beyond one year. The plans have aided in reducing delinquencies, too; for the delinquent borrowers, there was a 17 percent reduction of delinquencies for other credit commodities, showing an improvement in overall household budgeting.

Though the report only focuses on near-term delinquencies after IDR enrollment, it still allows the Bureau to understand how borrowers repay their student loans and how that affects other aspects of their financial lives.